The coming fintech wars between Amazon and Visa

It appears that Amazon.com Inc. is showing its passive-aggressive side. The e-commerce giant is waging a war with Visa Inc. over the price of using its credit cards, but will not confront the company directly. The company recently informed Visa credit card users in Australia and Singapore that they face a 0.5% transaction fee when using their credit cards on its websites.

In its latest move, Amazon is no longer going to take Visa-branded credit cards from customers in the UK starting next year. This does not apply to Visa-branded debit cards (where you pay directly from your bank account) or to MasterCard Inc. cards.

The U.K., Australia and Singapore seem to have in common that their users are relatively insignificant to their respective companies. Singapore is considered a very small market for Amazon, trailing behind two other popular e-commerce platforms there, while Australia has one of the fastest-growing alternatives payments markets in the world.There is no statement from either side on the share of Visa credit cards in credit card purchases in the U.K. Generally, industry data suggests that Visa credit cards account for less than 7% of all card-based purchases in the U.K. As for Amazon, they will account for only about $1.8 billion of its $26.5 billion U.K. net sales in 2020.

Despite being held hostage by Visa for more than a year, Amazon wouldn’t provide details regarding the business’ problems with the card company. It only expressed frustration over Visa’s intransigence in reducing costs over time. “Visa is not working towards the same goal,” it said. Amazon uses MasterCard for its own credit card in the U.K. and elsewhere. It said the relationship was not protecting MasterCard in this fight over fees. But Amazon is also looking to ditch Visa as the partner for its credit card in the U.S. and use MasterCard there as well, Bloomberg reported.

There have been similar, but larger, fights between Visa and other companies in the United States in recent years. Walmart Inc. stores and Kroger Co., two large retailers, in recent years had standoffs with Visa over its charges before they reached private settlements. Due to rapid changes in payment technology, Visa and MasterCard both face a mob of threats from newer forms of payment and fintech firms that are cheaper and faster than any type of debit or credit card.

MasterCard and Visa are network companies: They run the systems over which payments are confirmed and settled. They’ve built and maintained cash “railway tracks” that have operated for years; the banks and payment processors are in charge of the trains and the stops — processors move the money, banks accept and dispatch it. The biggest growth comes from buy-now-pay-later apps like Affirm and Klarna, which run their own direct payments technologies. Others are trying to make cryptocurrencies mainstream.

In some countries, Amazon has introduced its own buy-now-pay-later offering, and it is working to increase the number of payment options readily available to customers, particularly those that are fastest and cheapest. The train tracks make no money in this world. You can’t charge people for something they don’t need to use. That’s why both Visa and MasterCard are furiously looking to diversify, setting up their own buy-now-pay-later technologies and getting into crypto in small ways, like MasterCard’s recent partnership with Bakkt Holdings Inc., an exchange that can convert crypto for normal money for day-to-day payment.