The deal means UK Amazon customers can continue to use their Visa credit cards.
Back in November, Amazon announced it would stop accepting payments via Visa credit cards because of Visa’s increased fees due to Brexit. At the time, Visa said it was “very disappointed” with Amazon’s decision.
Amazon has since been pressuring Visa to lower its fees in a series of moves that motioned retailers’ increasing frustration over the costs associated with major card networks.
Speaking to CNBC via an email on Thursday, a spokesperson for Amazon said, “We’ve recently reached a global agreement with Visa that allows all customers to continue using their Visa credit cards in our stores. Amazon remains committed to offering customers a payment experience that is convenient and offers choice.”
The e-commerce giant is also set to abandon a 0.5% surcharge on Visa credit card transactions in Australia and Singapore, which it introduced last year.
Credit card giant Mastercard is set to increase the fees it charges EU merchants for taking payments from online shoppers in the UK by at least 400%, sparking fears that merchants could choose to pass on these costs to UK consumers.
The Financial Times, which first reported Mastercard’s latest move, said that the increase would benefit banks and card providers rather than Mastercard itself.
Since 2015, the European Commission has capped credit card interchange fees at 0.3%. Now that the UK is no longer part of the EU, however, payments between the UK and the European Economic Area are now deemed “inter-regional”, so the interchange fees will increase to 1.5%.
The fee for debit card payments is also slated to rise from 0.2% to 1.15%. Both fee increases are set to take effect on 15 October.
MP Kevin Hollinrake, chair of the parliamentary group on Fair Business Banking, said the move “smacks of opportunism.”
"I would urge the regulators to step in as a matter of urgency to ensure that financial institutions do not use Brexit as an opportunity to hike up costs that consumers will ultimately bear," he said in a statement to the FT.
Anton Komukhin, Head of Product, at Unlimint, also expressed concern. "The increase in fees announced by Mastercard for UK purchases from the EU will definitely be a challenge for businesses on both sides (both EU and UK) and such a significant increase in price will undoubtably impact trade with the UK," he said. "It’s obvious that such a reaction is not aimed at maintaining cross-border turnover or trade - and looks only like an attempt to make more money from merchants in an already challenging environment due to Brexit and the pandemic."
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Mastercard has defended its decision, pointing out that the new interchange levels are already paid by EEA merchants on all cards issued outside of the EU, and that there is no evidence that European businesses charge consumers in these regions higher prices than those levied for consumers within the EEA as a result of this.
"In practice, only EEA merchants making eCommerce sales to UK cardholders will see a change,” the firm said. “Interchange is not a consumer facing cost but the fees paid between merchants and banks for the provision of payments. Consumers should not feel any impact of changes in interchange fees.”
This latest change comes as UK businesses face a number of new hurdles stemming from the country’s withdrawal from the EU. Increased red tape has led to delays in goods imports and exports, and the trading of European shares has moved away from London due to new restrictions.
Complaints have made the headlines insinuating Apple Card’s credit limits may have been different for men and women, making their overall offering inherently sexist.
New York's Department of Financial Services (DFS) has been in touch with Goldman Sachs, which operates Apple’s credit cards, stating that any discrimination, intentional or not, "violates New York law."
Even Apple's co-founder Steve Wozniak said in a tweet that the algorithms used to arrange customer credit limits may be inherently biased against women, and last week Bloomberg reported that tech entrepreneur David Heinemeier Hansson issued complaints that the Apple Card allowed him 20 times the credit limit that it allowed his wife, despite her having a better credit score.
Mr Hansson recently tweeted: "Apple Card is a sexist program. It does not matter what the intent of individual Apple reps are, it matters what THE ALGORITHM they've placed their complete faith in does. And what it does is discriminate."
The DFS issued a statement to assure it would be "conducting an investigation to determine whether New York law was violated and ensure all consumers are treated equally regardless of sex."
"Any algorithm that intentionally or not results in discriminatory treatment of women or any other protected class violates New York law."
Goldman Sachs also told Bloomberg: "Our credit decisions are based on a customer's creditworthiness and not on factors like gender, race, age, sexual orientation or any other basis prohibited by law."
But, really, this is about a tech company moving into banking by launching a credit card. The card, albeit revolutionary for Apple’s product line, is fairly similar to products offered by challenger banks such as Monzo and Starling Bank. The new credit card allows users to pay for products through an extension of Apple Pay; only rather than Apple Pay acting as a vehicle for other payment cards and services, it will allow users to use the Apple credit card.
Although this may seem like an easy sell for Apple, as the credit card is a simple add-on for existing iPhone users, the success of the new service will be based on the company’s ability to convince consumers to switch current accounts.
