In the fast-changing world of payments, Visa is beginning to feel as left out as those of us who didn’t get invited to a Friendsgiving.
Last week, Amazon said it would stop accepting Visa-branded credit cards from UK customers beginning next year. That move follows another snipe in Australia and Singapore, where Amazon slapped a small fee on customers who pay using Visa credit cards there. And to put a cherry on top, Amazon also said it was considering switching its own co-branded card from Visa to Mastercard.
Why is Amazon doing this? The company cited Visa’s high processing fees, though data shows that Mastercard’s and Visa’s fees are pretty much the same in the UK. “I find it quite odd that they’re claiming they did this because of the high cost of acceptance of these in the UK,” Visa CEO Al Kelly told the FT.
Payments analysts say Amazon’s ditching of Visa is a negotiating tactic to secure lower processing fees from the company. And they don’t expect it to hurt Visa’s bottom line in any tangible way.
But it’s definitely a worrying sign for credit card networks
Visa and Mastercard have worked for decades to build the “railways” upon which global payments travel, and they’ve been extremely successful. Both Visa and Mastercard are among the companies with the highest margins in the S&P 500, at 65.6% and 53.3%, respectively.
But retailers have never been happy with an arrangement that forces them to pay a fee every time you swipe a credit card at the counter. Merchants forked over $110 billion in credit card processing fees just last year.
And thanks to fintech innovations, there are more options available than ever to bypass these credit card railroads for hyperloops. Buy now, pay later services like Affirm are surging in popularity, as are direct bank-to-bank transfers.
Bottom line: Growth in digital payments and alternative payment methods is threatening to disrupt the Visa–Mastercard duopoly.