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MPC asks Fed to review Amazon UK Visa card issue

Wednesday, January 19, 2022 — 10:02:54 (EST)

WASHINGTON, January 19, 2022 – The Merchants Payments Coalition today called on Congress and federal agencies to “look closely” at Amazon’s recent announcement that it would stop accepting Visa credit cards in the United Kingdom. Even though Amazon changed its mind this week, MPC said the high “swipe” fees that prompted the move are much higher in the United States and drive up consumer prices here even more.

“Despite the reversal, Amazon’s move shows how frustrated even the largest retailers are over skyrocketing swipe fees, and the situation is even worse for small retailers,” MPC said. “This is not the first time a major retailer has tried to say no to a major card network, but cards are so dominant today that it’s virtually impossible to refuse them as payment. Lack of competition lets card networks like Visa and Mastercard and the banks that issue their cards get away with price fixing and practices that would not be tolerated in any other industry.”

“As bad as the situation is in the United Kingdom, the pain for merchants is far worse in the United States, which has the highest swipe fees in the industrialized world,” MPC said. “U.S. authorities should look closely at what Amazon has done in the UK and need to be aware that many retailers here feel the same. It’s time to bring about competition that will require the U.S. card industry to play under the same rules as any other business.”

MPC’s comments came in a letter to the Federal Reserve, Federal Trade Commission, Department of Justice, Consumer Financial Protection Bureau, the House Financial Services Committee and the Senate Banking, Housing and Urban Affairs Committee.

Amazon announced in November that it would no longer accept Visa cards issued in the United Kingdom as of today, citing high fees charged to process the transactions. This Monday, however, Amazon told customers in an email that the ban would not take effect as scheduled, and that it is “working closely with Visa on a potential solution.” No reason was given, but the wording suggested that details remain unresolved.

The average swipe fee charged on Visa credit cards in the UK is 0.55 percent of the transaction amount, or nearly double the maximum 0.3 percent allowed under European Union rules before Brexit, and totaled $369 million in 2020, according to payments consulting firm CMSPI. In addition, the rate for online transactions between the UK and the EU rose to 1.5 percent in October, costing UK merchants an estimated $48.6 million a year, according to analysis done by CMSPI for the British Retail Consortium.

Rising swipe fees have been a concern on both sides of the Atlantic for years, but the impact is far greater in the United State, where the market is larger and cards are more widely used. Swipe fees on Visa credit cards totaled $43.5 billion in the United States in 2020, more than 100 times the amount collected in the UK, according to CMSPI. And Visa’s 2.22 percent average swipe fee in the United States is four times the UK rate.

In addition, Visa’s market dominance is significantly stronger here. Visa controls only 39 percent of the UK credit card market, compared with 55 percent by transaction volume in the United States, while its closest rival, Mastercard, accounts for only 22 percent of the U.S. market. Visa and Mastercard together control nearly 80 percent of the U.S. market and swipe fees for their credit cards totaled $61.6 billion in 2020, up 137 percent over the previous decade, according to the Nilson Report.

Processing fees for all types and brands of U.S. cards totaled $110.3 billion in 2020, up 70 percent over 10 years, according to Nilson. At current rates, merchants receive less than 98 cents on the dollar when a credit card is used and have to adjust prices accordingly. Swipe fees are most merchants’ highest cost after labor and equate to an estimated $724 a year for the average U.S. family, according to CMSPI.

U.S. swipe fees are expected to get even higher: Under pressure from Congress as merchants struggled to recover from the pandemic, Visa and Mastercard last year postponed $1.2 billion in increases that were scheduled to take effect in April 2021 but said they would take effect this April instead. The increase would come as merchants still face challenges from COVID-19 and consumers are facing the worst inflation in 40 years. With the card industry collecting its percentage on larger amounts because of inflation, swipe fees are “a multiplier effect that ultimately comes out of the pockets of consumers,” MPC said.

A number of prominent retailers have tried to stop taking Visa credit cards over the years. But with Visa controlling the market and consumers conditioned to expect the cards to be accepted, none have succeeded for long. Walmart stopped accepting Visa credit cards at its stores in Canada in 2016, but the policy lasted only seven months. In 2018, Kroger stopped accepting Visa credit cards at over 250 of its Food Co. and Smith's Food & Drug Store locations but resumed the following year.

About MPC

The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants.

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Source: Company press release.