Amazon has announced that starting January 19th, it would no longer accept Visa credit cards issued in the United Kingdom.
It cited hefty credit card transaction fees as the reason for the change. But it said Visa debit cards would still count.
Visa said it was “very disappointed that Amazon is threatening to restrict consumer choice in the future”.
Amazon said: “The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers.”
The online retailer said costs should be going down over time due to advances in technology, “but instead they continue to stay high or even rise”.
The argument, according to an Amazon spokesperson, stems from Visa’s “pretty egregious” price increases over several years with no added value to its service.
Amazon is providing £20 to Prime members who convert from Visa to a different payment method, and £10 to everyone else.
It stated it had a “long-standing relationship with Amazon”. Also, it was working to rectify the issue so that consumers in the UK could use Visa credit cards.
Amazon would not specify how much Visa charges the business to handle credit card transactions.
Visa likewise declined to comment, although it claims to take less than 0.1 percent of a purchase’s value on average.
‘A blow’
Any charge changes, according to Amazon and Visa, have nothing to do with Brexit.
Following Brexit, both Visa and its competitor Mastercard increased the so-called interchange fee on cross-border transactions between firms in the United Kingdom and the European Union.
The disagreement between Amazon and Visa concerns the fees that Visa charges Amazon for its services in the United Kingdom.
Amazon is reportedly considering abandoning Visa as a co-brand credit card partner in the United States.
According to the BBC, it is in talks with payment networks such as Mastercard, American Express, and Visa as part of what it considers a normal process.
This squabble between two titans of industry is now being played out in front of their customers.
Visa fees, according to Amazon, are high and a barrier to consumers getting inexpensive costs. Visa claims that its fees are competitive. They have no impact on prices and that when choices are inadequate, no one wins.
Whether this dispute is about pricing or is merely a smokescreen is virtually irrelevant to customers who use these services. They’re only aware that they may have to alter their Amazon payment methods.
However, time is crucial. When individuals purchase for Christmas on Amazon daily, these signals to customers hit home even more.
But it also indicates that a possibility of settlement before January 19.
The change “will come as a blow to the millions of Britons” who use Visa credit cards. Thereby, including Barclaycard and HSBC customers, according to James Andrews, the senior personal finance editor at comparison website Money.co.uk.
Amazon move to aim at lowering Visa costs
“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.
He went on to say that Amazon’s rewards card is “powered by Mastercard.”
Mastercard’s executive vice-chairman Ann Cairns, said: “It’s very important that customers have choice, and have the widest variety of ability to pay, whether that’s through cards or from their bank accounts or cash, and remember that it is never the consumer that pays fees.”
“We talk to Amazon all the time because obviously we are two big global businesses and Amazon is one of our top customers around the world.”
In a tweet, retail researcher Steve Dresser speculated that Amazon’s move could aim at lowering Visa costs.
Final strategy out in the new year
The Federation of Small Businesses (FSB) said credit card fees “charged by the handful of card providers which dominate the cashless payment space have soared in recent years”.
“Small businesses are almost always charged more for card terminals than big corporates – so when online giants start throwing down the gauntlet, you know the situation is becoming critical,” said FSB national chairman Mike Cherry.
Credit card fees from major providers have long been a source of concern for businesses.
The British Retail Consortium (BRC) accused Visa and Mastercard of collecting excessive fees last October. They had doubled in two years, according to the trade group.
The BRC warned at the time that retailers would have to compel to pass on costs to customers. Thereby, potentially raising credit card payments by up to £40.
There are “real questions about how well the cards market is working,” according to the Payment Systems Regulator.
“We will look into how well this market is working, including the issue of increasing card fees,” a spokesman for the regulator said. “If necessary we will intervene to address any issues we identify.”
He said a final strategy would be out in the new year.
