Amazon has announced that, from 19 January 2022, it will no longer accept Visa as a payment type in the UK, with customers having to register a Mastercard, Amex or Eurocard credit card. It will continue to accept Visa Debit cards.
The move has been prompted by what Amazon claims are “high fees Visa charges for processing credit card transactions.” The move appears to only be targeted at the UK.
Amazon Prime members are also reminded to change their default payment method, as are other subscribers to Amazon services.
“We know this may be inconvenient, and we’re here to help you through this transition so you can continue enjoying Amazon’s low prices and wide selection,” Amazon said in an email to affected customers.
A Visa spokesperson told Bloomberg that the company will continue to communicate with Amazon to avoid the ban: “We are very disappointed that Amazon is threatening to restrict consumer choice in the future. When consumer choice is limited, nobody wins,” they said.
“We have a long-standing relationship with Amazon, and we continue to work toward a resolution.”
Commenting on the move, Cas Paton, CEO and founder of online retail marketplace OnBuy, says: “Amazon has effectively decided to drop the principle of consumer choice. Disallowing Visa credit cards, alongside other decisions recently made by Amazon – such as its move to push sellers on their platform to price match Amazon competitors – shows that Amazon isn’t working for the benefit of either shoppers or sellers on its platform. Amazon is looking after Amazon, openly so. This is based on a belief that Amazon is untouchable – one I believe may be mistaken.”
Card costs rocket
The move comes as the retail industry comes under increasing pressure from the cost of card transactions. Retailers in the UK and the EEA now face an estimated £150m a year cost increase to accept cross-border card payments, with British retailers alone shouldering an extra £36.5m, or £100,000 every day.
Research by retail payments advisory firm CMSPI, in conjunction with the British Retail Consortium (BRC) and its members, reveals the huge impact of fee changes, which have risen up to 475% in some cases.
Many of the UK’s closest neighbours face rocketing cross-border fees – with retailers in Italy, Germany and the Netherlands forking out over £53 million between them.
These increased charges will add to existing cost pressures from rising commodity prices, widescale labour shortages, and increased haulage and shipping costs, making it more challenging for retailers to absorb these new charges from card firms.
In a recent Keynote address at PayExpo, the Managing Director of the Payment Systems Regulator (PSR) noted: “The absence of specific regulatory caps is not itself sufficient reason to increase particular fees, particularly if these increases are not obviously linked to costs. Such pricing behaviour poses real questions about how well this market is working.”
The BRC is calling on the Government and PSR to take action to tackle these soaring card fees, which cost retailers millions every year.
Brexit exacts its toll
With the UK exiting the EU, retailers are seeing that transactions between the EEA and the UK are no longer capped at the intra-regional rate, instead classed as inter-regional transactions. This has allowed major card brands to raise interchange fees on some online or “card not present” transactions by up to 475%.Furthermore, some card brands have increased their ‘interchange fee’ on all cross-border transactions between the UK and EEA.
It is also estimated by CMSPI that new scheme fees will cost UK merchants £9.5m and EEA merchants £20.8 million, on top of previous rises which saw major card brands double their scheme fees between 2014 and 2018.
All these new fees exist on top of the £1.04 billion per year that UK retailers spent to accept card payments in 2020 (BRC Payments Survey). Over 80% of all retail spending in the UK now uses debit or credit cards.
Andrew Cregan, Payments Policy Adviser at the British Retail Consortium, comments: “Consumers and retailers on both sides of the Channel are on the hook for tens of millions in new card costs unless swift action is taken. At a time when retailers are facing rising costs across the board, from higher energy prices to soaring shipping charges, it is likely that some of these five-fold fee increases will eventually be passed on to hard pressed consumers. British merchants alone will pay an extra £100,000 every single day just to process cross-border transactions, holding back British exports to Europe.”
He adds: “The Government and the Payment System Regulator need to urgently intervene to reverse these spiralling charges on cross-border trade. Without action, it is consumers who will pay the price for the lack of much needed regulation.”
Siamac Rezaiezadeh, Director of Product Marketing at leading fintech in account-to-account payments GoCardless, believes that Amazon’s decision is the first step towards removing cards altogether. He says: “Amazon’s decision marks a turning point in the modern economy; it’s the moment retailers decided they’ve had enough of being stung by the high fees charged by the card industry, simply for the privilege of collecting a payment. This move will prompt other merchants to explore alternative payment options and represents a tailwind for the adoption of newer methods, such as account-to-account (A2A) payments. Not only do these reduce the cost for businesses through removing the now-redundant intermediaries in each card transaction — they also make it easier, quicker and more secure to pay for consumers, thanks to other innovations like open banking.”
He adds: Amazon’s announcement shows that major brands are ready to fight back against the monopoly of card networks who have long had the power to set and raise fees. It continues the move away from pieces of plastic introduced in the pre-internet world to payment methods built for a digital society.”