Amazon’s Acceptance Ban Got Visa’s Attention in the U.K. Now What Will Negotiations Likely Yield?

Amazon.com Inc.’s decision to pull back from its threat to stop accepting Visa cards issued in the United Kingdom may have evoked a sigh of relief among some consumers, not to mention at Visa itself, but it also could betoken some complex dynamics behind the decision-making at both corporate giants.

In its latest move, announced Monday, Amazon backed off on a Visa ban it announced in November as part of a protest against the acceptance fees it pays for the card. The massive online merchant said then it would stop taking Visa in the U.K beginning Jan. 19. In a terse email message it sent to customers Monday, Amazon hinted that negotiations may yield a new agreement. “We are working closely with Visa on a potential solution that will enable customers to continue using their Visa credit cards on Amazon.co.uk.,” the company says in the message, which was widely shared on Twitter. Contacted Tuesday, an Amazon.co.uk spokesman would not comment beyond that statement. Visa did not respond immediately to inquiries from Digital Transactions News regarding the announcement.

While some observers may have been tempted to conclude Amazon blinked in the face of losing Visa’s considerable buying power in the U.K. market, others say the move likely comes as the culmination of long weeks of strategizing on both sides. “There has been plenty of speculation in recent days on who would back down first,” says Neil Smith, head of strategic partnerships , EMEA and APAC, for the cybersecurity firm Forter, in remarks sent to Digital Transactions News. But Amazon’s latest move, he adds, “could signal a degree of compromise from both companies, with a 2021 survey indicating a potential loss of £1.4 billion [$1.9 billion] for the e-commerce giant.”

At the same time, pressure was on Visa, as well, Smith says. “Given Amazon’s U.K. market share, it’s likely that Visa has agreed to negotiate on the fees it charges for credit card transactions,” he notes.

Others interpret Amazon’s November move as part of an intricate strategy to get Visa’s ear for negotiation, which it has accomplished. “Banning Visa credit cards would annoy and inconvenience customers. Amazon wants to pay less for acceptance, but foremost it wants to sell more and to build greater share of, and engagement with, customers. They’ve got Visa’s attention,” says Eric Grover, a payments consultant, in an email message.

Now the payments industry is likely to watch the negotiations closely, given what’s at stake, observers say. Smith argues Amazon’s leverage is likely to prevail. “Even a significant reduction in Visa’s processing fees would be worthwhile in order to avoid the substantial loss of volume that access to Amazon’s e-commerce marketplace offers,” he notes

Others point to the unprecedented nature of a retailing behemoth wrestling publicly over high stakes with a giant card network. “I’d love to be a fly on the wall in private negotiations between the world’s largest payment network and the world’s leading e-commerce retailer, both of which are used to getting what they want,” says Grover.

Amazon may have added leverage in its talks with Visa as a result of its willingness to accept widely used alternative payments, most recently PayPal Holdings Inc.’s Venmo wallet, some observers point out.