Correct, merchants do not charge interchange, banks/networks do, and its dumb because it increases the costs of doing business in the EU (which as I said, makes it more insular)

How does lowering fees increase the cost of doing business exactly?

The only businesses suffering from the cap are issuing banks.

Fees are not the only cost of business, compliance is too - and things like if you want to enjoy lower intra-EU costs then you need to be in the EU which is an added cost as a non-EU business, etc - it's not as simple as "fees more eu bad"

That's true pretty much everywhere on Earth.

Some countries smaller than the EU bloc have more complex regulations regarding online payments.

The EU managed to cut fees in half for its population and businesses, if you want to stay outside then why do you care?

You're kind of agreeing at this point, despite what the EU believe they are not self sufficient and require international business - the only people who lose out by that not happening are citizens and there are already enough reasons doing business (or even buying) stuff from outside the EU is a tedious and expensive chore