Amazon halts are planning to stop accepting Visa credit cards in the U.K.

Amazon halts are planning to stop accepting Visa credit cards in the U.K.

January 18, 2022: – Amazon has scrapped is planning to stop accepting Visa credit cards in the U.K.

The e-commerce giant was expected to prevent Brits from using a Visa-issued credit card on its platform from January 19. But in a statement on Monday, the firm said the change “will no longer take place.”

“We are working with Visa on a potential solution that will make customers continue using their Visa credit cards on Amazon.co.uk,” an Amazon spokesperson told CNBC.

In November, Amazon initially made the shock announcement, citing “high fees Visa charges for processing credit card transactions.” Visa at the time said it was “very disappointed” in the move and would work toward a resolution with Amazon.

The two companies are not alone in the past, with Amazon that announces plans to introduce a 0.5% surcharge on Visa credit cards in Australia and Singapore in the previous year.

It’s unclear why Amazon made the U-turn on its plan to ditch Visa credit cards in the U.K., nor if the decision is final or temporary.

“Amazon customers can continue to use Visa cards on Amazon.co.uk after January 19 as we work together to reach an agreement,” a Visa spokesperson told CNBC by email.

After Brexit, rival payment processor Mastercard have hiked interchange fees, the cut they take on digital transactions amid the U.K. and European Union. Card networks were allowed to increase their charges after an E.U. cap on interchange fees ceased to apply in Britain.

Although Amazon and Visa say, the dispute is not related to the U.K.’s withdrawal from the E.U. Instead, the move was interpreted by experts as a way for Amazon to get some bargaining power for it to lower its fees.

David Ritter, a financial services strategist at I.T. firm CI&T, said the about-face from Amazon “comes as no surprise.” He then argues that the move would have proven difficult given that customers’  credit cards may be tied to digital wallets such as Apple Pay, Google Pay, PayPal, and Amazon’s own Prime subscription service.

“Amazon is a retail giant, so it has little leverage, but there’s no way it won’t accept Visa cards,” said Ritter. “It’s possible that Amazon has been applying pressure tactics. Major players in the retail space tend to have bespoke rates with payment firms instead of paying published rates. The move by Amazon is a way to negotiate a longer-term agreement on rates, or even to push for a freeze to its current rates.”

Amazon is not complaining about the high costs associated with major card networks. Another notable example was grocery chain Kroger’s that temporarily banned Visa credit cards at many of its stores.

Therefore, card companies face growing pressure from financial technology upstarts such as Klarna and Afterpay, which offer “buy now, pay later” services that let shoppers split the cost of their purchases throughout monthly installments.

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