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Why Visa Stock Dropped Today

Why Visa Stock Dropped Today
Written by publishing team

What happened

shares Visa (NYSE: V) fell on Wednesday after Amazon.com (NASDAQ: AMZN) It told its customers that they will not be able to pay with credit cards issued by the UK payment processing giant beginning next year.

As of 3:30 PM ET, Visa’s stock price is down more than 5%.

so what

Amazon claims that Visa’s increased transaction processing fees recently are driving up prices for online shoppers, at a time when inflation is already a serious threat to the economy. “The cost of accepting card payments continues to be an obstacle for companies striving to provide the best rates to customers,” an Amazon spokesperson told Bloomberg.

Visa, for its part, says Amazon’s decision will only reduce consumer payment options, at a time when many people are already struggling to pay their bills. “When consumer choice is limited, no one wins,” a Visa spokesperson told Bloomberg.

Visa’s share price fell on Wednesday. Image source: Getty Images.

However, it is likely that Visa and Amazon will reach a deal that will prevent these restrictions from occurring. The changes are set to take effect on January 19. “We have a longstanding relationship with Amazon, and we continue to work towards a solution,” Visa said.

Meanwhile, Amazon will allow its UK customers to pay with Visa debit cards. They can also choose to use credit cards issued by Visa competitors, including Master Card Credit Card.

What now

Visa’s UK transaction volume represents a relatively small portion of its global operations, and Amazon accounts for only a fraction of those payments. Therefore, even the permanent loss of Amazon’s UK business would likely have little impact on Visa’s earnings.

However, the biggest risk will be that other e-commerce platforms will follow Amazon’s lead and start rolling back Visa fees. Retailers have long sought to limit the fees that Visa and Mastercard can charge, which can take a heavy toll on their often meager profit margins.

Amazon UK opposition also suggests that any additional rate increases by Visa and Mastercard will likely face strong opposition.

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