Amazon, Visa resolve spat over credit card swipe fees
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Relations between Amazon (NASDAQ:AMZN) and Visa (NYSE:V) have been deteriorating for months, but the two companies have just worked out an agreement. At issue was a feud over swipe fees, which Amazon pays to accept the financial giant's cards for e-commerce transactions. During the worst of the crisis, Amazon began adding surcharges to customers who used Visa credit cards on its Singapore and Australia websites, and even threatened to ban Visa cards from Amazon.co.uk.
Backdrop: Tensions over transaction fees have been ongoing for some time, but last October, Visa significantly upped the charges it takes for credit card payments made online between the U.K. and the EU. Amazon wasn't taking any of it, especially since Visa oftentimes secures special pricing agreements for its top clients, which encourages them to send more volume over its network. In fact, Visa earmarked $8.4B for those incentives in fiscal 2021, 26% more than the previous year.
Playing some hardball, Amazon considered shifting its popular co-brand credit card - one of the industry's largest co-branded portfolios - to rival Mastercard (NYSE:MA). It also flagged Visa's policy of classifying e-commerce payments as "card not present," which generally means higher fees. That's on top of the surcharges in Australia and Singapore, as well as the potential ban in the U.K., which is Amazon's third largest market after the U.S. and Germany.
Outlook: The whole spat has put a spotlight on credit card transaction fees, and could eventually provide an opening for other payment options, especially upcoming fintech players. Account-to-account payments and 'buy now, pay later' option have been exploding in popularity - compared to the payment rails and traditional systems of Visa and Mastercard - and Amazon has been experimenting in the space, offering BNPL options to U.S. shoppers through third-party provider Affirm (NASDAQ:AFRM).