Amazon has announced to its UK customers that it will stop accepting credit card payments by Visa from 19 January 2022. The online giant states the decision has been made as a response to the high fees Visa charges for processing credit card transactions. No other credit cards, or Visa debit cards, have been included in the ban. This means that Visa credit cards issued outside of the U.K. will also be exempt.

It is believed a key factor in Amazon’s decision for the ban stems from Visa’s continuous rise in cross-border fees as a result of Brexit. As the U.K. is now out of the European union its departure has meant caps on transactions between the U.K. and the European Economic area no longer apply. This has allowed card payment firms to increase cross-border payment fees and Visa is under scrutiny for being among the worst offenders.

An Amazon spokesperson said: “The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers. These costs should be going down over time with technological advancements, but instead, they continue to stay high or even rise”.

Last month, Visa began charging 1.5% of the transaction value for credit card payments made online or over the phone between the UK and EU. Increases also included 1.15% for debit card transactions, up from 0.3%. The average credit card processing fees across the industry range between 1.5% and 3.5% for each transaction, according to analysts.

According to retail payments advisory firm, the British Retail Consortium (BRC), retail across Europe was shouldering an extra £150m annual increase in card fees – with some rising by almost 500%. Andrew Cregan, a payments policy advisor at the BRC says, “Card payments accounted for over four-fifths in the U.K with just two firms facilitating 98% of these payments. Ultimately, it will be consumers who suffer higher prices unless these spiralling costs can be brought to heel.”

Shares in Visa fell by 4.7%. A spokesperson for the card payment giant says, “We are very disappointed that Amazon is threatening to restrict consumer choice in the future.” The company also stated it is currently in talks with Amazon to resolve the situation so the ban does not come to fruition in January 2022.

Concern for shoppers

When shopping with Amazon, retailers will now have to switch from credit card to debit card. Other concerns for shoppers include not having the same level of protection with debit purchases as they do with credit card purchases. If goods purchased with a credit card are faulty, damaged, or do not arrive, you may be able to get your money back. Debit cards do not provide the same level of protection, and customers are typically encouraged to use a credit card to purchase larger, more expensive items.

American Express, Maestro, and Mastercard remain unaffected. However, Visa has argued this move by Amazon ‘restricts’ consumers choice on payment options. Card payment giant American Express is already rejected by many UK retailers; Amazon may be setting a precedent for other retail giants to follow and ban the use of credit cards if fees are too high. This could then expand to other sectors including holiday, rail, and even hospitality.

If limits are put on how consumers can pay for purchases and the banning of credit cards spreads to other industries it could result in fewer purchases being made by consumers. This can have a negative impact on businesses that are already struggling to recover from an ongoing pandemic and are now dealing with rising inflation which analysts claim has hit 4.2%, the fastest rise in almost 10 years.

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