Interchange fees have long been a point of contention between merchants and payment networks, particularly as e-commerce continues to grow. Large retailers are increasingly willing to challenge the economics of card acceptance when they believe payment costs outweigh the value provided by the network. Amazon’s decision to stop accepting UK-issued Visa credit cards illustrates how merchant acceptance has become a strategic negotiating tool in the evolving payments ecosystem.
Amazon announced that beginning on Jan 19, 2022 it will no longer accept Visa credit cards issues by UK banks. In notifying customers about the change, Amazon cited the high cost of UK interchange fees, and noted that shoppers can continue to use Visa-branded debit cards or other branded credit cards like American Express or Mastercard.
The following statement was issued by a spokesperson for Amazon:
“The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers. These costs should be going down over time with technological advancements, but instead they continue to stay high or even rise. As a result of Visa’s continued high cost of payments, we regret that Amazon.co.uk will no longer accept UK-issued Visa credit cards as of 19 January, 2022. Customers can continue to use all debit cards (including Visa debit cards) and other non-Visa credit cards to shop on Amazon.co.uk. With the rapidly changing payments landscape around the world, we will continue innovating on behalf of customers to add and promote faster, cheaper, and more inclusive payment options to our stores across the globe.”
A spokesperson from Visa offered the following rebuttal:
“Amazon is threatening to restrict consumer choice in the future. When consumer choice is limited, nobody wins.”
What we are watching here is a giant game of chicken… two global consumer brands each trying to prove who has the most sway with consumers. This debate is not new, by the way. Years ago, when you used your Macy’s credit card to shop at Macy’s, there was no question that you were a Macy’s customer. When large department stores began accepting 3rd party cards back in 80’s, you could now shop at Macy’s with your Visa card. This started the debate that continues today: Are you a Macy’s customer or a Visa customer? Did you intend to shop at Macy’s and just happened to pay with your Visa, or were you going shopping with your Visa and only considered Macy’s because they accepted Visa cards?
Amazon is obviously trying to pressure Visa into reducing interchange, but they are also challenging core Visa acceptance rules. What’s often called the “first commandment” is the “honor all cards” rule. If a merchant accepts Visa they must accept ALL Visa-branded cards, so the cardholder doesn’t have to ask if the merchant accepts their particular Visa card. Of course, Visa is banking that cardholders will pressure Amazon into accepting their UK-issued Visa credit cards. I don’t see the government rushing to regulate anything just yet since there are other places for consumers to shop, and other cards they can use to shop on Amazon.
This isn’t the first move that Amazon has made in this direction. Amazon now surcharges Visa-branded credit cards on both the Singaporean and Australian websites. In both cases, the retailer is offering incentives for consumers to add a non-Visa payment type to their Amazon wallets.
Who blinks next is largely a function of what consumers do at this juncture… if Amazon feels a sales pinch, they may have to concede the inherent value of Visa’s interchange fees. If consumers switch issuers to replace their Visa card with a Mastercard so they can continue shopping on Amazon, then Visa will likely have to re-assess what it thought was its value proposition and re-price interchange accordingly.
Similar efforts by Wal-Mart in the US years ago resulted in a compromise that led to Visa creating a tiered interchange structure that provided discounts for the highest-volume merchants, and interchange fee caps on supermarket transactions.
The dispute between Amazon and Visa highlights the ongoing tension between merchants seeking lower acceptance costs and payment networks defending the value of their services. As digital commerce expands and alternative payment methods become more widely available, negotiations over interchange fees and card acceptance are likely to remain a defining issue for the payments industry.
Stay tuned…
Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group
