Amazon to stop accepting Visa credit cards in UK
By Tom Espiner
Business reporter, BBC News
Amazon will stop accepting Visa credit cards issued in the UK from 19 January, the online retail giant has said.
It said the move was due to high credit card transaction fees but said Visa debit cards would still be accepted.
Visa said it was "very disappointed that Amazon is threatening to restrict consumer choice in the future".
Amazon said: "The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers."
The online retailer said costs should be going down over time due to advances in technology, "but instead they continue to stay high or even rise".
An Amazon spokesperson said the dispute was to do with "pretty egregious" price rises from Visa over a number of years with no additional value to its service.
Amazon is offering £20 for Prime customers to switch from using Visa to an alternative payment method, and £10 for other customers, if they have a Visa cards as their default or only payment method on their account.
Visa said in a statement it was "very disappointed that Amazon is threatening to restrict consumer choice in the future. When consumer choice is limited, nobody wins."
It said it had "a long-standing relationship with Amazon" and that it was trying to resolve the situation so customers would be able to use Visa credit cards with Amazon UK.
Amazon declined to say how much Visa charges the retailer to process transactions made on credit cards.
Visa also declined to comment though it claimed that on average it takes less than 0.1% of the value of a purchase.
Amazon and Visa said any changes in fees had nothing to do with Brexit.
Both Visa and its rival Mastercard have raised the so-called interchange fee on cross-border transactions between businesses in the UK and the European Union following Brexit.
The dispute between Amazon and Visa is to do with the fees the credit card company charges Amazon for its services in the UK.
Amazon is also considering dropping Visa as a partner for its US co-branded credit card.
It is in talks with payment networks, including Mastercard, American Express and Visa - as part of what it calls a standard process, the BBC has learnt.
This row between two corporate titans is now being played out in full view of their customers.
Amazon says Visa's fees are excessive, and an obstacle to low prices for consumers. Visa says its fees are competitive, has minimal effect on prices, and that nobody wins when choice is restricted.
Whether or not this row is about fees, or whether that is just a smokescreen is largely irrelevant to consumers using these services. They just know they may have to change the way they pay on Amazon.
Yet, the timing is significant. These messages to customers hit home harder when people are regularly using Amazon for Christmas shopping.
But it also means there is still time before January 19 for a compromise to be reached.
James Andrews, senior personal finance editor at comparison website Money.co.uk, said the move "will come as a blow to the millions of Britons" who use Visa credit cards, including Barclaycard and HSBC customers.
"With American Express also rejected by many UK retailers, that means people looking for rewards on their spending or trying to split the cost of shopping with a 0% purchase card on Amazon will be effectively forced to choose a Mastercard," he said.
He added that a rewards card that is offered by Amazon is "powered by Mastercard".
Mastercard's executive vice chairman Ann Cairns, said: "It's very important that customers have choice, and have the widest variety of ability to pay, whether that's through cards or from their bank accounts or cash, and remember that it is never the consumer that pays fees."
"We talk to Amazon all the time because obviously we are two big global businesses and Amazon is one of our top customers around the world."
Retail analyst Steve Dresser said in a tweet that Amazon could be aiming to bring Visa fees down with its move.
The Federation of Small Businesses (FSB) said credit card fees "charged by the handful of card providers which dominate the cashless payment space have soared in recent years".
"Small businesses are almost always charged more for card terminals than big corporates - so when online giants start throwing down the gauntlet, you know the situation is becoming critical," said FSB national chairman Mike Cherry.
Businesses have had ongoing concerns about credit card fees from the major providers.
Last October, Visa and Mastercard were accused by the British Retail Consortium (BRC) of charging excessive fees. The trade body said they had doubled in two years.
At the time, the BRC warned that retailers would be forced to pass on costs to consumers, with credit card bills rising by up to £40.
The Payment Systems Regulator said there were "real questions about how well the cards market is working".
"We will look into how well this market is working, including the issue of increasing card fees," a spokesman for the regulator said. "If necessary we will intervene to address any issues we identify."
He said a final strategy would be published in the new year.
Visa shares ended Wednesday's New York trading day down by 4.7%.
Amazon to block UK Visa credit cards from January 2022
Amazon will stop accepting Visa credit cards in the UK from 19 January 2022, meaning cards from some of the country’s largest banks will no longer work with the world’s biggest online retailer.
The news was communicated to customers today via email in which Amazon revealed the change is due to the ‘high fees’ Visa charges for processing credit card transactions.
Visa debit cards and credit cards from other payment networks, such as Mastercard, will still be accepted.
Why won’t Amazon accept Visa credit cards?
Earlier this year, Visa increased its ‘interchange fee’ for some online credit card payments fivefold to 1.5%. The fee is an amount taken from a payment to cover the costs of sending money between your bank and a retailer’s bank.
