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Amazon UK and Visa credit card reach a deal

66 points by Kaibeezy ↗ HN
Email from Amazon UK this morning:

The expected change regarding the use of Visa credit cards on Amazon.co.uk will no longer take place on January 19. 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.

Should we make any changes related to Visa credit cards, we will give you advance notice. Until then, you can continue to use Visa credit cards, debit cards, Mastercard, American Express, and Eurocard as you do today.

Thank you for being an Amazon customer.

84 comments

[ 3.3 ms ] story [ 137 ms ] thread
themihai
It would be nice to see a Union of merchants. I'm pretty sure Amazon got a sweat deal given its power but the poor small merchant pays the full fee price.
chmod775
Isn't it the norm for smaller stores to pass the cost onto the consumer?

That's in effect just as good. Visa doesn't want to be seen as "the card it's expensive to buy stuff with".

bayindirh
All stores pass the cost onto the consumer. It's in the price.

Having to pay the full price limit smaller stores' power to compete on price with the bigger ones.

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yardstick
In many countries it’s illegal for merchants to charge differently based on payment method. So ironically you are better off using Amex or some high fee card with rewards because the merchant has to factor it into the sticker price.
dannyw
In many countries being the USA, whose Supreme Court deemed it anti-competitive for courts to strike down Visa/Mastercard/AmEx's clause that makes it illegal for merchants to pass along processing costs to consumers.
hdjjhhvvhga
Fortunately, there are countries where it's not the case. When you think about it for a moment, it's extremely clear how unfair this clause is for everybody except credit card companies.
vinay427
Honestly, I prefer it as a consumer. In the US, one can relatively easily find a card that gets 2% back on every transaction, if not more, with 3-7% not uncommon for certain spending. Even at 1-2% back, most of the price increase by a merchant is recouped, and some nominal extra amount is perfectly acceptable to me for the convenience. Cash isn't free to accept either for most merchants, given the security risks, so I can't imagine I'd be saving much (if anything) if different prices were allowed for cash transactions.
lotsofpulp
It is not true in the US either since 2010. See my adjacent comment above.
5736uhhdohr
Contract clauses don't make things illegal. In the countries where it's illegal it's because the government has made it so, presumably because of lobbying by the card companies or large businesses. See the UK for example: https://www.gov.uk/government/news/card-surcharge-ban-means-...
Reason077
Surcharges are generally considered anti-consumer, because businesses often hide them until the final payment step, disguising the true cost of the product and reducing price transparency.
carlhjerpe
Same in Sweden, no card charges here. They used to decline card purchases on smaller amounts, but I don't see that anywhere anymore either. Our credit card rewards are absolutely terrible in comparison to the US though.
umanwizard
Interesting. A minimum purchase of $10 or $15 for credit cards is still common at bars and small, independently-owned stores in the US.
carlhjerpe
I was at the grocery store the other day to pick up a package, bought an energy drink for 8 SEK (<1$). In a convenience store prices are just higher to cover fees. (I guess)

I haven't paid for a beer with cash since I came home from a trip to Indonesia & Australia ~3 years ago. A normal bar-beer would set you back between 30 and 90 SEK (commonly 65) in Sweden, exchange rate is about 1$ to 9 SEK.

lotsofpulp
This is incorrect. It would not even make sense on its face, as all business costs get passed down to customers. If they did not, then the business is losing money.

As of 2010, Dodd-Frank legislation explicitly made it illegal for payment card networks to prevent merchants from offering discounts for different payment methods:

https://www.ftc.gov/tips-advice/business-center/guidance/new...

> A PCN cannot stop you from offering your customers a discount or another incentive for using a certain method of payment, as long as you offer it to all your customers and disclose the offer clearly and conspicuously. For example, you can offer your customers a discount or a coupon if they pay with cash or a debit card rather than a credit card.

In Mar 2017, Supreme Court went further and said state laws banning credit card surcharges were a violation of merchants’ first amendment rights:

https://en.wikipedia.org/wiki/Expressions_Hair_Design_v._Sch...

