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Will the conflict between merchants and the card networks over acceptance fees ever find resolution? The argument, which has been in progress for years, may never find total resolution, but perhaps the parties can agree on some accommodations.
Amazon.com Inc.’s decision last month to pull back from its threat to stop accepting Visa cards issued in the United Kingdom may indicate some flexibility on both sides. The move certainly betokens some complex dynamics behind the decision-making at both corporate giants as rate revisions loom.
Amazon backed off on a Visa ban it announced in November as part of a protest against acceptance fees. The massive online merchant said then it would stop taking Visa in the U.K beginning Jan. 19. But in a terse email message it sent to customers on the eve of the ban, Amazon hinted that negotiations may yield a new agreement.
While some observers may have been tempted to conclude Amazon blinked in the face of losing Visa’s considerable heft in the U.K. market, others say the move likely comes as the culmination of long weeks of strategizing on both sides. Certainly, Amazon’s had to consider the impact of losing some portion of the billions of pounds Visa accounts for on Amazon’s site in the U.K.
But pressure was on Visa, as well, especially as it faced the prospect of consumers switching to other cards as they shopped on Amazon. Some observers say this fact alone may have brought the network giant to the table.
Certainly, if Amazon’s aim in all of this was to get Visa’s attention and to start negotiations, that has been accomplished. Now the payments industry is likely to watch the talks closely, given what’s at stake. And some observers argue Amazon’s leverage is likely to prevail. Visa’s fear of seeing Amazon sales flowing to other card brands, they say, could be greater than Amazon’s nervousness that some sales will be lost altogether.
After all, Amazon may enjoy 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.
These intricate negotiations come as Visa and Mastercard are preparing to roll out new rates this spring. They had intended to introduce a variety of increases, with some reductions, last year but held off in view of the pandemic and its impact on many merchant categories. They aren’t likely to postpone the changes again.
That’s food for thought for most merchants—particularly those that, unlike Amazon, lack the huge sales volumes and market share that can get the attention of nervous networks.
— John Stewart, Editor, john@digitaltransactions.net
