Visa’s CEO called Amazon’s decision to ban UK-issued credit cards from the platform as “strange” and “unhappy,” but said he hopes the issue will be resolved through negotiations. I did.
“Obviously we are in a challenging negotiation,” Al Kelly told the Financial Times. “The difference here is that, unfortunately, Amazon has decided to tackle the negotiating agenda we are publishing and, strangely, has chosen to threaten to punish consumers.”
Amazon notified customers on Wednesday that it will stop accepting UK issued Visa credit card Starting next year, we’ve offered affected customers a £ 20 discount on their next purchase using a different payment method. Retailers also said they are considering removing Visa as a partner for co-branded cards in the United States.
“This shouldn’t be seen as a shock, as Amazon uses all available bargaining tactics to reduce the cost of payment processing,” autonomous analyst Kenneth Schoski wrote in a note.
Amazon has told its UK customers that it is acting for the high visa fees. However, according to payment firm Bambora, Mastercard and Visa have similar transaction fees in the UK.
“I think it’s very strange to claim that they did this because of the high cost of accepting them in the UK,” Kelly said. “It’s totally inaccurate.”
Visa and Mastercard have announced an increase in the exchange rate applicable to payments between the UK and the EU after Brexit was formalized this year. For digital payments without a physical card, fees have been raised to 1.15% for debit transactions and 1.5% for credit transactions, 0.2% and 0.3%, respectively.
Those familiar with Amazon’s position have stated that interchange fees are just one of several issues, including visas. Prior to Brexit, he said rising costs were a concern and executives felt that payment providers were “not adding much value.”
Before Visa’s interchange fee was raised in October, Amazon moved to limit its use in markets such as Singapore and Australia, where a 0.5% surcharge was introduced for Visa credit transactions this year. In both countries, vouchers were offered to customers who switched to different payment methods.
Amazon believes that given the large amount of retailer data and consumer insights, it is unreasonable for Visa to impose additional charges to prevent online sales fraud. “Amazon is investing heavily to protect its customers from fraud and abuse,” a spokeswoman said. “Visa’s prices are still high, but merchants are responsible for fraud.”
The confrontation with Amazon is the latest issue for visas as they combat the growing threat to the core business of routing payments.
“These aren’t the happiest days for visas,” said Mizuho analyst Dan Dreff. “They are being attacked on multiple fronts.”
Visa and Mastercard are effective Duopoly Due to the popularity of cards as a payment method, about payments worldwide for decades. However, FinTech competition and geopolitical pressure can weaken its influence.
Amazon’s move towards visas is just the latest example of a merchant trying to lower interchange fees. They cite studies showing that the cost of processing transactions has dropped sharply, but the fees they charge remain the same. According to consultancy CMSPI, payment networks and issuers enjoy a rate of return of 30-50%, with a retail rate of return of about 3%.
Card companies have set up interchange fees, but point out that they haven’t received most of the money they’ve collected. “Visas are responsible for markets where pricing is unregulated and no one is happy with us,” Kelly said. “When prices go down, financial institutions aren’t happy and prices go up. Merchants aren’t happy.”
Merchants have been opposed to transaction fees for decades, but are being used in negotiations due to the proliferation of alternative payment methods.
Payments between accounts via Venmo or its bank-owned competitor Zelle are becoming more popular, significantly avoiding the Visa and Mastercard payment rails. According to a new Accenture report, these payments account for 13% of checkouts in Europe.
Financial services companies like PayPal have built their own payment systems that are independent of established networks. Last month, Citigroup launched a program that bypasses the card system and allows retailers to request payments directly from consumers via banks.
Anthony Thomson, UK Chairman of Zip, an Australian “buy now, pay later” company, said:
Many of these payments are enabled through application programming interfaces that facilitate secure connections to third-party consumer financial data, or APIs such as Plaid.
“It’s clear that in the future it will be an API-based connection that uses a bank account as a routing hub instead of using a credit card,” said Keith Grose, International Head of fintech Plaid.
Due to concerns about the future of the debit business, Visa bid $ 5.3 billion on Plaid last year, but the deal was withdrawn as the US Department of Justice opposed antitrust laws. Visa and Mastercard have also started building their own API network and investing in open banking technology.
Amazon has been experimenting with other payment methods that bypass the card. In August, the company announced that it would offer BNPL facilities to US shoppers through third-party provider Affirm, allowing purchases of $ 50 and above to be paid in installments.
Similar options were set in Germany using Barclaycard, but in Poland and the Netherlands, the company works with several companies to offer direct bank transfers to pay for goods.
In addition to the backlash from merchants, there is also pressure on transaction fees from governments around the world.
UK payment system regulators are considering the issue of interchange fees this month and said they would “intervene to address the identified issues.”
The Federal Reserve has said it will revisit exchange regulations to address the development of payment technology, and analysts expect new rules to be issued next year.
Duopoly also faces competition from domestic payment networks in China, India, Australia, Germany and Russia. These are being strengthened by the government to keep costs down and strengthen national security, said James Booth, Head of Partnership for FinTech Group PPRO.
Meanwhile, efforts are underway to build a European payments initiative. Important hurdle..
Alex Ellwood, Senior Vice President of CMSPI, said: .. “Card payments bring commission income to many stakeholders.”
Visa hits back at Amazon over claims its fees are too high Source link Visa hits back at Amazon over claims its fees are too high
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