Spotlight: Amazon U-Turns on Visa Ban – The Industry Response

January 19 was supposed to be the day Amazon’s plan to stop customers using Visa credit cards for payment went into effect. However, at the last minute, the e-commerce giant changed its mind, announcing that the two companies were working together to reach an agreement.

The ban was originally announced in November 2021 due to the “high fees for Visa processing credit card transactions.

In what has been billed as a “corporate chicken game,” companies quit the paddock earlier this week, with Amazon issuing a statement to its customers.

No expected change in relation to the use of Visa credit cards on Amazon.co.uk on January 19. Read the statement. “We are working closely with Visa to find a potential solution that will enable customers to continue to use their Visa credit cards on Amazon.co.uk.

“If we make any changes with respect to Visa credit cards, we will give you advance notice. Until then, you can continue to use Visa credit and debit cards, MasterCard, American Express, And Eurocard As you do today. Thanks for being an Amazon customer.”

A victory for the consumer?

in advertising, Alex Reddish, General Director, clan payments He said: “This is a very positive development – ​​it is important for consumers to have a choice in how they pay, and having a large company like Amazon refuse Visa could have long-term unintended effects on the payment methods accepted. We hope that any renegotiation of exchange fees will benefit the Every company accepts payments, not just giants like Amazon.”

On the other sideSusanna StreeterSenior investment and markets analyst Hargreaves Lansdowne He believes that while a truce between businesses will halt lost business, there is still confusion among consumers.

She said, “A truce has been called in the brinkmanship between Amazon and Visa with the e-commerce giant seeming to relent and allow credit card customers to continue shopping on the site. The two sides haven’t quite backed down, but recent talks over the weekend seem to have been fruitful, to be sure. Amazon is becoming more conciliatory in tone.Visa’s high fees remain a concern, and a long-term solution likely includes some movement here, but it is in neither company’s interest to restart the war of attrition, with potential for major losses to UK business business for either side.

“This is a headache that Visa will want to see lifted as it grapples with competition from start-ups and more established competitors. But it is still the world’s largest payments processor and remains squarely at the heart of the global shift toward cashless payments. Not coming into the US only recently in a big wave, there is still plenty of growth potential ahead.

“For consumers, if you swap your card saved on Amazon in anticipation of the ban on Visa credit cards, it’s worth thinking carefully about whether a credit card is the right choice. If you’ve made certain large purchases and want extra protection, it might be worth going back again. , but if it means you’re facing more credit card debt, now might be a good time to change. Unfortunately, this type of change at 11 o’clock is not good for people who have been forced to apply for a new MasterCard credit card. If you have already applied It will actually show up on your credit history. It’s not fair for consumers to pay the price for two big companies facing each other.”

Bullet dodged to get visa?

What does this news mean for Visa? While the situation is still unfolding, the company is likely to be somewhat relieved. Had the ban continued, Visa would have lost a significant portion of revenue as customers would have had to use other cards.

However, it could be a tipping point for merchants, with high card fees being a point of contention in the industry for a long time, and Amazon potentially opening the door to industry-wide change.

Ian McDougall, Commercial Director in the expansion of European Open Banking ClosedAnd For Visa, he said, the willingness to negotiate fee terms at Amazon’s request sets a dangerous precedent for card schemes among e-commerce platforms: ‘If Amazon can negotiate card fees for its merchants, why can’t we? “

“For a Visa credit card customer, this is a short-term win. In the long run, it just underscores the importance of having alternative payment methods available to consumers so they are never left exposed again.

“To win the loyalty of both e-commerce platforms and end consumers, Visa needs to innovate quickly in order to survive in a world where card payments are not the only method for online transactions.

“It’s no surprise that Amazon and Visa are still negotiating an agreement. In the face of a significant drop in transaction volumes, I imagine Visa has been doing everything it can to reverse the decision since it was made last November. This was announced – just two days ahead of schedule. The initial final – indicates that Visa has likely moved significantly from the proposed fee structure.However, it leaves a small door open, which will, at least, buy a number of Visa credit card customers more time to prepare – whether it’s switching to a card Change Visa or an alternative payment method entirely.

Kevin Mountford, Platform co-founder UK RaisinsHe added, “It is not surprising that this dispute has been resolved, albeit temporarily. In what has been a painful feud in both the public and private sectors, these two leaders in the corporate market appear to have regained some of their relationship.”

