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GUEST COMMENT Amazon’s Visa stance underlines that online card payments are due for expiry

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In November, Amazon took the unprecedented step of announcing intentions to decrease its reliance on Visa for credit card payments in the UK. In January, a last-minute ceasefire was agreed, and yesterday, a settlement was reached meaning that Amazon customers will in fact be able to continue using Visa credit cards.

However, regardless of motivations for each side, the public statement of discontent is a watershed moment for the retail industry that is increasingly feeling the financial burden that comes with operating slick online storefronts. The significance of one of the world’s largest e-commerce businesses referencing the “high fees Visa charges for processing credit card transactions” cannot be underestimated. Amazon’s stance has made card fees a mainstream topic.

Amazon’s statement echoes concerns voiced by the British Retail Consortium and numerous business leaders: businesses of all sizes are being stung by rising fees from card networks that have a direct impact on operating costs and revenues.

This points to a more fundamental issue: physical cards are no longer fit for seamless online commerce experiences, creating complexity for businesses and friction for shoppers.

Increased transaction fees, reduced revenues

A recent TrueLayer study in partnership with YouGov revealed that high cost of card payments is the biggest pain point for half of retailers – a problem Amazon is likely to be feeling this acutely owing to its vast scale. This cost comes from fees that card networks charge for processing payments, high number of chargebacks associated with the increasing volume of returns, as well as greater risk of fraud.

For retailers with high average order values, namely, orders that often exceed £500 (eg. travel, luxury goods, electronics and furniture), chargeback costs can be a significant financial burden, totalling an annual charge of more than £235,000 per retailer.

Having just made it through a busy Black Friday and pre-Christmas shopping period, when big ticket electronics, home goods, fashion and beauty supplies fly out of the door – retailers are no doubt already losing sleep over the incoming wave of chargebacks and card fees that beset retailers every year.

But it’s not just about the fees. The commercial impact of cards’ inefficiency cannot be overstated when it comes to customer experience. At the checkout, the risk of customer drop-off is high and impactful, and for a hypothetical retailer bringing in £100+ million worth of orders, drop-off associated with physical cards is a significant risk.

Among customers choosing to pay with cards at the checkout, a little less than half will actually fill in their card details because of the added friction cards bring, meaning that £100 million can be easily halved. Of those that do fill in the details and hit ‘pay’, only 85-90% will experience a successful transaction due to errors entering their card details or issues when processing the card.

How technology can deliver a new way to pay

The opportunity and need to create the ultimate online shopping experience, where payments aren’t just retrofitted for the online world, is huge. For retailers that don’t have the brand clout of Amazon to negotiate lower fees, however, all is not lost. With the tech available to us at our fingertips, there’s no longer a good excuse to solely rely on traditional methods. On the consumer side, it’s also evident that shoppers are ready to embrace the new ways of paying that improves their overall experience.

The UK is leading the way thanks to alternative payment methods enabled through the Open Banking regulation. Many forward-looking merchants have introduced ways for shoppers to securely connect their bank account directly to the checkout, so that payment can be taken within seconds. With payment details authenticated directly with the bank and device-holders biometrics, there’s no need to enter card details or fill in elaborate forms that can fall prey to fraudsters.

It is advantageous for the retailer too, as funds are received immediately allowing them to ship the goods with total confidence or arrange an instant refund if the customer is not satisfied.

As a payment method built for the mobile era, it lowers the cost per transaction while also playing an important role in building a smoother checkout experience that increases conversion as retailers create the intuitive online experiences their customers expect. The data bears this out: these payments have an acceptance rate 15-20% higher than cards online across checkout and that means higher revenues.

Regardless of the settlement Amazon and Visa reached, this is an opportunity for other retailers to take control of their online business models and reduce dependencies on unnecessary digital ‘landlords’ as much as possible. Instant bank payments through open banking are the necessary next step in that revolution.


Roger De’Ath, UK country manager at TrueLayer

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