Just two days before it was meant to stop accepting Visa credit cards in the UK, Amazon has made a U-turn.
In November, Amazon said it was pulling the plug on the payment method used by 27% of Brits because of high “interchange fees”—a charge levied on merchants that goes to issuing banks whenever a customer pays with plastic. But on Jan. 17, the e-commerce giant said that Visa credit cardholders will continue to be able to buy stuff on for now.
But the two firms remain at an impasse. They’re working closely on a “potential solution” but there is no clarity yet on what that might be. And while Amazon’s tone has shifted from threatening to reconciliatory, it’s not ruling out banning the card at a future date, its email to customers reveals. “Should we make any changes related to Visa credit cards, we will give you advance notice,” it said.
Are Amazon and Visa in a deadlock?
After Brexit, both Visa and Mastercard hiked up the interchange fees from 0.3% to 1.5% for credit card users. Amazon has been contesting the increase—only with Visa, not Mastercard—arguing that it’s an “obstacle” that stops customers from getting the best price. (Not only Amazon, but even UK’s payments regulator is irked by these “unnecessary” increases that are costing British retailers an extra £100,000 a day.)
Widely considered pressure tactics to get better rates, Amazon’s attacks on Visa credit cards have been unrelenting and universal. The company has been offering Brits up to £20 ($27) for setting a debit or non-Visa credit card as the payment default. It’s given customers in Australia and Singapore similar monetary incentives to move away from Visa credit cards, and imposed a surcharge for Visa credit cards in both countries. In the US, Amazon is debating ditching Visa as a partner for its Prime Rewards credit card.
Still, severing the cord entirely isn’t in Amazon’s best interests either. Even though Visa is a smaller company in terms of market cap and revenue, Amazon would take a hit. “Amazon simply had to weigh up the potential cost of abandoned purchases and the potential loss of traffic to its website because of the ban with the cost of paying Visa’s transaction fees,” says Myron Jobson, a broker at Interactive Investor.” The scales tipped in Visa’s favor.”