The higher fee is charged on payments from UK customers to EU merchants. It might be that Amazon – with a European HQ in Luxembourg – counts as an EU merchant in this case, though Which? did not receive confirmation of this from either Visa or Amazon ahead of publication.
Before Brexit, interchange fees like these were capped at 0.3% by the European Commission. Mastercard has also increased its fees on cross border amazon visa credit card apply to 1.5%, though Amazon has not announced a similar ban on Mastercard credit cards. We asked Amazon if it would be banning Mastercard payments as well on this basis and it declined to comment.
Gareth Shaw, Which? Head of Money said: ‘There have been long-standing concerns about soaring credit card fees that affect both consumers and businesses.
‘We would encourage Amazon and Visa to urgently find a resolution to prevent any restriction on consumer choice. Regulators should also look very closely at this development and work to establish whether fees in the credit card market are fair and what impact this will have on competition.’
Which credit cards will be affected?
Amazon’s announcement will come as a shock to UK customers who use Visa credit cards with the retailer. Major Visa credit cards include Barclaycard, HSBC and Nationwide.
However, many major credit cards operate on the Mastercard network – including those from Natwest, Halifax and TSB. Amazon’s own credit card also uses the Mastercard network.
Since Amazon will continue accepting Mastercard credit cards, many customers will not be affected at all. Still, this unexpected turn will be frustrating for many UK credit card customers.
A Visa spokesperson told Which?: ‘UK shoppers can use their Visa debit and credit cards at Amazon UK today and throughout the holiday season. 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, so our cardholders can use their preferred Visa credit cards at Amazon UK without Amazon-imposed restrictions come January 2022.’
When should you pay by credit card?
Amazon customers with Visa credit cards could miss out on a major consumer protection thanks to this change.
If you pay via credit card for goods or services over £100 and under £30,000 you’ll be able to claim money back from your card provider under Section 75 of the Consumer Credit Act if something goes wrong.
Any Visa credit cardholders who simply switch to a debit card will no longer have this powerful protection. Amazon customers who want Section 75 cover will need to switch to a Mastercard or American Express credit card, which may involve a new application that could impact their credit score if they don’t already have one.
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Why is Amazon stopping Visa credit card transactions in UK – and how is Brexit involved?
Amazon has taken the unusual step of announcing it will no longer accept payments from Visa credit cards issued in the UK from January 2022, pitting two huge companies against each other.
The e-commerce company said Visa’s fees are too high, something smaller retailers have complained about for years.
Visa swiftly rejected the complaint and said it was “very disappointed” by the decision.
What is the dispute between Amazon and Visa?
Visa recently increased the amount it charges to process payments. Anyone accepting card payments has to hand over “interchange fees” to Visa or other card networks like Mastercard. The fee is to cover the cost of processing payments.
Amazon said only that it would stop accepting UK Visa credit cards because of “high fees” without giving any further information.
Is Brexit a factor?
When the UK was in the EU its was bound by a 2015 EU regulation that capped interchange fees at 0.2 per cent of the cost of the transaction for debit cards and 0.3 per cent for credit cards.
According to Brussels’ calculations at the time, the change would save consumers and businesses €6bn a year.
The UK’s exit from the EU means that credit card networks are not required to stick to those limits.
Visa reportedly decided earlier this year to hike fees for cross-border transactions from 0.3 per cent to 1.5 per cent.
According to the British Retail Consortium, which lobbies on behalf of large retailers, fees on card sales for transactions between the UK and EU have jumped by £150m this year.
Andrew Cregan, payments policy adviser at the British Retail Consortium, said: “British merchants alone will pay an extra £100,000 every single day just to process amazon visa credit card apply transactions, holding back British exports to Europe.”
However, both Amazon and Visa have said that this is not the Amazon visa credit card apply issue. Amazon recently started charging surcharges on Visa transactions in Australia and Singapore, citing high fees.
Might Amazon ditch cards altogether?
Some payments and IT experts have suggested Amazon is seeking to persuade people to ditch credit and debit cards for newer payment methods.
The e-commerce giant could take payments from customers’ accounts directly, cutting out middlemen like Mastercard and Visa. While Amazon’s sales are vast, its margins are tight. Cutting out card fees would provide a big boost to profits or allow Amazon to further undercut rivals.
While such a shift in consumer habits would take time it is not unthinkable. The company has not addressed this directly but did say: “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.”
Will Visa and Amazon reach a compromise?
It is possible that Amazon is using its power in the hope of pressuring it into reducing its fees but will ultimately back down.
Amazon has given a deadline of 19 January meaning there is still some time – including the busiest shopping months of the year – for negotiations to be held.
