With Amazon ditching Visa credit cards, will other retailers follow suit?

• In an email to customers, Amazon, attributing its decision on “high fees Visa charges”, said the change will go into effect on January 19 2022
• Visa debit cards and other credit cards including Mastercard and American Express will still be accepted
• Disappointed Visa claimed Amazon is threatening to restrict consumer choice in the future

For years now, merchants have complained about credit card transaction fees that eat up their revenue. In findings revealed by the British Retail Consortium last October, it was announced that the fees charged by payment firms have almost doubled in the last two years. This week, in a rather surprising move, Amazon announced that it will stop accepting Visa credit cards for payments in the UK from January 2021 onwards.

The online retail giant blamed Visa’s high credit card transaction fees for its decision. However Visa debit cards, as well as other credit cards such as Mastercard and American Express will still be accepted. “The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers,” Amazon said.

The retailer further expected costs to go down over time due to advances in technology, “but instead they continue to stay high or even rise”. Unfortunately, this isn’t the first time a credit card company has been in the limelight for such reasons. In fact, the British Retail Consortium accused Visa and Mastercard of cashing in during the Covid-19 crisis, by charging “excessive fees”.

In an email to its customers, Amazon said the new rules will be applicable starting January 19, 2021. “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.” Meanwhile in Singapore, Amazon added a 0.5% surcharge to all purchases made using Visa credit cards since mid-September.

Credit card companies like Visa would have to compromise on rates or risk fallout with the world’s largest online retailer. In response to Amazon’s announcement, Visa’s spokesperson said the company was unhappy and hoped to resolve the situation before the deadline went into effect. “We are very disappointed that Amazon is threatening to restrict consumer choice in the future. When consumer choice is limited, nobody wins.”

To recall, Visa and Mastercard had planned to raise fees for online cross-border purchases made between the UK and many countries in the European Union, after not being protected by the bloc’s cap on fees. To top it off, following the UK’s exit from the European Union, businesses in the country were subjected to higher credit card fees, from 2021 onwards.

Following Amazon’s e-mail, retail analyst Steve Dresser speculating the move by Amazon could be with a motive to have Visa fees bring down with its fees.

Amazon to stop accepting Visa credit cards from January next year. A challenge when such a big retailer decides to stop accepting payments…. Aiming to bring fees down? pic.twitter.com/vHYUkChO4K

— Steve Dresser (@dresserman) November 17, 2021

Could the move by Amazon indicate the slow death of credit cards?

Leading UK Buy Now Pay Later (BNPL) platform Butter, through its market analysis showed that the classical favourites of the debit and credit card are showing a notable decline in the face of buy-now-pay-later (BNPL) challenger platforms. “In just one year alone, the number of debit cards in issue with UK residents has fallen by -6% to just 92,172,000. At the same time, credit cards have seen a -3% decline with just 62,948 now in issue,” the firm said in an e-mail statement.

While the value of purchases made immediately via the use of a debit card has climbed 3% on an annual basis, there has also been a decline in those choosing to purchase on credit. Butter said the latest data shows that consumers purchased goods on credit to the tune of £13.9 million annually, down a huge -18% on the previous year — during the same timeframe, BNPL transaction values climbed 65%. 

Butter’s CEO and co-founder Timothy Davis added that it is abundantly clear that the greater flexibility, transparency and accessibility BNPL offers over purchasing with a credit card, for instance, resonates with today’s consumers. “So it’s no coincidence that credit card purchases have declined while the BNPL space has gone from strength to strength.”

Davis also reckons that for many, credit cards are a rabbit hole of additional charges, confusing bills, and uncertainty. “It also seems as though credit card costs no longer work for retailers and while Amazon has been the first to announce their removal as a route to transacting, we could see many more soon follow suit.”