Amazon is considering dropping Visa as a partner on its US co-branded credit card, after previously confirmed it would stop accepting Visa credit cards in the United Kingdom as disputes over payments intensified.
A spokesperson said the e-commerce giant is in talks with several payment networks including MasterCard, American Express and Visa, which it called its standard procedure for reviewing its co-branded credit card agreements.
Visa declined to comment on the co-branded card. MasterCard and American Express did not respond to requests for comment.
Earlier, Visa shares closed down 4.7 per cent after Amazon said it would stop taking Visa credit card payments in the UK from January 19, 2022. In a statement, it said such charges “are going down over time in line with technological advancements, but instead they remain high or continue to rise.”
In recent months, Amazon has introduced surcharges on customers using Visa credit cards in Singapore and Australia, citing higher fees as relations between the two firms deteriorated.
Since the UK’s exit from the EU, the EU-enforced limit on charges charged by card issuers no longer applies in the UK, meaning providers are free to raise fees.
Visa last month began charging 1.5 percent of the transaction value for credit card payments made online or over the phone and 1.15 percent for debit card transactions between the UK and the EU, up 0.3 percent and 0.2 percent, respectively.
According to analysts, the average credit card processing fee across the industry ranges between 1.5 percent and 3.5 percent of each transaction.
Historically, retailers accepted processing fees by major credit card firms as the cost of access to their vast networks of card users, analysts said, but that could change.
Laura Hoy, equity analyst at Hargreaves Lansdowne, said the move marks “a turning point in the payments industry,” adding Amazon may hope to bring more customers to its own payment system.
“Ultimately, we think Amazon has the edge in this game of chicken — whether customers adopt its own payment system or Visa pays and reduces its fees, either is a win for the retail giant,” Hoy said.
In the past, other large retailers have settled fee disputes with Visa after announcing that they would stop carrying Visa credit cards in narrow areas of their businesses.
For example, Walmart’s unit in Canada said in 2016 that it would stop accepting Visa credit cards after being unable to reach an agreement on fees. Seven months later, the companies said they had resolved the issue as about 20 stores stopped taking Visa cards.
Amazon customers can still use Visa debit cards, Mastercard and Amex credit cards and Eurocards in the UK, Amazon said in a note to customers.
Visa said in a statement that it is “disappointed that Amazon is threatening to restrict consumer choice.”
“We continue to work towards a solution so our cardholders can use their preferred Visa credit card on Amazon UK without restrictions imposed by Amazon in January 2022,” Visa said.
Shares of rival Mastercard fell 2.8 per cent on Wednesday. Amazon shares rose 0.2%. American Express shares closed down 0.7 percent.
The British Retail Consortium said other retailers in the United Kingdom faced higher fees for cross-border payments following Britain’s departure from the European Union.
© Thomson Reuters 2021