Payments News Digest 21 January 2022

UK: Amazon ban on Visa credit cards averted as talks begin

With mere days to go, Amazon has announced a reprieve for Visa-branded credit cards on its website, with the companies currently collaborating on a "potential solution". Two months ago, Amazon had announced that it would end this particular payment option, citing what it characterised as "pretty egregious" price hikes in recent years. The e-commerce giant then began luring its Prime customers to position alternatives as their default payment method with a £20 ($27) credit, or £10 for non-Prime customers.

Having come so close to the deadline, Visa's British credit card operations may have lost some ground to competitors. "The proverbial game of chicken that has ensued from Amazon and Visa on the issue illustrates the wider polarisation between merchants and networks since Brexit", commented Gary Brennan of Argus Advisory Research. "Card fees have been reignited as a point of contention since Brexit, with both Mastercard and Visa increasing cross-border interchange fees for credit card transactions."

Last month, 'Instalments by Barclays' joined the array of enabled payment methods for approved domestic shoppers at Amazon UK, offering finance on amounts above £100 over 3-48 equal monthly payments. In the United States, Amazon has been pitching Affirm's pay-later method, also payable in as many as 48 instalments, to its mailing list.

US: Renewed zest for consumer business among biggest banks

Across the Atlantic, fourth-quarter results have been emerging from the major American lenders. With them has come news that Wells Fargo will be joining several others in revising fees for customers whose debits overstep their credit: in its case, it is doing away completely with bounced cheque and overdraft protection fees, a clear bid to win its way back into popular affections after the disastrous fake accounts scandal that triggered a perfect storm of multi-billion dollar fines, draconian restrictions from regulators and a humiliating overtake by BofA in consumer banking. Now, customer-pleasing innovations from Wells include allowing direct-deposit recipients access to expected funds as far ahead as two days beforehand.

In other highlights from Wall Street, rival Bank of America's consumer banking division reported a 20 percent year-on-year rise in quarterly profits thanks to a fall in expenses accompanied by increased consumer spend on both debit and credit cards. The Commerce Signals Consumer Spend Tracker from Verisk Financial reported this week that, between Thanksgiving and the end of Christmas week, consumer spending on debit and credit cards soared by 22 percent. The rising balances on the latter should contribute to issuers' net interest income for future quarters as Fed officials signal upcoming rate increases.

For its part, Citigroup's North American revenue dropped by six percent on decreased sales of own-brand cards and retail banking services, while, amid better-than-expected results, JPMorgan Chase is allocating $12bn to spend on fintech innovations: as one analyst told the Financial Times, "That probably blows away the cumulative dollar value of investment of all the fintechs in the world that are trying to disrupt them".

Global: Tech firms relentless in payments quest

Silicon Valley's star fintech, Stripe, has landed what may well be its biggest fish to date: a five-year deal that will see the startup process digital transactions in the United States, Canada and Europe for Ford's financial services unit. The deal covers consumer transactions as well as bundled financing for the car giant's commercial business. "During the pandemic, people got comfortable paying online for groceries, health care, even home haircut advice from barbers", said one Stripe executive. "Now, they expect to be able to buy anything and everything online."

Big Tech is having a busy time in payments, with Apple now allowing some in-app alternatives for payments in both the Netherlands and South Korea to conform with regulatory pushback. In November, Google too made a similar move in South Korea – and for much the same reason. But industry commentator Ben Evans finds these responses "against the spirit" of the directives concerned since both stores still make affected apps pay them the same commission. Will there be a similar tussle in the United States? That depends on the outcome of the Fortnite case: as matters currently stand, a November federal court ruling to end the payments monopoly in the Apple App Store has been put on hold as an appellate judge further considers Epic Games v Apple.

Other stories of interest this week...

Australia: Cards strong amid age of payments innovations
China: Digital yuan wallet now has 260m individual users
Global: How Facebook plans to monetise metaverse
US: SoFi clears final regulatory hurdle to become bank

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