This morning, Amazon UK have started emailing their customers, advising that they will stop accepting UK credit cards issued by VISA from January 19th, 2022. The reason they give is the high processing fees VISA charges them. But I suspect there is more than that going on under the surface.
VISA are known to charge transaction high fees in the UK - a good reason retailers should see if their customers would like to pay with cryptocurrency and the lower fees involved !
But the other big expense for Amazon will be VISA hitting them under the Credit Card Guarantee. I don't know if this is a UK-only thing, but the idea is that if a buyer has a problem with a transaction over £100 in value, the credit card issuers will act as insurers for it, and will refund the buyer if the retailer won't, and then claim reimbursement from the retailer.
Amazon is known for being a real hotspot for online fraud. The vast majority of people are basically honest, but it only takes a very small minority of dishonest buyers and sellers to have a significant financial impact. With every Credit Card Guarantee claim, VISA will be claiming back the cost from Amazon (on the principle that banks never like to lose out). No-one outside those two businesses will know the true sums involved, but I suspect it runs into millions.
This move could also be a sign that Amazon are about to muscle into a new market. With their financial resources, they can afford to set up as a bank and offer their own credit card. They already offer business loans to sellers, so offering credit services to buyers is a logical (and potentially very lucrative) next step.
The biggest obstacle to creating their own bank is the level of regulation and oversight involved. But there is a way around that; cryptocurrency. As arch-centralisers and data collectors, I can see Amazon only using established crypto as an "entry level" enticement, and only if they can find a way to accumulate people's personal data.
However, if they created an "Amazon Dollar", which would act like a stablecoin and could be used on any Amazon site worldwide (as well as any website using Amazon Payments) and based the managing company in some small country with a GDP less than Amazon's annual revenue, they could effectively be self-regulating. There would be legal challenges from the EU and a few other countries, but Amazon could probably afford good enough lawyers to keep that bouncing around the courts for long enough to deliver a fait-accompli.
An Amazon Dollar would be centralised rather than decentralised, and would be the first corporate equivalent of a CBDC. But it would lack even the bare minimum of regulatory oversight that a government-issued CBDC would have. Inevitably, they'd tie it up with all the other personal data they hold on it's users, and that could potentially include anything hosted by any other organisation on AWS (Amazon Web Services). I'm not convinced this would be a good thing.
