In November Amazon shocked UK users that it would stop accepting Visa credit cards in January “due to the high fees Visa charges for processing card transactions.”
But then in January, the company reversed course sending out an email saying, “[w]e are working closely with Visa on a potential solution that will enable customers to continue using their Visa credit cards on Amazon.co.uk.”
Yesterday, Amazon and Visa announced they have reached a global agreement on accepting Visa cards on the shopping platform, including eliminating a surcharge Amazon charged customers using Visa in Australia and Singapore.
“We’ve recently reached a global agreement with Visa that allows all customers to continue using their Visa credit cards in our stores,” a company spokesman said to Bloomberg. “Amazon remains committed to offering customers a payment experience that is convenient and offers choice.”
Amazon’s Fake Reason
Sadly, the resolution to this standoff was virtually predictable with consumers being caught in the middle as always. Amazon used the cloud of its customer base to negotiate better terms for itself.
This wasn’t about what is best for the consumer because did they even bother to ask their customers? Of course not. Amazon knew Visa struck deals before with major retailers to accept its cards and now it was Amazon’s turn to negotiate a better deal.
In 2015, Visa entered into an agreement with Costco to become the exclusive issuer of Costco-branded credit cards that required Costco members who used the Costco-branded credit card to switch from American Express to Visa, ending a 15-year partnership between Costco and American Express.
In addition, Bloomberg reported at that time that Visa made a sweetheart deal with Costco that resulted in “almost zero” card processing fees for the warehouse giant.
Ultimately, Walmart, like Costco and Amazon now, reached an (undisclosed) agreement with Visa that for near certainty lowered its Visa processing fees.
The moral of this story is that there was never really a real threat of Amazon dumping Visa as Amazon only dug into the same playbook Costco and Walmart used before. The company didn’t even use its most valuable retail market, the US, as its strategic move in this game of chess between multinationals.
Instead, just like Walmart, it picked a large, but less impactful retail market to drive the point home. It chose a country where it could potentially afford to go without Visa for a limited period of time, but one large enough for Visa to understand the “repercussions” of a no-deal. The strategy worked.
Unfortunately, this won’t be the last time that consumers, or consumers in secondary markets, will be used by multinationals as pawns in negotiations for which they will realize nothing in return.
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