The Daily Update: Amazon vs Visa

I wrote a few days ago on how getting ‘Amazoned’ is the term used by industries across the world that live in fear that Jeff Bezos’s company will set its sights on their sector, thus disrupting the status quo, and usually putting downward pressure on margins. However, Amazon's latest announcement has less to do with disrupting a sector, although that’s still the aim, but has more to do with flexing its considerable muscles. The gargantuan company has announced that as of the 19th January next year it will stop accepting payments made using Visa credit cards issued in the U.K. Amazon customers can still use Visa debit cards, as well as MasterCard and Amex credit cards, along with Visa credit cards issued outside of the UK.

The online retail giant blamed the decision on high fees charged by Visa to process transactions. In a statement an Amazon spokesperson said, ‘The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers’ adding ‘These costs should be going down over time with technological advancements, but instead they continue to stay high or even rise’.

To ‘help’ the transition to a debit or non-Visa credit card Amazon will offer £20 off their next purchase to customers to change their payment default card. Of course, Visa sees this all very differently. ‘We are very disappointed that Amazon is threatening to restrict consumer choice in the future. When consumer choice is limited, nobody wins’ they said, adding ‘We have a long-standing relationship with Amazon, and we continue to work toward a resolution’.

Visa’s fees have been a bone of contention for the last 18 months with Amazon. Early last year Visa announced it was planning a massive shake up to its credit card rates in the U.S. The company’s rates will go up or down depending on the merchant and the way a consumer pays for their purchases, according to a document Visa sent to banks that outlines the changes. Higher rates are going to be charged to e-commerce sites, while retailers in certain services categories, such as real estate and education, will see fees decline.

The reason Visa has increased its rates here in the UK is because transaction costs that were capped whilst we were in the EU no longer apply after Brexit. However, it's not only Visa, with some credit card companies increasing their fees by as much as five times.

So, the big question is has Visa poked the biggest grizzly bear in the park with a sharp stick by not agreeing to reducing its fees when its customers use Amazon. Or is Amazon taking on one company instead of an entire industry as a shot across the bows. The whole sector will be watching with bated breath.

It will be interesting to see who blinks first. My money is on Visa.