Amazon to ban UK-issued Visa credit cards in ‘a challenging negotiation’

Last week, on November 17, 2021, Amazon emailed its customers in the UK, telling them it would no longer accept Visa credit cards for payment. The retailer put the blame on “the high fees Visa charges for processing credit card transactions.”

The change would not go into effect until January 19, 2022, yet Bloomberg reports that “Visa shares slumped 5.2 percent to $203.96 at 9:36 am in New York. They’ve dropped 6.6 percent this year, compared with a 29 percent increase for the S&P 500 Information Technology Index.”

As of 13:36 EST on November 22, 2021, Visa shares had slipped even further, to $195.48.

According to the Financial Times, Visa’s chief executive calls Amazon’s decision to ban UK-issued credit cards from its platform “odd” and “unfortunate,” but says he expects the spat to be resolved.

“Clearly, we’re in a challenging negotiation,” Al Kelly tells the Financial Times. “What’s different here is that Amazon unfortunately decided to take the negotiation challenges that we’re having public and oddly has chosen to threaten to punish consumers.”  

Amazon’s announcement on November 17 that it would stop accepting Visa cards in the UK from January was part of “challenging negotiations" with Visa over payment rates, he says. 

The Financial Times also notes that Visa’s competitor MasterCard Inc has similar fees to Visa in the UK, according to payments firm Bambora, but it was Visa that was chosen to be deleted.

“I find it quite odd that they’re claiming they did this because of the high cost of acceptance of these in the UK," Kelly says. “It’s just absolutely inaccurate."

According to Bloomberg, UK customers can still use Visa debit cards, as well as MasterCard Inc. and American Express Co. credit cards, as well as Visa credit cards issued outside of the UK. The retailer offered users twenty pounds ($27) off their next purchase if they set a debit or non-Visa credit card as their payment default. In Singapore and Australia, Amazon has already imposed a surcharge for those using Visa credit cards.

“We are very disappointed that Amazon is threatening to restrict consumer choice in the future. When consumer choice is limited, nobody wins,” a Visa spokesman says in an email to Bloomberg. “We have a long-standing relationship with Amazon, and we continue to work toward a resolution.”

Another Bloomberg article points out why the retailer may have made the move to restrict Visa credit card payments in the UK: “New rules after Brexit have increased credit and debit card costs by 150 million pounds ($200 million) a year, with both UK and European retailers losing out.

“Britain’s departure from the European Union removed caps on transactions between the UK and the European Economic Area. That’s allowed card firms to increase cross-border payment fees, and some have more than quintupled, according to research by retail payments advisory firm CMS Payments Intelligence and the British Retail Consortium.”

Bloomberg’s Jennifer Surane writes that with its latest move, Amazon is “taking a page from the likes of its rivals Walmart Inc. and Kroger Co., both of which have temporarily instituted similar bans on Visa cards.” Surane goes on to say that most analysts are under the impression that the credit card company “will be able to reach a truce with Amazon, as it has done with Walmart and Kroger in the past.”

“We expect Visa and Amazon to reach a UK deal as customer choice and ubiquity are paramount,” Dominick Gabriele, an analyst at Oppenheimer, says in a note to clients. Still, he adds, “we remain cautious.”