“Amazon, the world’s largest retailer and home brand, will be under tremendous pressure to overturn their drastic decision not to accept Visa credit cards. Amazon could have been hurt if it had followed through on its threat, with many customers unable to use their preferred payment method. But, Many customers will listen to Amazon and change their payment method.The deal provided by Amazon where customers can earn credit by simply switching payment methods is still valid, allowing you to use the promotional link in the email they sent you.

“Although Amazon and Visa have been silent about communications between powerful companies, we can conclude that a deal is close. No new expiration date has been set so it appears that Amazon may want to put this disagreement behind it.

In the end, is the dispute just about fees? Mostly not. Mastercard does not face the same threat, and in fact, that threat could have prompted Visa not accepting some people to sign up for the Amazon rewards card, which is operated by Mastercard.”

On the merchant side, Carl McGregorAnd whereCo-founder and CEO said: Amazon’s recent decision to scrap the ban on Visa credit cards in the UK illustrates the moving feast that is the current payments system. It is basically impossible to maintain fair trading when consumers and merchants rely on a small number of payment giants, especially when the current payment methods are inflexible, inconvenient and time-consuming.

He continued: “Card fees have been a source of dispute between service providers and merchants for a long time, and prices have increased after Brexit, which has exacerbated the problem. But not all merchants at the mercy of card schemes have the same size, power and influence as today’s internet giants. Many of these companies are already paying thousands of pounds a year, only to face price increases in the middle of the decade. However, there are alternatives that retailers should consider, such as account-to-account payments, which bypass traditional card schemes entirely to save money and time for consumers and retailers. Times and payments change, and retailers ahead of the curve will be the ones to benefit the most.

Is it a start?

Ben Goodall Online Payments Company CEO Banked.comAnd He believes the situation was not an issue from the start.

“Amazon is smarter than just playing chicken with Visa for fees,” he said. “It is possible that they never intended to abandon Visa at this point, but they did an experiment to test customer loyalty for the Amazon brand against a payment brand.”

“There are two reasons to suspect this was an experiment on consumer behaviour. First, Amazon announced a ban on credit card payments from Visa – which has a minority market share in the UK – rather than Mastercard – the country’s most used credit card – despite the fact that both payment providers have raised their processing fees.Amazon is always playing the long game and has shown how far they are willing to go gathering information to find ways to innovate and serve sellers and consumers.The fact that this has also played into negotiations with Visa once again is just part of the committed strategy .

Secondly, Amazon also announced the ban during the Black Friday and Christmas shopping period – a time when spending is highest. Once again, this would have been an ideal moment to conduct a controlled experiment on customer loyalty and consumer behavior by collecting data on actions taken by key customers in particular.

“Amazon is one of the most consumer-focused companies in the world – and knowing what people want and how they want to pay for things is what keeps them at the forefront of innovations in payments, customer retention and profitability. Think about all that data Amazon just picked up when it announced a visa… Who changed to MasterCard/Amex? Who canceled their prime membership? Who applied for an Amazon card? Who did nothing? Who complained? All kinds of info you might want if you were building a super payment process for the future…”

David JarvisCEO and Co-Founder, GriffinAnd He added, “With new payment methods such as open banking entering the market and merchant costs significantly lower, Amazon has proven that it is willing to test these limits by exerting power over traditional card schemes. However, the back and forth begs the question as to whether reports on The “death of cards” is premature. The widespread moratorium on Visa card payments speaks of the ability of traditional card schemes to remain in the game, despite the emergence of open banking and the emergence of new technologies to provide consumers with more payment options.

However, some believe that this situation should prompt completely new payment solutions, with the context of the market providing a significant opportunity to modernize the available payment solutions.

“Commerce, especially e-commerce, is borderless and is driven by logistics, cost, transparency and business risk. Unfortunately, Brexit has had a negative impact on the first three drivers, with lower-than-expected delivery times, import taxes and higher cost of payments” . Bart Spritzma, Senior Payments Specialist, sire.

He continued, “This results in a lower consumer shopping experience and direct merchant repelling of price, as evidenced by the Visa/Amazon case. This highlights the need to find new solutions and technologies that benefit every retailer.”

  • Polly Jane Harrison

    Polly is a North Wales journalist, content creator and opinion-maker. She has written for a number of publications, usually hovering around the topics of fintech, technology, lifestyle and body positivity.

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