Amazon cutting ties with Visa?
Diane Hall
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Update:
It’s been announced that Amazon will continue to accept customer payments by Visa, in an update to their plan detailed in our article below.
Amazon, in an email to all its users, says it’s ‘working closely with Visa on a potential solution’. Their very brief message gave no more information on what this solution would be, but the company has suspended its plan to prevent people from paying for their goods on their platform with a Visa credit card past January 19, 2022.
As we explained, Amazon has a strong relationship with Mastercard, which perhaps makes clear why the consumer giant would wish to favour this method of payment. However, Mastercard and Visa share the same significant shareholder, the Vanguard Group, and if the issue comes down to Brexit’s influence on interchange/card transaction fees in the UK, these apply equally to Mastercard.
There doesn’t seem to be much of a business case behind Amazon’s banning of Visa credit cards—perhaps the company has realised this themselves…
Original Article
You may have seen that Amazon, from January 2022, will no longer be accepting payments via Visa credit cards for purchases in the UK (they will still accept Visa debit cards, and all the other credit cards they accepted prior to this move).
Amazon are not just using the clout of their brand to stop consumers from using Visa credit cards to make purchases from their site, they have even provided a bribe. Prime customers will receive £20 if they switch to another payment provider, whilst non-Prime customers will receive £10 for doing the same.
The reason the company has given for their decision is that Visa’s transaction fees have become too high. It’s no coincidence that Amazon’s own credit card is underwritten by Mastercard, Visa’s biggest rival in the UK. Mastercard has also raised its interchange fees on cross-border transactions, yet Amazon hasn’t taken its bat home there.
Just as conflicting is the fact that the Vanguard Group is one of Visa’s top shareholders—the Vanguard Group is also Mastercard’s second largest shareholder.
The pandemic has seen consumers rely on card payments more and more; however, Amazon, being a giant of an online company, has never been the type of outfit to which you could post cash.
The change in transaction fees is relevant, even if Brexit didn’t have the influence on Amazon’s decision that financial experts claim it did. Amazon processes all UK payments in the EU; now that the UK is not part of the European Union and is classed as a separate entity, cross-border transaction fees that were not previously an issue are eating into the profits of the mega-brand, and Bezos can’t have that.
As mentioned, however, these same cross-border fees apply to UK purchases made via a Mastercard. Given that Amazon’s credit card is a Mastercard, it wouldn’t make commercial sense for them to ban this payment method too.
Ensuring consumers have lots of choice when it comes to paying for the goods you’re pushing is part of ‘How to sell stuff 101’. Well, for most companies it is. Amazon is perhaps too large a brand to worry that their decision to ban Visa credit cards on UK purchases will affect their sales figures. Of course, if Amazon customers desperately want to continue paying for their items on a credit card (and why wouldn’t they?), where else would they look than to Amazon’s own credit card? Unlikely to be knocked back on application as Amazon already holds knowledge of their payment record; ease of use on the Amazon platform; a brand they already know and trust…it’s a no-brainer. So, rather than annoying customers as a result of reducing their options and ultimately their choices, Amazon will still end up smelling of roses…no doubt there will be hundreds of thousands new customers for their Mastercard come the New Year.
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