A Thing
The Green SheetGreen Sheet

Tuesday, January 18, 2022

Amazon pauses planned ban on UK Visa cards

Amazon pressed the hold button on its decision to stop accepting Visa credit cards issued by UK banks. Amazon disclosed the decision in a Jan. 17, 2022, email to UK customers, although it left open the possibility that it might follow through on its threat at a later date.

"We are working closely with Visa on a potential solution that will enable customers to continue using their Visa credit cards on Amazon.co.uk," the ecommerce giant's email stated. "Should we make any changes related to Visa credit cards, we will give you advance notice. Until then you can continue to use Visa credit cards."

Amazon revealed a planned ban on UK-issued Visa credit cards in November 2021, citing rising interchange. The ban, scheduled to begin on Jan. 19, only applied to Visa credit cards; consumers would be allowed to continue using their Visa-branded debit cards for Amazon purchases, the company said.

In an email to The Green Sheet at the time, a spokesman for Amazon stated, "These costs should be going down over time with technological advancements, but instead they continue to stay high or even rise."

Many industry experts saw the move as an Amazon negotiating tactic. Several large retailers, including the grocery chain Kroger Co. (in 2018) and Walmart (in 2016) took a similar approach—threatening Visa acceptance in select markets—backing off only after they were said to have negotiated lower interchange rates.

Visa doesn't have as big a share of the UK credit card market as its chief rival Mastercard does. At the end of 2020, about one third of credit cards issued in the UK were Visa branded; Mastercard held a 62 percent share, according to UK Finance, a banking and finance trade group. Amazon also offers a co-branded Mastercard in the UK.

Government scrutiny

News of Amazon's reversal came on the heals of a decision by British lawmakers to examine interchange pricing, following a report by the country's Payments System Regulator that it could find no evidence to justify ongoing card interchange hikes.

A PSR analysis revealed that interchange more than doubled between 2014 and 2018. The regulator told the Treasury, a committee within Parliament roughly equivalent to U.S. House Banking Committee, that regulatory action may be necessary. The Treasury Committee said it would conduct "an accountability hearing" with PSR leadership in March to explore next steps.

"Given that Visa and Mastercard currently dominate this space, it's vital to ensure that there is sufficient regulation and competition in the market so that businesses are not subject to ever-increasing servicing costs," Rt. Hon. Mel Stride MP, chair of the Treasury Committee, said in a statement.

The situation in Britain appears to be one of the unforeseen consequences of that country's withdrawal from the European Union. EU regulators capped interchange in 2015 at 0.3 percent per transactions for credit card and 0.2 percent for debit cards. However, the caps don't apply to transactions between EU merchants and customers outside the EU. So last fall, Visa and Mastercard boosted card-not-present interchange involving EU sellers and non-EU cardholders by nearly five-fold—to 1.5 percent for credit card and 1.15 percent for debit card payments.

The UK is a large ecommerce market. In 2019, UK customers account for one third (34 percent) of Western Europe's online purchases, according to the consultancy CMPSI.

CMPSI's analysis suggests that European merchants will be hardest hit by the latest price hikes, with costs increasing $228 million a year. In a blog post in February 2021 the consultancy said the planned rate hike "not only represents a barrier to trade, but the increase…targets online merchants at a time when lockdowns across Europe have forced many to close their face-to-face operations." end of article

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

2024 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
A Thing