Visa and Mastercard were accused by the UK Payment Systems Regulator on Thursday of imposing exorbitant fees and limiting competition in the card payments sector, which has cost companies at least 170 million pounds a year and impeded economic progress.

The two payment giants, which account for 95 percent of debit and credit card transactions in the UK, have raised their basic scheme and processing costs by more than 25 percent over inflation since 2017, according to the regulator's final report after a year-long market study. Due to opaque pricing procedures, these fees—which are paid directly to the networks for services like fraud detection and payment authorization—have put a great deal of burden on businesses, particularly small merchants.

According to the PSR, Visa and Mastercard can to establish fees without doing thorough cost analyses or having enough competition in the market because of inefficient competitive restraints in the UK. According to the authority, the absence of clear price information has further skewed discussions, forcing payment processors and retailers to either absorb or pass on increased costs to customers.

Before contemplating enforcement action, the agency intends to engage in potential remedies, such as mandated disclosure of pricing techniques and charge limitations, to address these concerns.

After years of merchant concerns about growing transaction prices, the findings mark the most recent regulatory attempt to limit Visa and Mastercard's dominance. Since more than 80% of consumer transactions in the UK are made using a card, the PSR underlined how important market reforms are to maintaining fair competition and encouraging innovation.