Amazon backs down on UK Visa credit card ban
Online shopping giant Amazon has reversed its decision to stop accepting Visa credit cards on its Amazon UK website.
Amazon stunned the payments industry when it announced that it would stop accepting Visa credit cards in the UK from January 19, 2022, striking a blow against the card networks which have long been the subject of complaints from merchants over their interchange fees.
In an email statement sent to Commercial Payments International, Amazon said, “The expected change regarding the use of Visa credit cards on Amazon.co.uk will no longer take place on January 19. We are working closely with Visa on a potential solution that will enable customers to continue using their Visa credit cards on Amazon.co.uk.”
For its part, Visa told CPI, “Amazon customers can continue to use Visa cards on Amazon.co.uk after January 19 while we work closely together to reach an agreement.”
Interchange Fees In the UK
UK retailers led by Sainsbury had filed a case against Visa and Mastercard over the Multilateral interchange fees (MIFs) which are fees paid by merchants to card processors in return for accepting cards from customers and clients. In a move, the UK supreme court ruled in favor of retailers and the Court of Appeal ruling in 2018 that MIFs should be set at zero.
Sainsbury had settled the matter outside the court with Visa under an undisclosed agreement which actually showed that MIFs were the new battle front in the payments arena. The Amazon announcement of barring Visa credit cards came after the news of the Sainsbury settlement. The blows highlight the fact that high transaction fees have become a pain point for the retailers which are already working on thin margins post pandemic.
Road ahead
The terms of any deal reached by Amazon with Visa are so far undisclosed. However, the card fees paid by the retail giant run into the billions.
Based on the assumption that Amazon’s yearly product sales revenue based on its September end SEC filings would be $322 billion and average interchange fees are 1.5%, this would cost the company upwards of $4 billion per year. This is a huge cost for any corporation and given that SMEs work on thin margins, that would be a higher percentage of their total cost incurred.
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