Amazon’s spat with credit card giant Visa could shape the power struggle between merchants and payment processing providers. Amazon last week declared it would no longer accept Visa credit cards issued in the UK from 19 January 2022, citing high payment fees.

Visa and Mastercard announced increases to the interchange rates applicable to payments between the UK and the EU after Brexit was formalised this year. For digital payments where a physical card is not present, the fees were raised to 1.15% for debit transactions and 1.5% for credit transactions from 0.2% and 0.3%, respectively.

That planned fee hike by both credit card providers may suggest that Amazon’s stance in the UK, and previously in Singapore, is part of a wider negotiating tactic with the online retail platform looking at fees in the US. Amazon is also looking at its options for its own-branded credit card, currently powered by Visa.

Visa’s share price has fallen 9% since the Amazon announcement but analysts at Piper Sandler estimate the retailer accounts for less than 1% of Visa’s UK credit card volumes.

The digital payments space is changing with mobile payment options like PayPal-owned Venmo and buy now, pay later financing operators chipping away the dominant market share of credit cards, especially among younger shoppers. Amazon partnered with BNPL provider Affirm in August to help consumers spread the cost of purchases, while Visa has been also testing the BNPL space with the likes of Sweden’s Klarna.

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