Last month, Amazon announced that it will stop accepting Visa credit cards in the UK. The move is loaded with implications for the global payments arena. This decision and its context raises questions about the future balance of power in the global e-commerce and payments space.  

On the surface, Visa forced Amazon’s hand. The decision is consistent with Amazon’s policies in Singapore and Australia, where a 0.5% raise in Visa’s credit-card interchange fees were met with similar sanctions. The formalisation of Brexit forced its hand to an extent, but the announcement it was to raise online credit-card fees from 0.3 to 1.5 percent was certainly a bold move. 

Bold or complacent  

2021 saw Stripe become the world's most valuable private company, whilst fellow disruptors Marqeta and Plaid more than tripled their valuations in recent funding rounds. With crypto and BNPL payment solutions continuing to explode in popularity, the position of the once-unbreakable Visa-Mastercard duopoly is uncertain. 

Crucially, the vast majority of these challengers offer fees between 0.01 and 0.1% - a fraction of traditional interchanges. In a world where low-fee alternative payments solutions continue to emerge and grow, legacy payment players need to adapt and compete. Fintech-driven disruption is forcing legacy institutions across the financial ecosystem to innovate, and payments are no exception.  

Amazon Push Back   

In spite of Visa’s decision, it is no less surprising that Amazon would have the icy resolve to push back so forcefully-  Even going so far as offering a £20 voucher to consumers that upload a replacement payment method. In the UK, 44% of shoppers report using a credit card online in 2021- whilst Visa still leads globally for cards in circulation, transactions, and purchase volume. But Amazon is the world's most popular retailer and taking such decisive action serves as a warning that payments providers may now need Amazon more than Amazon needs them. The decision is due to take effect on January 12th, and though Visa hopes for a resolution, it could be a cold start to the new year for the payments industry.  

In isolation, this is a financial dispute between two giant companies but the implications it raises are profound. The notion that this was a simple rejection of Visa’s fees is complicated by the fact that MasterCard, who also raised their fees to 1.5%, are so far exempt. Mastercard themselves have been excluded from the ban because they offer a co-branded credit card with Amazon, which is advantageous to the tech giant.  

The power to change consumer habits  

This exemption suggests a dispute that goes beyond fees, emphasising Amazon’s power to enforce decisions that affect the end-consumer over private disputes. But as competition driven by fintech payments innovation pushes the cost of processing transactions closer to zero, those who cannot adapt will be under increasing pressure from retailers big enough to push back. If they fail to do so, the firms who have controlled the rails of the world's payment infrastructure will soon be replaced by challengers. 

But let's take a more macro perspective. If Amazon is successful, what does this mean for their ability to control their consumers' payments and broader financial services needs? Is their market dominance sufficient to eventually enforce a single, Amazon-sponsored payment method?  

The outcome of this dispute, and future attempts to assume control over payment options will inform our answers to these questions. But it is clear that though this appears to be a simple case of retaliation over a legacy player's fees, this dispute carries significance beyond the Visa-Mastercard duopoly. Payments providers across the spectrum will be watching with apprehension, as Big Tech continues to encroach into the world of finance.