Conversion is still king at VISA. And Amazon is a still an ugly monopoly.

A real corporate war? Or another PR attack by Amazon?

We were recently treated to the biggest corporate boxing match in recent times with Amazon, the worlds largest eCommerce company going toe to toe with VISA, the worlds largest financial services company. On November 19th, Amazon announced that it would no longer be accepting VISA cards in the UK. Most observed this to be a serious and contentious tie with merchants, alternative payment providers, commentators and processors following and supporting Amazon's lead. Over the course of the fight we stood by, whilst the commentators continued to duck and weave past the obvious moves, ultimately missing the fact that Amazon has acted more like Don King, than Muhammad Ali. Disappointingly we later find out it's a distasteful PR stunt, rather than a heavyweight classic.

The contention that led to this dispute was one of convenience and a Machiavellian nature. However, we must first erect the ring, before promoting the fight.

Recently with the UK leaving Europe, VISA and MasterCard collectively have raised the interchange fees (interchange is the fees collected by VISA in order to pay issuers of cards and card acquirers, who facilitate payment, VISA also take a slice of this as well) for payments made by UK consumers abroad or vice versa when European customers are making payments. This price went up from 0.20% for debit cards and 0.30% for credit cards to 1.15% and 1.50%. A 5x rate increase. A lot you may say, to the casual observer, however, this was simply the passing of the torch now that the UK is no longer part of the EU as every other EU business that chooses to accept Non-EU issued cards also charges a similar fee (if not more in some cases) from those not part of its economic area or vice versa in the UK. Collectively this rate increase was seen and misunderstood by many as being a contentious and opportunistic grab by VISA. However, on the contrary, they have simply acted in a perfectly reasonable/explainable manner to account for such change. Whilst many merchants have had to swallow these new fees, many global and savvy operators have avoided these increased fees altogether.

But how have these fees been avoided? And how does this relate to Amazon?

When you contract with a local entity and an acquiring partner (Bank that processes VISA and MasterCard), you avoid these cross-currency interchange fees and pay significantly less as UK processing for locally issued cards remains at 0.20% for debit and 0.30% for credit. And vice versa for EU issued cards buying in the EU will still pay 0.20% for debit and 0.30% for credit respectively. Meaning that a company like Amazon effectively will see no price increase to its core UK customer base who shop with their VISA issued debit cards and credit cards. Why? Because Amazon uses multiple global acquirers via multiple local entities to ensure such savings and always have done to achieve the highest possible acceptance rates and reduction in interchange fees.

So why did they make something like this public when such change does not affect them?

Put simply, Amazon took this time to publicly attack VISA by announcing they would stop processing VISA issued cards in the UK, knowing that the climate was brewing a certain level of contention, not least by the recent changes following Brexit, increasing scrutiny and the 'increasing popularity of alternative online payment methods. All of this was then combined and made worse by the ticker tape headlines and poor standards of journalism evident in 90% of the articles I have read on this topic. Many people in my own industry have also not sat down and disappointingly joined the dots.

Amazon once more has been found foul and once again continues to stir the pot, using bullying and intimidation tactics. If you do not follow Amazon's tactics, we only need to look back over the last 2 years of Jeff Bezos and Amazons tactics. Whether it’s Bezos/Blue Origin trying to run patents against Spacex or Bezos/Amazon banning the sale of certain published books.

There are countless other examples of such tactics, that can only really leave a sour taste in your mouth, not to mention Amazon being famous for paying a total of £3.8m more corporation tax in 2020 than in 2019, even as sales increased by £1.89bn... I will leave you to do that maths on such total percentages...

But Jake, VISA are a monopoly too. Yes, yes they are...

But the nice thing is, they don't hide from it and they are perfectly happy to tell you they own the worlds leading card scheme. And similar to Muhammad Ali they dance like a butterfly and sting like a bee as the ubiquity of their product is for all those to see, whilst the Don Kings of the world; Amazon and Bezos would rather play a much dirtier game of monopoly... A game I have little time for and neither should you.