David Ritter, financial services strategist at CI&T, expects the two sides to reach a compromise.
“Amazon is a retail giant so it has some leverage, but there’s no way they won’t accept Visa cards,” he said.
“Cards issued by Visa and Mastercard are ubiquitous and many of these cards also sit behind digital wallets like Apple Pay and PayPal.
“Plus, Amazon has automatic subscriptions tied to Visa cards – most importantly its Prime subscriptions – that consumers would have to change. At the amazon visa credit card apply of the day, the consumer wants to use their preferred payment method and they won’t want Amazon to tell them it can’t be Visa.”
Will other sellers do the same?
Most experts think that other retailers are unlikely to follow Amazon’s lead because they are reliant on payments using Visa cards. They have nothing like the clout that Amazon has and any attempt to apply pressure to Visa in the same way would almost certainly be futile.
Amazon tells folks it will stop accepting UK Visa credit cards via weird empty email
Amazon has confirmed it will no longer accept payment via Visa credit cards issued in the United Kingdom after several Reg readers wrote in complaining of a cryptic message they'd been sent this morning.
The online sales giant has indicated the move was "due to the high fees Visa charges for processing credit card transactions."
Visa seems to be hoping Amazon will budge, telling The Reg that it was "work[ing] toward a resolution so our cardholders can use their preferred Visa credit cards at Amazon UK without Amazon-imposed restrictions come January 2022."
According to a statement on Amazon's UK website:
One of the bemused readers this morning speculated that Amazon had either "just utterly borked a mailing test" or had just decided to "cut off probably around half their customers' payment options."
The online souk will still accept Visa debit cards, but many Brits purposefully use credit cards for big online purchases because it can protect you from fraud. Under Section 75 of the Consumer Credit Act 1974, the credit card company is jointly and severally liable for any breach of contract or misrepresentation by the retailer or trader. This means punters can make a claim with the credit card provider to get their money back for goods or services, provided they cost more than £100 and less than £30k.
The initial announcement to users was contained in an empty email amazon visa credit card apply the subject line "Visa credit cards will not be accepted, starting 19 Jan, 2022" with nothing in the body text but a cryptic=============================== Amazon.co.uk ===============================
While it included DKIM signatures for amazon.co.uk and amazonses.com, and looked like "a legit email," one reader mused: "Why are Amazon dropping Visa, and why would they inform customers in a basically blank email?"
We're sure Amazon's move to restrict payments on Visa credit cards has nothing to do with its own Platinum Mastercard service.
Another Reg reader said she and her colleagues had all received the strangely empty mail, and they'd already been dealing with NatWest converting all of its debit cards to Mastercard from Visa.
The NatWest move happened back in February this year and affected all the banking group's retail and business debit cards in an agreement that covers all its brands: NatWest, Royal Bank of Scotland, Ulster Bank, and Coutts, "totalling 16 million cards."
NatWest stopped offering Visa credit cards in 2020.
The Amazon.co.uk website is run by Amazon Europe Core SARL and Amazon EU SARL, headquartered in Luxembourg. According to its full accounts made up to 31 December 2020 at Companies House, Amazon EU SARL had a net turnover of €43.84bn, up from €32.18bn the year before. The EU-registered firm has "branches" in France, Germany, Italy, the Netherlands, Poland, Spain, Sweden, and the UK, and reports consolidated accounts under US parent firm Amazon.com Inc.
According to its latest annual accounts, it average american savings 2020 holds at least 20 per cent of a limited UK services company as well as a limited Irish data services company, fulfilment centres in Poland and Spain, and a logistics unit in Italy.
Visa and Mastercard this year both raised their interchange fees from 0.3 per cent to 1.5 per cent for transactions made via credit card between the UK and the EU. The Commission caps these fees, but Brexit means the cap no longer applies to UK-EU transactions.
According to the FT, which broke the story in March, Visa also plans to increase so-called scheme fees on UK-EU transactions from July next year, as well as charging more for domestic payments using British company credit cards from April 2022.
Amazon and Mastercard did not immediately respond to a request for comment.
A Visa spokesperson said: "UK shoppers can use their Visa debit and credit cards at Amazon UK today and throughout the holiday season.
"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, so our cardholders can use their preferred Visa credit cards at Amazon UK without Amazon-imposed restrictions come January 2022."
Simon de Broise, a senior associate at Collyer Bristow LLP, commented: "It remains to be seen whether Amazon will make good on its threat, or whether there is a deal to be done, but either way it is a very significant development in the payments sector."
He added that the announcement "demonstrates how much the payments sector has matured in recent years. Such a move against one of the card schemes would have been unthinkable even a few years ago, but retailers are now starting to benefit from the proliferation in the sector and so may feel that they can move away from the traditional players without damaging their businesses." ®
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