LONDON, England: Amazon.com will stop accepting Visa credit cards issued in the UK for purchases starting next year, in a bid by the online retailer to avoid costly transaction fees charged by payment networks.
This week, Amazon users who recently made purchases received a notification stating, "We will no longer accept Visa credit cards issued in the UK due to the high fees charged to process transactions."
The ban will come into effect on 19th January 2022.
After the announcement by Amazon, Visa shares dropped 5.2 percent to $203.96 at 9:36 a.m. New York Time.
"The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers," an Amazon spokesperson said, as reported by Bloomberg.
Customers in the UK can still use both Visa and Mastercard debit cards, as well as American Express credit cards and Visa credit cards issued outside the UK.
Also, Amazon customers were offered a $27 discount off their next purchase if they use a debit or non-Visa credit card as their payment default.
In an email, a Visa spokesperson said, "We are very disappointed Amazon is threatening to restrict consumer choice in the future. When consumer choice is limited, nobody wins. We have a long-standing relationship with Amazon, and we continue to work toward a resolution," as quoted by Bloomberg.
Retailers have long complained about the yearly costs of accepting electronic payments, which have risen to more than $100 billion a year in the U.S., as fees increase and consumers are using more premium cards that have higher interchange rates.
In addition, since Brexit, both Visa and Mastercard have attracted criticism for increasing some fees, as the UK is now outside the European Union.
"Card payments accounted for over four-fifths of UK retail spending in 2020, with just two firms facilitating 98 percent of these payments," said Andrew Cregan, payments policy adviser at the British Retail Consortium, who called on the UK's payments regulator to intervene, according to Bloomberg.
Amazon has previously encouraged consumers to use debit cards to add cash to their Amazon accounts, instead of using credit cards, and has also provided the option to link their checking accounts for payments.
Because of the COVID-19 pandemic, Visa and Mastercard have postponed plans in the U.S. until April 2022 to increase fees paid by merchants when customers use credit cards online.
According to Bloomberg, Visa can weather this incident, as it will be significant only if the restriction is applied by other retailers and Amazon U.S.