Amazon won’t accept U.K. Visa credit cards in fight over fees

Amazon has dragged the British public into an argument it is having with Visa, by telling its customers in the country that they will soon be unable to use their U.K.-issued Visa credit cards on the e-commerce platform.

As of Jan. 19, Amazon told British customers in an email, it will stop accepting the cards “due to the high fees Visa charges for processing credit card transactions.” It added that U.K.-issued Visa debit cards will still be usable, as will Mastercard, Amex, and Eurocard cards.

Visa, which raised one type of credit card transaction fee fivefold earlier this year—thanks to Brexit removing restrictions on it doing so—said it was “very disappointed” at what it characterized as a threat from Amazon to “restrict consumer choice,” adding that it continued to “work toward a resolution” with Amazon.

“When consumer choice is limited, nobody wins,” a Visa spokesperson said in an emailed statement.

“The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers,” Amazon said in its own statement. “These costs should be going down over time with technological advancements, but instead they continue to stay high or even rise.”

The company, which earlier this year scotched rumors that it was preparing to accept cryptocurrency payments, also said it would “continue innovating on behalf of customers to add and promote faster, cheaper, and more inclusive payment options to our stores across the globe.”

Fee hikes

Amazon is hardly the only retailer to complain about rising card fees in the U.K., particularly as the vast majority of retail spending now takes place on cards. A couple of months back, the British Retail Consortium (BRC) complained that “card firms are abusing their dominant market position” and called on Parliament to step in.

Libby James, a card payments expert with Merchant Advice Service in Nottingham, England, said that for large retailers, such as Amazon, that sell items on razor-thin profit margins and make most of their money by selling in high volumes, Visa’s fee hikes make continuing to accept their credit cards commercially unviable.

Nonetheless, she said that Amazon’s announcement that it would stop accepting U.K.-issued Visa credit cards “came as a shock to us in the industry.”

“Amazon is certainly making a huge statement and I have no doubt other giants will follow,” she said.

In June last year, the U.K.’s Supreme Court ruled that Visa and Mastercard’s interchange fees—paid by card-accepting businesses to the customer’s bank—were illegally restricting competition. The BRC wants to see these charges abolished, and also wants regulation of the card scheme fees that go to the likes of Visa and Mastercard themselves.

Visa and Mastercard this year both raised their interchange fees from 0.3% to 1.5% for credit-card transactions between the U.K. and the EU; intra-EU interchange fees are capped by the bloc, but the U.K. has now left the EU, so the cap no longer applies to these transactions. As of a month ago, Visa also stopped refunds of the interchange fees when customers return the goods they buy.

The British Retail Consortium said Wednesday that the hikes were costing British retailers $135,000 more each day, while also adding costs for Italian, German, and Dutch retailers selling into the U.K. “These increased charges will add to existing cost pressures from rising commodity prices, wide-scale labor shortages, and increased haulage and shipping costs, making it more challenging for retailers to absorb these new charges from card firms,” the BRC said.

The card firms were planning to hike their interchange fees in the U.S. this year too, but postponed the move until April 2022 following pressure from retailers and lawmakers who pointed out that the U.S. was “still reeling from the ongoing pandemic.”