A War Between Giants: Amazon to ban Visa credit cards

November 25, 2021

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2 min read

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What's going on here?

The retail giant Amazon has announced it will be banning customers from using UK-issued Visa credit cards from January 2022.

What does this mean?

The online retailer issued an email to customers on  Wednesday 17 November to confirm that it would be banning Visa credit cards from January 2022. Amazon has made clear that this ban will only apply to UK-issued Visa credit cards, meaning those within the EU will not be affected. This decision has been heavily linked to a rise in fees, particularly interchange fees which are additional costs for cross border credit card transactions. In 2015 the EU introduced a cap on these interchange fees which no longer apply to the UK following Brexit. This has resulted in operators increasing fees, with Visa planning on upping the fees from 0.3% to a whopping 1.5%. Visa has heavily defended its rise in fees stating that its prices are competitive and that Amazon’s move has restricted customers’ choice. The announcement resulted in Visa’s US-listed shares falling almost 5%.

What's the big picture effect?

Although a rise in fees has been cited as the reason for this bold move by Amazon, it has been suggested that this battle goes deeper than that. The timing of this announcement has raised questions about the impact it will have on Christmas shopping on Amazon. However, some have suggested this timing will encourage a compromise to be made between the companies before the January deadline. Further, the ban reflects the wider issues currently faced by UK consumers in terms of a general rise in costs. In fact, the British Retail Consortium has raised concerns over the cards market, suggesting that fees may have to be passed onto consumers, further increasing the price of commodities. This is perhaps why many retailers are now looking towards other forms of payments such as Open Banking and Crypto in order to reduce the fees of processing transactions. Amazon has further fuelled these rumours after listing job postings relating to Crypto.

This ban may also be a move to push Amazon’s own payment solutions with advancements in online banking leading to a new form of “Open Banking”. This would allow companies like Amazon to directly take money out of a consumer’s bank account, effectively cutting out the middleman. However, this has raised concerns over what protection would be offered to consumers if this were the case. Section 75 of the Consumer Credit Card Act protects those buying goods with credit cards by allowing them to claim back against the credit provider, rather than the supplier, if there is an issue with the goods. Amazon’s ban of Visa credit cards therefore reduces this consumer protection. 

Whilst there are mixed opinions on this move by Amazon, it will perhaps lead to other retailers moving away from credit cards in the future, adding fuel to the race for new payment methods.

Report written by Nell Pringle

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