What you may be thinking about is rules prohibiting charging different payment card network prices for various credit cards (i.e. different price for Visa vs Amex vs Mastercard vs Discover). This was deemed allowable by the Supreme Court in Jun 2018:

https://en.wikipedia.org/wiki/Ohio_v._American_Express_Co.

As an aside, this Ohio v AmEx ruling was of great benefit to tech companies that operated market places, because

> This decision was considered to have created a new type of rule that could make it difficult to seek antitrust litigation; with credit cards being a two-sided market serving two distinct sets of customers, a successful antitrust argument would have to show how both sides of the market were harmed.

IshKebab
That doesn't mean small merchants are unaffected by the higher prices they have to charge. They still have to charge higher prices, which means less profit.
teamonkey
They also pay a higher rate of tax than Amazon
mihaaly
"Isn't it the norm for smaller stores to pass the cost onto the consumer?" ...and sell for more than the big ones, loosing cutomers? Yes. This is what would be nice to be avoided.
azalemeth
The trouble is that Visa/Mastercard/Amex are all american corporations who have effectively extracted a ~1% tax on a large proportion of every in-person non-cash monetary transaction worldwide. That's a huge amount of power for an unelected, unaccountable organisation to have, and one that returns money to its american shareowners and employees only.

Exactly how the tax is collected is a matter for the businesses to hide. I don't like it one bit, but there's nothing I can do about it.

Youden
Maybe you simply intended your comment as hyperbole but if not:

- It's not a 1% tax worldwide. For example most of Europe uses debit cards instead of credit and the fees are regulated to be much lower than 1%. This also demonstrates that Visa's power is not unchecked.

- Visa may be listed on American exchanges but foreign nationals can buy shares no problems.

On the percentage, I was curious and had a look at Visa's financials [0]. On payment volume of $10.4T, they reported revenue of $24.1B, so they get about 0.2% overall.

[0]: https://annualreport.visa.com/financials/default.aspx

ricardobeat
I'm curious how the numbers look to get to that result. The lowest rate I've heard of was ~0.7%.
MagnumOpus
EU maximum for debit cards is 0.2% and for debit cards is 0.3%. Major clients like Amazon, Tesco or Aldi have leverage and probably pay half that...

https://www.linklaters.com/en/insights/blogs/fintechlinks/20...

ricardobeat
Isnt the majority of VISA transactions on credit cards, not debit?

Those have rates in the 1-3% range, so even with the lower debit rates everything should average to more than 0.2%.

rswail
The end merchant pays 1-3%, then there are a whole bunch of middle-people that take a cut.

The merchant acquirer (eg Stripe), the merchant bank, the issuer bank, the tokenization service (if using Apple/Google/Samsung Pay), there's a long list of people taking part of that fee.

Visa as the network operator takes some of that cut as well, depending on the type of transaction, the type of card (debit vs credit vs "premium" credit).

It's much more complicated than Visa getting all of the merchant fee.

moeadham
Yeah, visa and it’s partners collect the 1% tax. Don’t forget the cut squiring banks take.
kzrdude
EU law has regulated the maximum fee down to 0.2% for debit and 0.3% for credit cards since 2015, I don't know if it has further progressed since then. But regulation is clearly needed, since these "taxes" on transactions create an inefficient market and they want to encourage, not discourage card transactions.

It should be down to the level already that the big stores think that card handling is cheaper than handling cash.

umanwizard
> and one that returns money to its american shareowners and employees only

This isn’t quite right. Nothing stops British people from becoming shareholders of Visa.

I don’t see how the nationality of the company matters. If a private British company were extracting this tax for the benefit of its shareholders, why would the fact that it’s your own countrymen screwing you make you feel any better?

MagnumOpus
Your point is correct, but nationality matters (a) because Visa et al. pay taxes in the US and not the UK (b) because most higher-up employees of Visa et al. are based in the US and pay taxes there and not in the UK (c) because the executives are not on-shore, they can sell customer transaction data to US TLAs and anyone else with near-impunity.
rswail
Visa as an American corporation is subject to American law. So it's not just a matter of who is making the profit.
killingtime74
Just fyi you need to get authorisation from Competition regulator for that. It’s also known as a cartel…(you’re talking about price fixing).
yardstick
Would this include PayPal? They are the middleman between many, many merchants and acquirers, I assume they have sufficient transaction volume to negotiate prices.

