Sunday, November 28

Consumers stand in the middle as Amazon and Visa collide over fees

LONDON (AP) – Customers are caught in a growing dispute between Amazon and Visa over transaction fees.

The online retail giant decided this week to prevent shoppers from using Visa credit cards issued in the UK starting next year, the latest volley in a battle between payment networks and retailers. Amazon blamed “high fees” for its decision, escalating action in Singapore and Australia, where it has started charging 0.5% additional fees for using credit cards from the payment juggernaut.

Seattle-based Amazon and San Francisco-based Visa are two of the biggest forces in retail, and their showdown on fees marks a turning point in the payments industry, said Laura Hoy, equity analyst at Hargreaves Lansdown.

“In the past, Visa was able to charge whatever it thought was right because of its vast network of card users – not accepting Visa meant excluding a huge pool of potential customers,” said Hoy. “More merchants accepting Visa meant more customer signups and the virtuous loop kept turning.”

Amazon is hoping to break that chain by cutting the card company out of its payment options in the UK, and it is likely one of the few players with enough power to do so, Hoy said.

According to an industry publication, Nilson Report, Visa is the dominant payment network in Europe with 58% of the market, while MasterCard accounts for 41% and American Express accounts for 1%. Visa has a similar presence in the US, where it has about half the market while its two competitors combined make up about a third.

In the US, Amazon could drop Visa as the provider of its Prime credit card. The company is in talks with MasterCard and American Express as part of a standard review of its co-branded credit card agreement, a spokesman said.

Merchants have been grumbling about card fees for years, which include various payments to banks on both sides of the transaction and the card network itself.

In the UK, the British Retail Consortium has warned that “improper fee increases” increase the cost consumers pay for goods and services. The country’s Supreme Court even ruled in 2020 that interchange fees charged by a buyer’s bank are unlawful.

The ruling came shortly before the UK left the European Union, which led to rising interchange fees in the UK as card companies were no longer required to adhere to the block’s caps on these fees.

Major card brands have increased these fees for some EU-UK transactions from 0.3% pre-Brexit to 1.5%, according to the British Retail Consortium.

Meanwhile, other fees paid to the card networks themselves have also increased in the UK, doubling between 2014 and 2018, the group said.

“With retailers now spending over £ 1 billion ($ 1.3 billion) accepting card payments, it’s no surprise that many retailers are frustrated by these rising fees,” said Andrew Cregan, group payments policy advisor.

It called on regulators to tackle so-called “anti-competitive card fees”.

“Ultimately, it will be consumers who suffer from higher prices, unless those rising costs can be mitigated,” Cregan said.


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