In November 2021, Amazon announced that it would no longer accept Visa credit cards in the UK – they had already done so in Singapore and Australia. To the layman, this might sound like Amazon shooting themselves in the foot, and right before Christmas! What’s going on you may ask?

The moment a customer uses a card, the merchant pays a fee of up to 3 percent of the transaction. This fee is distributed among the companies enabling the transaction. A small “acceptance” fee goes to the payment company that connects the merchant to the network, and an “interchange” fee goes to the bank that issued the credit card, with Visa or MasterCard keeping the balance. Amazon doesn’t like that and thinks they can screw that up and take some or all of the margin themselves.

Amazon and their merchants believe this is completely unfair, especially since technology has enabled other payment alternatives that were not available even three years ago. There are too many opportunities for marketers to mention that we are in the digital age and there is always FinTech on hand with a solution no matter how big the problem.

Account-to-Account (A2A) payments are approaching something of a maturity. Amazon now offers A2A payment method in India: Amazon Pay works through UPI / IMPS rails. Open banking also allows transactions to bypass credit card rails entirely. This is a worrying trend for both MasterCard and Visa, and they have been frantically trying to build their alternative offerings for years. For example, Visa tried and failed to buy Plaid, which had spent many years building its network of 2,000+ banks. MasterCard buys companies with established networks and products and skills in payment security.

What does this mean for the future of payments and consumers? Will Amazon be able to get a better deal from Visa to lower its own costs and those of its merchants? If Amazon wins this dispute and manages to secure a better deal for itself and its merchants – no doubt it will turn its guns on MasterCard to lower their fees.

It’s anyone’s guess what Amazon’s strategy is, it could be to get a better deal for itself, its merchants and consumers than Visa and MasterCard. Or they may consider introducing their own payment system or using an alternative, cheaper rail system. Sound familiar – a major tech retailer offers its own payment method, think eBay and PayPal. For a company that does everything from retail to space travel and is run by the richest man in the world, anything is possible, and I for one wouldn’t bet against Amazon.

So the game begins! You can be sure it’s going to be an interesting few months and some feathers will be ruffled as these giants go head-to-head. My feeling is that Amazon has the upper hand, they have customers and merchants and there are many FinTechs willing and able to help Amazon and other retailers deal with Visa and MasterCard. If you think the F1 final race is exciting, you’ll love this!—who-will-win?utm_medium=rssfinextra&utm_source=finextrablogs