Same with Square (who technically are a single merchant but with lots of payment points)

chinathrow
It still blows my mind that we have credit card fees structured mostly in percentages of the payment amount instead of what essentially the costs associated with payments are: fixed.
Reason077
Not all costs are fixed. Dealing with fraud, for example, becomes more costly with higher transaction values.
chinathrow
Can you explain that a bit? Isn't the anti-fraud system in place (software, people) roughly the same, no matter if 2B or 20B are transferred per day?
7steps2much
If a person were to commit fraud they would do it on big, high value transactions. Fraudulently buying a pizza isn't really all that much payoff for our fraudsters after all.

They will buy stuff that's expensive. This means that to credit card companies, the bigger the transaction, the more likely that they will have to spend time and effort on fraud investigations etc.

Man hours are expensive though, and as such it is important someone pays for it. And well, that's where the percentage system comes from.

Ichthypresbyter
>Fraudulently buying a pizza isn't really all that much payoff for our fraudsters after all.

Although they will sometimes do that as a test before making a bigger purchase. When my mother's card was cloned, the first fraudulent purchase was a coffee or sandwich at a railway station in a different city (but one close enough that it was believable she might have been there). Her bank only alerted her the next day when it was used to buy jewelry.

notahacker
But I think the low cost stuff just gets eaten by the parties involved (I once had a stolen card used to make a single $1 payment on iTunes. Refund was as automatic as the new cards and I doubt Apple or the bank cared at all). Not so much when theres $1k at stake and the distinct possibility that the customer, the merchant or both could be lying
Raidion
The more payments there are, the more reducing fraud is worth it. 1% savings on 20B is worth 10x the effort than 1% savings on 2B.
MattPalmer1086
I guess it's because otherwise the fixed cost would overwhelm small payments.
carlhjerpe
Are they really though? Chargebacks on higher amounts = more lost money
1cvmask
It would be nice to learn what the terms of the deal are and if it is about chargebacks or concessions on payment terms and fees.
Reason077
It’s about interchange fees on cross-border transactions following Brexit. Amazon sells many good to UK customers from its EU warehouses, but such transactions are no longer protected by the EU & UK interchange fee caps (if the customer is using a UK-issued card).
alibarber
All transactions are UK -> Amazon Luxembourg, regardless of where the goods are shipped from, the majority are from within UK warehouses.

Amazon is simply taking the money in Luxembourg and landing the profits there instead of the UK. This is now more expensive to do from UK customers.

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tuyguntn
Capitalism at its worst.

When Amazon (non digital service), Apple, Google (digital) charges 30% fee for their services, no one can do anything, but when Visa increased their fees from 0.2% to 0.3% and 1.15 to 1.5% Amazon is screaming and shutting them down. And eventually they won and probably got nice discount as well, when other merchants can't do anything with it

mschuster91
The current events are yet another Brexit-related issue IIRC. Under EU regulations, CC fees are capped under Reg 2015/751 [1]. As a consequence of Brexit, British consumers and companies lost the protections that EU law provides and that have been not codified into British law (like the GDPR was).

The legal foundation for the EU to regulate CC fees is the goal of ensuring affordable equal access to credit/debit card payments for all consumers, and the legal authority are decades of banking regulation.

App stores are not seen as part of that regulation since their payments are not deemed to be instruments of finance, so there is no legal basis to cap their fees - but individual member states can (and do, like the Netherlands [2]) regulate app stores.

[1]: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CEL...

[2]: https://www.heise.de/news/Niederlande-Erstmals-externe-Bezah...

alibarber
It's more complicated than that. UK -> UK transactions are capped at the same rate as they were pre-brexit. That was codified into UK law.

The problem here is that Amazon UK, the part that the consumer pays at least, is _not_ a UK company, it is a Luxembourg based company. Therefore, there is no cap because from their side it is an EU -> Non EU payment received, no longer an intra EU payment. These types of payments were never capped by the EU. So yes, Brexit caused this, but then, given that other companies do seem to be able to take payments in the UK, and that all of their physical UK operations take place in the UK, perhaps they could have avoided it by re-locating the payments to the UK. Except, I do think that may have meant attracting a higher tax bill.

