Retail giant Amazon is taking on card behemoth Visa with plans to impose a half percent surcharge on all Visa credit card transactions in Singapore starting next month in its first ever such surcharge.
"Due to Visa's high cost of payments, beginning 15 September 2021, Amazon will apply 0.5% surcharge to purchases made using Visa credit cards on Amazon.sg," the company said in a notice today to its Singapore site customers. "To avoid this surcharge, we encourage you to use a debit or non-Visa credit card as the default payment method in your account," said the notice, which was provided by Amazon.
Asked if the surcharge could be extended to other parts of the world, a spokesperson for Amazon declined to comment but suggested the Seattle-based company might consider adding the surcharge elsewhere. "Singapore is the first country we've decided to make changes in, but this is a global issue and is not isolated to Singapore," the spokesperson said by email.
An emailed statement from the company underscored the point. "The cost of accepting card payments continues to be an obstacle to providing the best prices for customers," Amazon said in a statement. "These costs should be going down over time with innovation and technological advancements, which allows merchants to reinvest savings into low prices and shopping enhancements for customers. Yet, despite these advancements, some cards' cost of payments continue to stay high or even rise."
A spokesperson for Visa didn't immediately respond to a request for comment.
The Amazon move is the latest blow to the card industry, which has faced increased pressures this year from lawmakers and regulators to keep a lid on their fees. Visa and Mastercard postponed a scheduled fee increase on transactions for the second year in a row this year after pushback.
Merchants have complained for years that the fees they shoulder to process credit and debit cards are overburdensome. With Democrats in control of Congress and the White House this year, their concerns may be gaining ground.
Sen. Dick Durbin, D-IL, earlier this year continued his crusade against card fees, excoriating the industry over the now-abandoned plans (at least temporarily) to increase fees. He helped win a cap on debit fees in an amendment to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, but credit card fees have remained unrestrained. More recently, the Federal Reserve Board is getting an earful this month as a deadline approaches on a clarification of some aspects of the debit fee rules.
The jolt now from Amazon will buttress the broader merchant campaign to reduce card fees. While the card companies, especially the two biggest, Visa and Mastercard, have sometimes been seen as acting in lock-step on pricing, the move by Amazon today targeting Visa suggested card companies' activities in the marketplace may be diverging. A spokesperson confirmed that Amazon's surcharge applied only to Visa credit cards, but declined to provide an explanation for singling out the card company.
Other merchant organizations have also railed about card fees not declining on technological advances that have reduced the costs of processing transactions. On debit fees, the Fed this year decided to leave the debit cap amount unchanged despite those arguments. Banks mainly issue the cards, and card networks, along with other intermediaries, process the transactions.
In a press release today on the Fed debit rule, a major food retail trade group echoed complaints about card fees not reflecting tech progress. "Since the law went into effect in 2010, banks' costs, as reported to the Federal Reserve, have gone down by approximately half to process debit payments, while the regulated prices charged to merchants for the same debit payments remained unchanged," the Food Industry Association (FMI) said in the press release. "Combined credit and debit processing fees have escalated, resulting in most merchants' second-highest cost after labor, totaling $110.3 billion a year for all types and brands of cards in 2020," the group said, citing industry research firm the Nilson Report for the data.
The issue was amplified for Amazon last year because of its significant e-commerce, which surged generally in 2020 as the COVID-19 pandemic confined many consumers to online shopping from home.
In its statement today, Amazon also glanced at another threat to card companies, namely a swarm of well-financed payment fintech startups finding new ways to process payments.
"With the rapidly changing payments landscape around the world, we anticipate a future that is less card-centric in the coming years, and we will continue innovating on behalf of customers to add and promote faster, cheaper, and more inclusive payment options to our stores across the globe," the Amazon statement also said.