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Amazon halts plan to ban Visa credit cards in UK

Amazon halts plan to ban Visa credit cards in UK

Leon Neal | Getty Images

Amazon has halted a plan to ban customers using UK-issued Visa credit cards from this week, as the companies work on a “potential solution” to a rancorous dispute that threatened to severely disrupt shoppers.

The world’s largest online retailer announced the proposed ban in November, citing the “high fees Visa charges for processing credit card transactions,” and advised customers to find new payment methods.

However, on Monday Amazon said that “the expected change regarding the use of Visa credit cards on will no longer take place on January 19.” The group added that it was “working closely with Visa on a potential solution that will enable customers to continue using their Visa credit cards on”

The ban by Amazon was widely regarded as a negotiating tactic and branded “odd” and “unfortunate” by Visa chief executive Al Kelly.

Amazon, whose own grip on consumers has strengthened as more people shopped online during the pandemic, has been working with alternative payment providers to Visa, which alongside Mastercard has been a dominant force in payments for decades.

Unlike rivals Mastercard and American Express, Visa does not offer a co-branded Amazon card in the UK. When the ban was first announced, the co-branded cards were among the alternatives Amazon suggested to customers.

At the end of 2020, Visa represented a third of the credit card market in the UK, Mastercard 62 percent and American Express the remainder, according to the latest available data from UK Finance, the banking and finance trade association.

“Amazon customers can continue to use Visa cards on after January 19 while we work closely together to reach an agreement,” Visa said on Monday.

In the UK, the main banks issuing Visa credit cards include Barclays, HSBC, and the Co-operative Bank as well as building society Nationwide.

Amazon’s intervention in November came after payment companies escaped an EU cap on cross-border interchange fees—a levy credit card companies charge on behalf of the issuing banks—when the UK left the bloc.

Visa last October began charging 1.5 percent of the transaction value for credit card payments made online or over the phone between the UK and EU, and 1.15 per ent for debit card transactions, up from 0.3 percent and 0.2 percent respectively.

Amazon said in November that Brexit was not the specific cause of the dispute with Visa, instead blaming the US company’s fees over the long term.

Amazon has examined several alternative payment methods beyond traditional credit cards. Last August, it announced “buy now, pay later” option for US customers through third-party provider Affirm. In December, Barclays and Amazon unveiled a BNPL option called Instalments for purchases over £100.

The surge in online shopping during the coronavirus crisis has helped forge an opening for alternative payment providers and seen investors race to back them. British payments group secured a $40 billion valuation last week, while US competitor Stripe was valued at $95 billion last March.

“For too long, cards have been retrofitted into online checkouts, creating an invisible web of hidden costs and unwieldy payment structures that affect the cost base of every single retailer,” said Roger De’Ath, head of ecommerce at TrueLayer, which provides a platform for companies to access open banking.

© 2022 The Financial Times Ltd. All rights reserved Not to be redistributed, copied, or modified in any way.

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