Honestly, making it difficult for companies to relocate their profits to a tax haven could be regarded by some as a feature of Brexit, instead of a bug.

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mavhc
I read somewhere that Amazon pay more because they don't ask you for the CVC number, to enable easier purchasing
objclxt
You do not necessarily pay a higher rate, but you become directly liable for all fraud, rather than the credit card company or bank. So effectively you will be paying a lot more.

I suspect Amazon have run the numbers and determined that people are more likely to buy stuff when they don't need to enter the CVC, which when combined with their own anti-fraud engines (which are probably as good if not better than Visa's) result in a lower cost overall.

ngcc_hk
Another way to put it is Amazon knew their customers and their behaviour. Hence your “run the number” is not just for general risk but for that customers. In particular in this lock down, so many being purchased unless sone odd purchase it is very hard to fool them for big loss. You really have to handle how to get the goods from Amazon and resell them in a fraud. Not easy to get the trick work I guess.

Unlike money you have to deliver to a physical address.

dannyw
Hopefully they reverse their Amazon.com.au 0.5% visa surcharge soon.
lifeisstillgood
This was a fascinating piece of bluff calling by Amazon. I honestly expected Visa to hold their ground and let Amazon refuse to accept payment for millions of people.

Edit: fair enough, I do not know if Amazon or Visa caved. I simply assumed Visa would. Then again it was Amazon threatening, so the only way for the world to know if Visa held on, is for Visa to hold on till Jan 19. At the moment we can assume both pulled back, or Amazon "won". Only once Jan 19 passes could we assume Amazon caved.

Edit: Amazon UK has 15 Million Prime subscribers, and visa has ~ 80% market share in UK, so I am happy to say "millions" of people would at least have to scrabble and update their purchase settings. It would be disruptive to amazon - but the total cost?

https://dontdisappoint.me.uk/resources/technology/amazon-sta...

rtb
Do you know that Visa have backed down and not Amazon? Can you share any info? I wasn't able to find any details of the deal.
mytailorisrich
My guess is that Visa caved and that it was the plan.

My rationale for this guess is that everyone in the UK who has a Visa credit card also has, at the very least, a Visa or Mastercard debit card. So this was going to make people change payment method but I doubt was going to make them stop buying from Amazon.

I am exactly in that case and, like many, a Prime subscriber. I would have just changed card on Amazon and my use of my Visa credit card would have dropped 80%.

Let's face it no-one was going to drop Amazon because of this and they knew it. In the UK Amazon sells $26 billion of stuff annually.

pbalau
I really doubt there are millions of us that chose to pay on Amazon with Visa Credit Cards, here in UK.
chimpansteve
It's anyone with a HSBC or Barclaycard credit card, so probably quite a lot of people
MagnumOpus
People who care enough about that sort of thing have Amex reward cards too which Amazon would still accept.

People who don't care enough would normally have been OK paying with their Visa Debit which they will usually also have as an HSBC or Barclays retail customer...

philjohn
Except it's hammered home in the UK to use credit cards for online purchases where possible for Section 75 protection as well as if the card details are involved in a breach you don't have your bank account emptied and can't pay your bills.

Section 75 in particular has a lot of attention in the UK because over the last 4 years a lot of businesses have gone bust, and people who paid by bank transfer or debit card were shafted, receiving pennies on the pound (if that).

umanwizard
Why? Are Visa credit cards not as common there as they are in the US?
disruptiveink
Norm in the UK amongst most banks/card issuers these days seems to be either Visa or Mastercard Debit and Mastercard Credit. Out of all the meaningful issuers that I know of, only Barclaycard and HSBC issue Visa Credit, with everyone else issuing Mastercard (or Amex, which targets a different kind of users).
buggeryorkshire
Yeah, pretty much most cards you get now are MasterCard I assume due to Visa fees.
chrisseaton
> I really doubt there are millions of us that chose to pay on Amazon with Visa Credit Cards, here in UK.

