Visa vs. Amazon – is this the start of a revolution?

The battle lines have been drawn, but which side will back down first is still to be decided. Now in its third week, the spat caused by Amazon’s announcement that it would stop accepting Visa credit cards issued in the UK from January 19th, 2022, due to the high fees the card provider places on transactions has got the payments world talking.

Once again, Amazon is making people rethink the fundamentals of retail and the customer experience. Payment is a crucial part of the process which has for a long-time revolved around card providers and the fees they charge. Even the arrival of mobile payments like Apple Pay and Google Pay did not disrupt card processing in the same way. With Amazon questioning Visa’s fees, many other retailers will be keeping a close watch and thinking about whether they should make the same move.

What are the options for Amazon now?

For either company to back down now will be very problematic. If Amazon back down, then it will not have achieved its goal of getting lower processing fees, while also confusing its customers. If Visa back down, then you can be sure other retailers will be asking for their own reductions.

Looking at what the options are for Amazon, I expect it will likely be offering its own alternative account-to-account payment solution soon. If it does, this will be a big step in revolutionising payments and offering more choices to both retailers and UK consumers. Data from Omdia highlights how big a trend this is set to become, with it being a top open banking priority for card issuers and acquirers.

For retailers, this is good news as systems like account-to-account payments (A2A) have much lower processing fees and ensure payment is available immediately in a business’ account, rather than the days or even weeks that it takes with a card payment. Consumers benefit too as they now have other ways of paying. Retailers can even incentivise customers to switch to A2A payments by passing some of the savings on to them in the form of discounts or additional loyalty points.

Is this the start of the end for cards?

It’s important to remember that alternative payments will not replace cards overnight. Far from it, thanks to their huge market and mindshare with customers. Instead, they will sit alongside cards as a complementary option for consumers.

However, Amazon is firing the starting gun on a race for new payment methods, and I expect this turn of events will be seen as the catalyst for broad change in the payment space.

The good news is that the technology exists for retailers to offer new payment methods. Working with MultiPay, many existing Android payment terminals can already take new alternative payment methods like instant payments. With just a quick software update they are ready to go. For the consumer, it’s just as easy. Instant payment can be done by a mobile app that reads a QR code generated by the merchant device. Once scanned this triggers the payment, which goes directly to the retailer’s bank account, without any card fees being charged.

But it won’t just be the ones that have the best technology that succeeds, the all-around service is equally important. Payments must work 24/7/365. Having a payment provider that understands this and offers a couture service tailored to a business’s unique needs will be what wins out.

The coming weeks and months will certainly be an interesting time in the payments space. Early Christmas shopping and entertaining means UK consumer spending is showing resilience despite surging inflation. With this, they’re also demanding more choice. Amazon is potentially paving the way for an alternative payments future able to meet these demands that also gives a better deal for retailers. All eyes will be peeled to see what comes next.