0 Amazon Reportedly Bans Venmo Credit Cards as Electronic Payment Rates Decline
Amazon announced in a letter to merchants that, effective July 1, it will no longer accept Visa credit cards from UK merchants. Its rationale? Visa’s credit card processing fees are higher than it’s existing card payments, and Visa’s everyday interchange rates and charges are below Amazon’s contracted rates and costs for carrying a Visa card.
On its 2018 third-quarter earnings call, Amazon said it had a $670 million ‘spread’ between its variable and contractual costs for doing business with Visa. But in its letter, Amazon says:
The spread is, at best, just slightly negative, and typically negative or negligible. In order to remain competitive in the UK, we have recently negotiated agreements with Visa to enhance our current spreads and charges. While these improvements will eventually increase our spread and charges, they will not occur for a period of one to two years, and as a result, we are no longer offering Visa credit cards to merchants in the UK.
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In response to Amazon’s announcement, Visa UK’s CEO, Joe Lopez, said:
We are aware of the plans by Amazon to stop accepting Visa credit cards. We believe this is to reflect the decrease in our average interchange rate since the end of 2018. However, our average interchange rate on variable credit card transactions on a two-year rolling basis was 29.1p per transaction in 2017 (according to the UK Payment Systems Regulator). We have also agreed to reduce our interchange rate by 2.5% on Visa credit cards processed through our network for Amazon in the UK by the end of 2019.
Amazon says, “The recent decrease in our variable credit card spread relates to a change in interbank terms, which have been around for many years. While we always aim to keep our costs as low as possible for merchants, we also strive to ensure the affordability of our service.”
We have agreements in place with multiple banks in the UK to offer alternative banking solutions through our Amazon Payments service that remove those high processing costs for merchants.”
Visa U.K.’s Rates Will Be “Covered Through Additional Trusted Promotional Credits”
In response to the news, Visa UK said the interchange rate it charges Visa credit card issuers will be “covered through additional promotional credits. This appears to be Visa equivalent of a flat rate to cover the cost of the difference between the two interchange rates.”
Before going onto its site, Amazon also told British merchants to take action now.
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