Not sure where you're coming from? Many (most?) UK retail banks use VISA for their card card network. I have VISA cards from HSBC, Barclays, MBNA, etc... In fact I didn't have anything else so I got a new AmEx when they said they were stopping accepting VISA.

darrenf
Those are debit cards, are they not? Which Amazon were still going to accept.
chrisseaton
No all credit cards.
darrenf
HSBC and Barclaycard I agree, but your MBNA experience is the opposite of mine - they closed my Visa and, I thought, completely went to Mastercard!

Regarding the overall proportion, when the Amazon announcement was originally made Which? listed all the retail banks and other card issuers. MasterCard far outstrips Visa at a ratio of 3:1 (15 to 5): https://www.which.co.uk/news/2021/11/amazons-visa-credit-car...

pbalau
My HSBC Debit card is Visa.
chrisseaton
This whole thread is about credit cards. If your cards from HSBC etc are debit cards then nothing in the thread applies to you.
pbalau
You are arguing that all Visa cards in UK are credit cards. My DEBIT card is Visa. So is my credit card. Both from HSBC.
chrisseaton
> You are arguing that all Visa cards in UK are credit cards.

No where did you read that? It's not true that all VISA cards in the UK are credit cards. It's just that only credit cards are relevant here.

> My DEBIT card is Visa.

Again... this thread is about credit cards, not debit cards. Nobody's talking about debit cards.

darrenf
> visa has ~ 80% market share in UK

What is this statistic measuring? Number of adults who have some form of Visa card? Number of transactions in total? Online transactions? Debit and credit cards combined? If you're able to provide more detail that would be useful.

According to the industry, debit card usage far outstrips credit card usage, at a ratio of about 3:1 for online purchases[0] - and debit cards were unaffected by Amazon's proposed change. So if we assume the 3:1 ratio holds true for Amazon customers, then we're looking at an absolute maximum of 15m/4 == 3.75 million customers - i.e. if all of them are paying with Visa.

Five years ago it was reported that MasterCard had 65% of UK credit card market[1]. If we assume that hasn't shifted much, and ignore Amex and other issuers (i.e. granting Visa a generous 35% market) then we end up at 3.75m*0.35 = 1.31 million customers, or about 8.7% of Prime subscribers. A big and valuable chunk, to be sure - and obviously Amazon's customer base could well skew towards Visa for some reason or other - but to me it still isn't anywhere near as dramatic as "Visa has ~80% market share" implies.

[0] https://www.ukfinance.org.uk/sites/default/files/uploads/Car...

[1] https://cmspi.com/eur/blogs/competition-in-the-debit-card-is...

lifeisstillgood
https://www.statista.com/statistics/1116580/payment-card-sch...

I think transaction share (ie number of swipes).

The main issue for me is that its a big number - Amazon and Visa will have much more detailed models, but the direction of travel is the same - will people swap to Mastercard or just not buy?

jhugo
That question seems absurd. Of course they'll just get a Mastercard if they don't already have one. The U.K. is full of neobanks that will give you one on your phone in 5 minutes.
jbc1
When not all banks supported Apple Pay here in Australia I would occasionally have people quite interested in paying with their phone after seeing me do it or hearing me talk about not carrying a wallet. I'd direct them to the two neobanks I use and told them they could be paying with their phone in two minutes. All lost interest.
beardyw
There is better protection on credit card transactions so like many people I use credit card for online and debit card for contactless, and cash never.
notahacker
> Then again it was Amazon threatening, so the only way for the world to know if Visa held on, is for Visa to hold on till Jan 19. At the moment we can assume both pulled back, or Amazon "won"

I don't see how that follows. Amazon has an interest in not irritating its customers and losing sales (just because most people own other cards doesn't mean everyone will update, especially not for recurring billing like Prime subs), and just as much interest in resolving that before Jan 19 if Visa wouldn't cave as Visa if Amazon wouldn't. Just because they threatened doesn't mean they couldn't have internal forecasts suggesting that following through on the threat would be worse for business than accepting what was already on the table.

mrkramer
It's all about who gets greater percentage of each transaction, that's why they split ways and are now negating it again.
mchusma
The Visa/MasterCard/Amex tax is real, and large. Hopefully we can find a way to end it soon. Payment transfers really should be nearly free.

But deals like this are not the way to get it done, they just make it less competitive for small businesses.