Insights Once more with feeling Uncategorised

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Trust Amazon to be disruptive. The seller of everything to everyone told UK customers yesterday that it will no longer accept Visa credit card payments on account of the latter’s “high” transaction processing fees.

Some of the 9 out of 10 consumers in the UK who shop with the firm will now have to change their default payment method, either to another brand’s credit card or to a debit card, which offers less consumer protection.

The move appears at odds with Amazon’s purported stance as a consumer champion, providing cheap goods and the widest possible choice – indeed, Visa’s statement argued that “nobody wins when choice is restricted.”

It looks like a negotiation tactic by the retailing behemoth to put pressure on Visa, and the more than five per cent share price decline in the latter’s share price will help in that regard.

The move also enables Amazon to nudge customers to other forms of payment – including Amazon-branded credit cards from American Express and Mastercard.

The retailer has delayed implementing the move until January 19 2022 – crucially, after Christmas shopping has taken place – and Visa said it was “working towards a resolution”, suggesting it is keen to compromise.

Following Brexit, payments companies have been able to lift their fees for cross-border UK-EU transactions above a price cap imposed in 2015.

The timing is curious. Sky News reported back in March that Visa was planning to increase its fees, so Amazon has known the move was coming for a long time.

Yet its email to customers looked like a rushed job, with the subject line delivering the news while the body of the email contained nothing but “” between two parallel lines, suggesting an edict from management being executed at speed with minimal involvement from the communications department. The company made zero attempt to put the move in context for consumers, giving the impression that it is indifferent to public opinion.

While investors seem to care, consumers appear unmoved. Judging from the Twittersphere, many are simply attributing the spat to Brexit (a move both Amazon and Visa have denied) and are unsympathetic to Amazon’s complaints about high fees given its deep pockets.

The story was widely and factually reported with little additional comment, perhaps a sign that both sides failed to get their messages across. Or perhaps they didn’t want to: assuming that Amazon and Visa ultimately want to reach an agreement, they have little incentive to trash each other in public, as that would make any later reconciliation more difficult.

Some observers have hailed it as a turning point in the payments industry. Certainly, it looks like Amazon has called Visa’s bluff and won.

While Amazon won’t be revealing whatever it negotiates with Visa, the inevitable withdrawal of the ban will show that some deal has been cut. Other retailers will then be emboldened to follow Amazon’s lead, knowing that they are incurring less reputational risk as they are not first out of the gate, in what one might call a second mover advantage.

Expect Visa to try to recoup its lost profits by extracting harsher terms from smaller merchants, who depend on it as an easy way to pay.

Meanwhile, Amazon will now feel free consider further similar moves to reduce the fees it pays to another partners, knowing that it can hold both them and the public hostage without any fear of a backlash.

The media and consumers had an opportunity to stand up for consumer choice and protest. It is a pity that neither rose to the occasion.

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