Payments News Digest 19 November 2021

UK/US: Amazon escalates interchange dispute with Visa

Amazon announced this week that it will stop accepting Visa credit cards issued in the UK from early next year. The move is a result of what Amazon sees as unfairly high charges, arguing that – given its size and low fraud rates – it should be given concessions on standard card-not-present rates. Visa holds a share of about a third of the British credit cards market per Argus Advisory Research's UK report, with Barclaycard and HSBC among banks issuing the brand. However, debit cards are preferred to credit cards for online use in the UK, so the proportion of spend on Amazon's UK site with Visa credit cards is likely to be less than ten percent.

Visa will no doubt fight to retain the highest fees it can for its issuers but must tread carefully here as Amazon potentially has the power to change consumer payment habits. While Visa has dealt in the past with retailers who depended on the network, Amazon with its market power combined with new payments technology and Open Banking could conceivably survive without Visa. Indeed, shoppers in the US will be able to pay for their Amazon purchases with Venmo from next year. In a further sign of a deteriorating relationship, Amazon are reportedly in talks to switch their co-brand card to Mastercard from Visa in the United States.

Europe: Public funding needed for new payments network

While Visa may have some minor headaches, building a new competitor is no easy task. The European Payments Initiative (EPI) was founded last year to create a new pan-European payments network to replace several national systems and reduce reliance on Visa and Mastercard. With private stakeholders such as banks and retailers either unable or unwilling to fully fund the project, it appears public funding will be required if the vision is to come to fruition. The first phase of the project, peer-to-peer payments backboned by instant payments, is scheduled to be delivered as early as 2022; however, the roll out of a replacement card network is likely to take significantly longer.

India: Paytm disappoints on market debut

Paytm shares fell by 26 percent on Thursday after the company raised $2.5 billion in India's biggest IPO. India's digital payments market is hypercompetitive, with the potential offered by the country's huge population that is largely underserved by traditional banks attracting significant investment from domestic and foreign firms. Investors have questioned whether Paytm can become profitable as it competes with global giants such as Google, Walmart, Amazon and Facebook. India's Unified Payments Interface (UPI) is open to all, making it harder for Paytm to differentiate itself, while a central bank mandate for all QR codes to be interoperable has reduced the competitive advantage of Paytm's proprietary merchant network. Profitability is challenged further by the government's 'Zero MDR' policy, which bans merchant fees on transactions processed through UPI.

Other stories of interest this week...

US: N26 to withdraw from US market
Global: Mastercard advances global Open Banking capabilities with close of Aiia acquisition
UAE: Network International and NPCI to collaborate on UPI acceptance
Global: Euronet debuts real-time cross-border business payments platform