Urgent action to support the payments system is needed as card fees spiral and bank branches disappear, according to businesses.
The call was made after it emerged that Amazon intends to stop accepting payments made using UK Visa credit cards next year.
The online retailer said in an email to customers that Visa credit cards issued in the UK will be halted from use on its site from January 19.
Amazon said it has made the decision due to “the high fees Visa charges for processing credit card transactions”.
Federation of Small Businesses (FSB) national chairman Mike Cherry said: “The scheme fees charged by the handful of card providers which dominate the cashless payment space have soared in recent years.”
He said the Payment Systems Regulator (PSR) “now needs to take urgent action – with banks upping cash deposit and withdrawal fees, and our bank branch network disappearing as card fees spiral, a lot of small firms are caught between a rock and a hard place when it comes to payments”.
Chris Hemsley, managing director of the PSR, told the BBC’s Today programme that it is closely monitoring the market – and that it has powers to potentially change how the market works and cap fees.
He told the programme: “We think there are questions about whether this market is working sufficiently well for retailers and for ultimately consumers.
“And so we’ve announced further work to really investigate that properly so that we can think about what action we need to take, if and when we find significant problems in how competition is working.”
Mr Hemsley added: “We are closely monitoring this market and thinking about now taking that work forward so that we can identify what we can do.”
He later said that the PSR has a range of powers, including taking steps to change how the market works.
He said: “Also it could include introducing either a temporary or more enduring cap on those fees.”
Mr Hemsley said that would be a significant action, so it would take some time to build an evidence base.
Mr Hemsley later added: “We’ve been in contact with Amazon and also the big card schemes and one thing I’d like to get across to your listeners is these are credit cards we’re talking about here, so if you have a Visa debit card… you can still use that card.”
James Andrews, senior personal finance editor at money.co.uk, said shoppers would be wise to “check your cards now”.
He said: “Shops are entirely free to choose whichever payment method they want, but the news that Amazon plans to stop accepting Visa credit cards will come as a blow to the millions of Britons that have them.”
Mr Andrews said Barclaycard and HSBC were among those using Visa on credit cards.
He added: “With American Express also rejected by many UK retailers, that means people looking for rewards on their spending or trying to split the cost of shopping with a 0% purchase card on Amazon will be effectively forced to choose a Mastercard.”
He said hopefully Visa and Amazon will work out their differences but added: “in the meantime it would be wise to check your cards now”.
Visa has said it is disappointed by the decision by Amazon, which it claims is “threatening to restrict consumer choice”.
A Visa spokeswoman said on Wednesday: “UK shoppers can use their Visa debit and credit cards at Amazon UK today and throughout the holiday season.”