Amazon (NASDAQ: AMZN) has dropped its pre-announced plans to stop British users from using a Visa (V) credit card on its platform from January 19 onwards, according to CNBC.
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The Background
Following the U.K.’s withdrawal from the European Union (EU) aka Brexit, many payment processor firms like Mastercard (MA) and Visa increased their U.K.-EU interchange fees, after the EU cap on interchange fees ceased to apply in the U.K.
Likewise, in November 2021, Amazon stated that it will no longer accept Visa credit cards issued in Britain from January 19 onwards. The company cited high Visa charges for the processing of credit card transactions for the move.
In response, Visa said that it was “very disappointed” and will work with Amazon to arrive at a resolution.
What’s Next
In accordance with today’s announcement, Amazon customers can continue to use Visa cards on Amazon.co.uk even after January 19.
According to CNBC, an Amazon spokesperson stated that, “We are working closely with Visa on a potential solution that will enable customers to continue using their Visa credit cards on Amazon.co.uk.”
Both companies also clarified that the dispute over the charges was not related to the U.K.’s exit from the EU.
Usually, retail giants agree upon bespoke rates with payment firms against their regular published rates. Separately, Amazon introduced a 0.5% surcharge on Visa credit cards in Australia and Singapore.
While both companies work together to reach an agreement, this could mean that Amazon is able to exercise higher bargaining power and negotiate a longer-term agreement on rates with Visa.
Analysts Recommendation
On January 11, Morgan Stanley analyst Brian Nowak increased the price target on Amazon to $4,200 (29.5% upside potential) from $4,000, and reiterated a Buy rating.
Consensus among analysts is a Strong Buy based on 30 unanimous Buys. The average Amazon stock price prediction of $4,150.83 implies an upside potential of 28% from current levels.
Smart Score
AMZN scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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