On Wednesday morning, Amazon emailed consumers to confirm that the restriction will begin on January 19 next year, and to clarify that no other credit cards or Visa debit cards would be affected.
Why did Amazon take this step?
Amazon cited rising expenses as the primary reason for terminating its partnership with Visa, an American financial corporation. They continued, "The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers."
Visa's fees, according to Amazon, are high and a barrier to consumers getting inexpensive costs. Visa argued that they were "very disappointed that Amazon is threatening to restrict consumer choice in the future". They also added,
"When consumer choice is limited, nobody wins. 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."
The announcement to end this partnership coincided with a report from the British Retail Consortium's study on the payments industry as a whole. It claimed that retailers throughout Europe were bearing an extra £150 million in yearly card fee increases, with some soaring by nearly 500%.
The reason for Amazon's decision may be irrelevant to their customers as they may simply be concerned about having to change their Amazon payment methods especially during the upcoming Christmas season where most are preparing to purchase gifts for the festive period.
For business reasons, Visa will not specify how many UK cardholders it has, and Amazon would not say how many customers will be affected by the move, so we can only estimate how many will be affected after the change takes effect next year.
Industry experts and their opinions:
Many have stated that the dispute is over Visa's fees, which have lately increased as a result of Brexit. However, industry observers believe the debate is more serious and this could potentially lead to a much larger conflict in regards to the future of payments.
MoneySuperMarket money expert Jo Thornhill told MailOnline, “'Amazon's announcement that it will stop accepting visa credit cards from January is bad news for consumers as it will reduce choice when it comes to how they pay when making purchases with the online retailer.”
Others have suggested that this may work in Amazon's favour, according to CNBC technology expert Ryan Browne, “It could be a way to get some bargaining power over Visa to lower fees.”
A number of experts believe the eCommerce giant is attempting to move customers away from credit cards entirely. MultiPay Global Solutions CEO David Maisey said, “Amazon is firing the starting gun on a race for new payment methods.”
Amazon can now potentially tap into a customer's bank account directly and collect payment directly from the bank, thanks to advances in online banking and regulations protecting what's known as 'Open Banking.' This would eliminate card companies entirely, leaving Amazon with a considerably larger cut of the profits.
TrueLayer's head of ecommerce, Roger De'Ath, remarked, “Fundamentally, cards were not built for online commerce and have been retrofitted into digital checkouts, creating complexity and cost for merchants and friction for customers. That is why every merchant, including Amazon, is looking at alternative and digitally native payment methods."
Experts also predict that Amazon and Visa will resolve their issues before the January deadline. This is primarily due to the sheer size of Amazon, which may force Visa to compromise. As investors reacted to the announcement of the ban, shares of the firm plunged 3.5 percent at the open in New York, demonstrating how seriously they regard the problem.
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