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After months of negotiations, a clash of the titans row that has engulfed the payments industry and caused wider debate appears to be over, as the companies announced a new arrangement regarding payment fees. However, could further fee regulation be on the cards?
Amazon, which had back in November threatened to prevent the use of Visa credit cards in the UK due to the fees that the card giant was charging to process payments, has now said it has reached a compromise.
At the time, Visa’s stocks fell by 5.3 percent on the news, although it has now since recovered.
Although Amazon eventually backed down on this threat in the UK, customers in Singapore and Australia continued to have to pay a surcharge on Visa card purchases following previous actions carried out by the retailer in 2021.
However, Amazon also announced that the surcharge on Visa cards in Singapore and Australia has been removed.
“We’ve recently reached a global agreement with Visa that allows all customers to continue using their Visa credit cards in our stores,” said a spokesperson for Amazon.
The spokesperson continued: “Amazon remains committed to offering customers a payment experience that is convenient and offers choice.”
The news has not raised too many eyebrows in the payments industry.
"I think it's safe to say that Amazon secured what it was looking for, a reduction in the interchange fees it pays to process Visa credit card transactions,” said Jason Mikula, managing director at 312 Global Strategies, a Netherlands-based consultancy.
This outcome is not surprising, he said. “Both in the near term and especially in the long run, Amazon has the upper hand.
“In the near term, no longer accepting Visa credit cards, which cost more to process than Visa debit cards, would likely result in some abandoned carts and a lower conversion rate, but anyone who holds a Visa credit card will have another form of payment available,” he said, adding that it seems unlikely that Amazon would lose many customers as a result of no longer accepting Visa credit cards.
Ouliana Smith, a UK-based payments consultant, agreed that the outcome is not surprising.
“With advancements in technology giving rise to new payment methods that are rapidly evolving, one could argue that card fees are becoming obsolete in the digital age,” she said.
“What’s more, Visa obviously wants to be seen more willing to work collaboratively with merchants on new payment options,” she continued. “Greater industry collaboration will help ensure that payments become more affordable and accessible for everyone.”
Regulation needed?
The threat to ban Visa credit card usage across Amazon in the UK prompted a response from the UK’s Payment Systems Regulator (PSR) and raised concern among campaign groups.
Which?, the UK-based consumer affairs group, said in a statement that it welcomed the news.
“Using a credit card to pay offers shoppers valuable legal protections that debit cards can’t and removing this option for Visa cardholders would have meant fewer rights for millions of consumers,” said a spokesperson for the group.
They continued, however, to note there have been long-standing concerns about credit card fees. “This affects both customers and businesses. The regulator must urgently take forward its proposals to examine whether card fees are fair and what impact this will have on competition.”
UK politicians on the Treasury Select Committee have also been prompted to investigate the fees that both Visa and Mastercard are charging.
Prior to a public hearing that is due to take place on March 9, the committee has published correspondence between its chair and the PSR claiming that there is no evidence that the costs of operating payment services have increased for card issuers to warrant the recent fee rises.
Following Brexit, both Mastercard and Visa increased cross-border interchange fees between the UK and the EU. Debit card cross-border interchange rose from 0.2 percent to 1.15 percent, while credit card rates rose from 0.3 percent to 1.5 percent.
In addition to this, scheme fees, which are paid by businesses to the card networks for use of the service, have risen substantially, with average fees more than doubling between 2014 and 2018, according to the Treasury Select Committee.
In the correspondence with the Treasury Select Committee’s chair, Mel Stride, the PSR suggested that if it becomes apparent that there are no real prospects of improving competition in the market, it would be willing to consider additional regulation to protect consumers and businesses from rising prices.
