Amazon UK announced today that it will stop accepting credit cards from Visa on January 19th, blaming the ban on the high cost of processing credit card transactions, according to the Wall Street Journal.
The company told customers it would stop accepting Visa credit cards issued in the UK due to high interchange fees on credit-card transactions, saying that rates will go up the 0.3% cap set by the European Commission to 1.5%.
Debit card transactions rates will also rise from 0.2% to 1.15% in January, with both Mastercard and Visa taking advantage of Brexit to rise interchange fees on cross-border transactions between the UK and EU. The news caused Visa shares to fall more than 5% Wednesday morning.
“When consumer choice is limited, nobody wins,” a Visa spokesperson said, saying Amazon’s choice would restrict consumer choice. “We have a long-standing relationship with Amazon, and we continue to work toward a resolution, so our cardholders can use their preferred Visa credit cards at Amazon UK without Amazon-imposed restrictions come January 2022.”
In a push to encourage users to update to different payment methods, Amazon is offering UK customers £20 (~ $27) to those that use a different type of credit card or Visa debit card. Amazon, alongside JPMorgan Chase, has its own credit card that runs on the Visa network in the US and provides Amazon Prime members cash back on purchases, according to the WSJ.
Europe also plans to strike back
Visa and Mastercard also face opposite with those still in the European Union, with a bank-led European Payments Initiative being formed to build a rival pan-European payments system.
The initiative is backed by 31 major Eurozone banks and acquirers Worldline and Nets and is planning to offer cards, digital wallets and P2P payments for consumers and merchants across the continent.
The coalition was established via the EPI Interim Company in Brussels last July, with the intention of setting out clear deliverables including a technical and operational roadmap, according to Finextra.
While the system would likely pay for itself upon completion, with European regulation likely to favor a bank-led payment system over international third-party providers, creating a competing payment rail system will take massive amounts of investment, according to EPI chief executive Martina Weimart.
“Public funding would be nice … Let’s not hide it – it’s going to be a massive investment. It’s expensive,” she said.
In other recent fintech news, PayZen introduces “Care Now, Pay Later” to help consumers pay medical debt. Sagent also partnered with Servion Mortgage to scale community bank and credit union servicing.