Amazon takes page from Walmart's playbook to fight Visa's fees

Amazon is justifying plans for a surcharge on Visa credit cards in Singapore by pointing to the costs it pays for handling those transactions. It’s a tactic similar to what other retailers have used to pressure the card network over payment costs.

Amazon on Tuesday sent an email to customers in Singapore saying it would charge 0.5% for Visa credit card purchases starting Sept. 15. Amazon did not provide an executive for an interview, but an Amazon spokesperson said the cost of accepting card payments is an obstacle to providing the “best prices” for consumers. Amazon also contends the payment costs, including interchange and other fees, should be decreasing over time due to technology advancements.

Amazon’s battle with Visa resembles a similar — and arguably more extreme — move by Walmart in 2016. Citing costs, Walmart banned Visa credit cards in Thunder Bay, Ontario, followed by threats to ban Visa credit cards throughout Canada. Consumers complained about the ban, and Visa and Walmart reached a deal after about six months, with neither side disclosing the details of their agreement.

Amazon acknowledged its move would be inconvenient for consumers, but added it anticipated a less “card-centric” future given the rapidly changing payments landscape around the world, a likely reference to alternative payment methods such as those Amazon is itself developing.

The e-commerce firm told consumers to use other credit cards or debit cards to avoid the surcharge. Singapore is the first market for the surcharge, but Amazon categorized the cost of card payments as a global issue.

Amazon is adding a surcharge fee for Visa credit card purchases in Singapore, drawing attention to the retailer’s own costs for handling payments.


By signaling out Visa and Singapore, Amazon is limiting its surcharge coverage while sending a public message. Amazon is the third largest e-commerce company in Singapore, trailing Shopee and Lazada, according to Statista. By contrast, Amazon controls about 40% of the U.S. e-commerce market, according to eMarketer, compared to 7% for Walmart and 4% for eBay.

As such, Amazon’s goal is likely to negotiate a better overall deal with Visa.

“If Amazon’s decision to surcharge represented a general disgruntlement with card fees, Amazon would have included the other card brands too,” said Sarah Grotta, director of the Debit and Alternative Products Advisory Service at Mercator Advisory Group.

Hilton, for example, recently announced surcharges in the U.S. for all credit cards. “I can’t wait to get back on the road and see if Hilton will take my check as payment,” Grotta said.

It’s not unusual for merchants to battle credit card companies over payment costs. The card brands have been in and out of court for years with retailers over fees. What’s less common is merchants adding their own fees on top of card fees as a forcing mechanism, a harder negotiation tactic that threatens consumer relationships. Credit card surcharging is legal in most markets, though it’s generally not popular with merchants, given the extra costs to consumers.

“Amazon’s move feels like a form of brinkmanship, but it’s a dangerous game to play,” said Jordan McKee “Introducing friction at checkout can jeopardize conversions and customer lifetime value.”

Despite the risk of angering consumers, Amazon’s considerable size could help the e-commerce company if its battle with Visa extends beyond Singapore.

“Amazon’s size and loyal following may help to insulate it from the potential customer relationship consequences of this move,” McKee said.

Amazon has its own mobile payments system, called Amazon Pay, which processes payments from consumers’ Amazon accounts. Amazon is also reportedly fielding bids for its co-brand credit card business, which uses JPMorgan Chase as the issuer and Visa as the card network. And Amazon has offered marketing incentives that are less tied to card usage in favor of encouraging enrollment in Amazon Prime, which is at odds with traditional card-focused incentives.

Card networks set interchange fees, which merchant acquiring banks pay to card issuing banks — but merchants bear the actual expense. Visa and Mastercard raised fees earlier in 2021, following a delay of about a year due to the pandemic. Visa also made what it called small adjustments in its fee structure to accommodate the growth of online payments.

“Amazon is taking out its disagreement over network card fees on its customers,” said Grotta. “So rather than convincing its customers that Amazon’s payment solutions offer better value, they take the stick approach and penalize their customers for their payment choice.”