What happened
Shares of Visa (V 0.41%) fell on Wednesday after Amazon.com (AMZN +0.20%) told its customers they would no longer be able to pay with credit cards issued by the payment processing titan in the U.K. beginning next year.
As of 3:30 p.m. ET, Visa's stock price was down more than 5%.
So what
Amazon claims that Visa's recently increased transaction processing fees are leading to higher prices for online shoppers, at a time when inflation already poses a serious threat to the economy. "The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers," an Amazon spokesperson told Bloomberg.
Visa, for its part, says that Amazon's decision will only serve to reduce consumers' payment options, at a time when many people are already struggling to pay their bills. "When consumer choice is limited, nobody wins," a Visa spokesman told Bloomberg.
Visa's stock price sank on Wednesday. Image source: Getty Images.
Still, it's possible that Visa and Amazon will reach a deal that prevents these restrictions from occurring. The changes are set to go into effect on Jan. 19. "We have a long-standing relationship with Amazon, and we continue to work toward a resolution," Visa said.
In the meantime, Amazon will allow its U.K. customers to pay with Visa-issued debit cards. They can also choose to use credit cards issued by Visa's rivals, including MasterCard.
Now what
Visa's transaction volume in the U.K. is a relatively small part of its global operations, and Amazon accounts for just a fraction of those payments. So, even a permanent loss of Amazon's U.K. business would likely have a minimal impact on Visa's profits.
The greater danger, however, would be if other e-commerce platforms follow Amazon's lead and begin to balk at Visa's fees. Retailers have long sought to limit the fees Visa and Mastercard can charge, which can take a heavy toll on their often-slim profit margins.
Amazon's pushback in the U.K. also signals that any additional rate increases by Visa and Mastercard will likely meet with strong opposition.
