Visa Tumbles on Amazon Ban in U.K. as Fight on Card Fees Expands
Amazon.com Inc. will stop accepting purchases made with Visa Inc. credit cards issued in the U.K. starting next year, the latest escalation by the online retailer in its push against transaction fees charged by payment networks.
Amazon users were told of the changes this week. After making purchases they received a notification from the company saying that from Jan. 19, 2022 “we will no longer accept Visa credit cards issued in the U.K.” due to the high fees charged to process transactions. Visa shares slumped 5.2% to $203.96 at 9:36 a.m. in New York. They’ve dropped 6.6% this year, compared with a 29% increase for the S&P 500 Information Technology Index.
An Amazon spokesperson said “the cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers.”
Customers can still use Visa debit cards, as well as MasterCard Inc. and American Express Co. credit cards, as well as Visa credit cards issued outside of the U.K., the retailer told users, offering them twenty pounds ($27) off their next purchase if they set a debit or non-Visa credit card as their payment default. In Singapore and Australia, Amazon has already imposed a surcharge for those using Visa credit cards.
“We are very disappointed that Amazon is threatening to restrict consumer choice in the future. When consumer choice is limited, nobody wins,” a Visa spokesman said in an email. “We have a long-standing relationship with Amazon, and we continue to work toward a resolution.”
Card fees have long been a flashpoint between merchants, banks and payment networks such as Mastercard and Visa, the world’s largest.
Retailers have long complained about the amount they spend each year to accept electronic payments, a figure that’s grown to more than $100 billion a year in the U.S. as fees increase and consumers flock to premium cards, which carry higher interchange rates -- fees charged every time a consumer uses a card.
The issue is an increasingly sensitive one in the U.K. after Brexit, with both Visa and Mastercard drawing scrutiny for upping certain fees now the U.K. is outside the European Union. Research this week showed credit and debit card costs have increased by 150 million pounds a year, with both U.K. and European retailers losing out.
Britain’s departure from the EU removed caps on transactions between the U.K. and the European Economic Area allowing card firms to increase cross-border payment fees, according to retail payments advisory firm CMS Payments Intelligence and the British Retail Consortium.
“Card payments accounted for over four-fifths of U.K. retail spending in 2020, with just two firms facilitating 98% of these payments,” said Andrew Cregan, payments policy adviser at the British Retail Consortium, who called for the U.K.’s Payment System Regulator to intervene. “Ultimately, it will be consumers who suffer higher prices unless these spiraling costs can be brought to heel.”
Amazon has tried different methods over the years to limit the amount of fees it paid from customers using credit cards. In the past, it has incentivized consumers to use debit cards to add cash to their Amazon accounts and use that for purchases rather than credit cards, and has also given the option for individuals to link their checking accounts for payments.
Back in 2016, Wal-Mart Stores Inc. sued Visa Inc.’s U.S. unit over the cost of processing payments. In 2018, supermarket chain Kroger Co. stopped accepting Visa’s credit cards at its Foods Co. subsidiary in California. It widened the ban when it stopped accepting the network’s cards at Smith’s, another unit, before the two sides reached a truce in October 2019.
In the U.K., J Sainsbury Plc, Asda and Wm Morrison Supermarkets Plc won a key court battle at the U.K. Supreme Court that could reap billions of pounds in payouts for them.
In the U.S., Visa and Mastercard have postponed plans to boost the fees U.S. merchants pay when consumers use credit cards online, pushing back the changes -- originally slated to take effect in April 2020 -- to April 2022 because of the pandemic.
Visa’s changes would have seen rates go up or down depending on the merchant and the way a consumer pays for their purchases, according to a document Visa sent to banks in 2020 outlining the changes, Bloomberg has reported.
What Bloomberg Intelligence Says
Visa can weather this. It’s significant only if the restriction spreads to other retailers and Amazon U.S., which becomes less likely as credit card spending keeps rebounding and options like buy now, pay later are added to cards next year. Amazon has a 25% share of the U.K’s. e-commerce market, according to Euromonitor, representing $29 billion in volume, or 0.26% of Visa’s total.
-- Julie Chariell, BI analyst
The document set out higher rates for transactions on e-commerce sites, while retailers in certain services categories, such as real estate and education, saw fees decline. The delay came after retailers lobbied to avoid a jump in costs for accepting cards at a time when consumers are especially reliant on online shopping.
©2021 Bloomberg L.P.