What you are missing is that a market left to itself is not necessarily competitive when monopolies/duopolies form.

There are distortions in that "market" because credit cards aren't just for payment acceptance and fraud handling (which are narrow functions).

In the U.S., many credit cards bundle short term credit, rewards, travel benefits, insurance etc. This bundling is why merchants can pay up to 2-3% in fees.

The payment clearance and settlement parts are much cheaper. That's why many countries are able to build domestic payment rails (e.g. Pix in Brazil) that process transactions at low cost.

A duopoly is not "a market"

Proves what point? GP was saying the government would only increase fees.