Is Amazon Ban on UK-issued Visa Credit Cards a Win For Crypto?
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
Amazon is refusing to accept UK-issued Visa credit cards on the e-commerce platform in a major blow to the card payments giant.
The move to stop accepting the UK Visa credit cards comes as a row over transaction fees deepens. Amazon says that it will pay its UK users £20 if they opt to use an alternative payment method to Visa credit card – alternatives which could include crypto in the future.
Visa charges merchants 1.5% on the value of a credit card transactions in the UK. This so-called interchange rate is far higher than that pertaining in the EU where there is a cap of 0.3% on credit cards and 0.2% on debit cards; card companies have been able to increase UK-European Economic Area (EEA) cross-border fees as a result.
Amazon has not banned Visa debit cards from its store.
Data from Nielsen shows that in the US credit card payment fees paid by merchants in the US have been rising steadily since 2012, now amounting to $107.8 billion.
Visa’s share price fell 4.7% yesterday after news of Amazon’s proposed new policy broke.
Mastercard was caught up in the sell-off, seeing its share fall 2.8%.
Card fees hurting Amazon and merchant margins
Amazon is particularly hard hit by fees because of its free returns policy for Prime users. The platform can end up paying three lots of fees: on the initial sale, on the return (although it is free for the user) and then the reissuing of goods.
A spokesperson for Amazon said of its announcement that “the cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers.”
The simmering tensions between Visa and Amazon have already led to the e-commerce behemoth imposing a surcharge on customers who pay with Visa credit cards in Australia and Singapore of 0.5%.
Research by CMS Payments Intelligence and the British Retail Consortium has found that post Brexit card cost have increased by £150 million. It costs UK merchants an extra £36 million on payments originating in the EEA.
“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,” said Andrew Cregan, payments policy adviser at the British Retail Consortium.
The BRC says that four-fifths of retail spending last year was with a card, with Visa and Mastercard account for 98% of the total. However, Visa credit cards are only thought to make up around 7% of overall UK payments.
A Visa spokesman said: “We are very disappointed that Amazon is threatening to restrict consumer choice in the future. When consumer choice is limited, nobody wins. We have a long-standing relationship with Amazon, and we continue to work toward a resolution.”
UK payments regulator slow to act
The UK’s Payments Systems Regulator has been criticised for not acting sooner to stop the hike in fees.
Managing Director of the Payment Systems Regulator Chris Hemsley told BBC radio today that it was still gathering information.
However, at a recent industry conference Hemsley 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.”
Fintech and crypto threat to card payments networks?
Both Visa and Mastercard have been exploring crypto in tentative ways, with Mastercard recently partnering with crypto company Bakkt. In a sign of growing interest in crypto at Visa, the payments network announced in March that it had settled a transaction using crypto, in this case the stablecoin coin USDC.
The old payments companies want to future-proof their businesses and an openness to exploring crypto is one way of covering their bets, as well as being a validation of crypto as a cheap rail for payments.
“We want to be an on-ramp and an off-ramp between the regular world and the crypto world,” says Oliver Jenkyn, Visa’s executive vice president and regional president for North America.
