Amazon (NASDAQ: AMZN) has reportedly decided to backtrack on its initial plans to stop accepting Visa credit cards in the United Kingdom.
The digital commerce company had been expected to stop UK consumers from using their Visa-issued credit cards for purchases via its platform, effective from January 19, 2022. However, in a statement released on Monday (January 25, 2022), the team at Amazon confirmed that the change “will no longer take place.”
In statements shared with CNBC, an Amazon representative said that they are now “working closely with Visa on a potential solution that will enable customers to continue using their Visa credit cards on Amazon.co.uk.”
Notably, Amazon had made the surprising or unexpected announcement back in November 2021, noting that the “high fees Visa charges for processing credit card transactions.” At that time, Visa had stated that it was “very disappointed” in the decision and also said it would be working to resolve the matter with Amazon.
The two firms have had various issues in the past, with Amazon confirming its own plans to offer a 0.5% surcharge on Visa credit cards in Australian and Singapore markets in 2021.
At present, it is not quite clear just why Amazon has backtracked on its decision to stop consumers from using Visa credit cards in the United Kingdom. It’s also not immediately clear or certain whether this move is just temporary or permanent.
A Visa representative told CNBC that Amazon customers can “continue to use Visa cards on Amazon.co.uk after January 19 while we work closely together to reach an agreement.”
After Brexit, Visa and competing payment processing firm Mastercard have increased their interchange fees, the cut or percentage they take on virtual transfers between the United Kingdom and the EU.
Payment card networks have been permitted to increase their charges after a European Union capping on interchange fees was longer being applied in the UK.
But Amazon and Visa confirmed that the dispute isn’t actually related to the United Kingdom’s withdrawal from the EU. They claim that the decision has been seen by industry professionals as a means for Amazon to get some negotiating influence or power over Visa to reduce the hefty fees it charges.
David Ritter, a financial services analyst at IT company CI&T, noted that the about-face from Amazon does not really come as a surprise.
He pointed out that the decision could have been challenging given that clients’ Visa credit cards might be linked up to virtual wallets such as Apple Pay, Google Pay and PayPal, or even Amazon’s Prime subscription service.
Ritter added:
“Amazon is a retail giant so it has some leverage, but there’s no way it won’t accept Visa cards. It’s more likely that Amazon has been applying pressure tactics. Major players in the retail space tend to have bespoke rates with payment firms, rather than paying published rates. The move by Amazon is likely a way to negotiate a longer-term agreement on rates, or even to push for a freeze to its current rates.”
It’s worth noting that Amazon isn’t the only one that has expressed concerns about the fairly high costs associated with large payment card networks. Grocery chain Kroger had placed a temporary ban on Visa credit cards at several of its locations.
