Amazon vs Visa - who will win?

In November 2021 Amazon announced that they will no longer accept Visa Credit cards in the UK – they had already done this in Singapore and Australia. To the layperson, this might sound like Amazon are shooting themselves in the foot and just before Christmas! What’s going on you may ask?

Currently, when a customer uses a card, the merchant pays a charge of up to 3 per cent of the transaction. This fee is distributed to the companies enabling the transaction. A small “acquirer” fee goes to the payment company that links the merchant to the network, and an “interchange” fee goes to the bank that issued the credit card, and Visa or MasterCard keep the balance.  Amazon doesn’t like this and feels they can disrupt this and take some or all of the margin themselves.

Amazon and their merchants feel this is completely unfair especially as technology has enabled other alternatives for payment that weren’t available say even three years ago. There are too many options available for merchants to mention here we are in the digital age and there is always a FinTech on hand with a solution no matter how big the problem.

Account to Account (A2A) payments are coming to something like maturity. Amazon already offers an A2A payment method in India: Amazon Pay operates over UPI / IMPS rails.  Open Banking also allows transactions to bypass the credit card rails altogether.  This is a worrying trend for both MasterCard and Visa and they have been frantically trying to build their alternative propositions for years. For example, Visa tried and failed to buy Plaid who have spent many years building their network of 2000+ banks.  MasterCard has been buying companies with networks in place and with products and skills in payment security.

What this means for the future of payments and the consumer? Will Amazon be successful in getting a better deal from Visa to drive down their own costs and those of their merchants? If Amazon wins this dispute and is able to secure a better deal for itself and its merchants – have no doubt it will be turning its guns on MasterCard to reduce their fees.

It’s anyone’s guess what Amazon’s strategy is, it could be to get a better deal for itself, its merchants and consumers from Visa and MasterCard. Or they could be thinking of introducing their own payment system or use an alternative cheaper rail system.  Does it sound familiar - a major tech retailer coming up with its own payment method, think eBay and PayPal. For a company that is into everything from retailing to space travel and is run by the richest man in the world – anything is possible and I for one would not bet against Amazon. 

So it’s game on! You can be sure it is going to be an interesting few months ahead and some feathers are bound to get ruffled as these giants square up against each other. My feeling is that Amazon have the upper hand, they have the customers and merchants and there are many FinTechs willing and able to help Amazon and other retailers take on Visa and MasterCard. If you thought the F1 final race was exciting you are going to love this!