Even for the likes of Apple, with its huge resources and strong established brand, this will be a difficult and challenging task. The Competition and Markets Authority (CMA) in February found that only 3% of people switch bank accounts in any one year and in the US the Retail Banking Satisfaction Study found that 4% of consumers switched primary banks in 2018.
Although this may seem like an easy sell for Apple, as the credit card is a simple add-on for existing iPhone users, the success of the new service will be based on the company’s ability to convince consumers to switch current accounts.
Despite consumers feeling reluctant to switch current accounts, Apple has cause to believe that it can defy the odds. The company has repeatedly beat competitors in established markets from computers with the launch of the Macintosh in 1984, to the mobile market with the launch of the iPhone in 2007. Plus it has a strong well-loved brand (the company is the most beloved brand in the world according to Forbes) and a network of iPhones around the world to support and promote the new service.
However, relying on the brand alone won’t be enough to convince consumers to use the Apple Card. Unlike a new computer or phone, consumers aren’t willing to experiment on who they bank with. In fact, according to a 2016 report from the CMA, customers don’t switch current account unless they have a problem with their bank, with most thinking that they have little to gain financially by moving.
Apple needs to develop a strong and effective marketing strategy in order to convince consumers to use the Apple Card, otherwise, the tech giant will find that consumers are unwilling to make the leap into using the new Apple Card over the likes of Monzo, Barclays and other banking services.
According to a 2016 report from the CMA, customers don’t switch current account unless they have a problem with their bank, with most thinking that they have little to gain financially by moving.
However, what would this marketing strategy look like? Firstly, Apple needs to target its ads to existing Apple users. Fans of the Apple brand are more likely to buy a range of Apple products from the iPhone to the iPad and therefore may be more willing to use the Apple Card. In fact, Apple’s customer loyalty is so strong that a survey found that 92% of current iPhone owners are "somewhat or extremely likely" to purchase a new iPhone as an upgrade over the next 12 months. This is compared to Samsung on 77%, 59% for LG, 56% for Motorola, and 42% for Nokia.
Apple can target these existing fans in a multitude of ways. Through search engines, Apple can target fans by leveraging keywords such as “Apple” and “iPhone”, while on social platforms like Facebook and Twitter it can target users based on likes and searches related to the tech giant. When reaching people out of home, the company can use physical billboards located near Apple stores to target users as they are actively seeking out new Apple products.
Apple also needs to position itself alongside the same lines as challenger banks such as Monzo, Starling Bank and Revolut. These newly created banks have grown rapidly with younger consumers over the last few years, despite the fact that consumers are reluctant to switch their current accounts. Take Monzo, the digital bank hit 300,000 customer mark earlier this year due to the fact that it positions itself as cool and innovative in its marketing messaging. It also positions itself as a supplementary account with Monzo CEO Tom Blomfield telling Reuters that only 30% of its users are using the app as their main bank account.
Without considering the messaging and advertising channels for the Apple Card, the tech giant will find that it no longer has the fabled Apple mystique. While the company has long been able to enter new markets and disrupt sectors, the launch of the Apple Card presents the tech giant with a different and more regulated sector. It is therefore clear that Apple needs to create and deliver a marketing strategy that targets people who use Apple products and that addresses concerns around switching banks.
But when is it sensible to use a card and when to save? MoneySuperMarket data shows that the usage of credit cards seems to be growing, and have recently conducted a study to identify how much you’ll actually pay on average based on the size of the payments you’re making, the average monthly repayment possible, and the average interest involved as a result.
Alongside the credit card payments, the research highlights how long it would take to make each payment by saving up a monthly average of £352.31 (based on average earnings of £1,827.10 a month, and average expenditure of £1,474.79 a month) – so you can compare whether it’s a better option to save up or to use a card.
Spending and Saving Numbers Crunched
With the average person being able to save around £350 a month, there’s minimal difference in terms of time and total amount spent for a purchase under this amount – whether you’re saving or using a credit card. But the interest does take an effect at higher costs. On a credit card payment of £600, for example, you would on average pay £17 in interest, taking two months to pay it off. At £5,000, the interest reaches up to £931 over 17 months of repayment, against 14.2 months of saving with no interest.
Save for the Suit, Spend on the Commute
The research suggests that while you could save up for a bespoke suit in 2.7 months and save yourself £36 in credit card interest, for a train ticket you might be better off paying on your credit card – as you’ll still have to travel while saving, and the costs of individual tickets is likely to be higher than the £8 you would save in credit card interest.
Can a New Coat Improve Your Credit Rating?
Buying a winter coat on a credit card can be a sensible choice as lower payments that can be paid off immediately, without any interest, will contribute positively to your credit rating.
Even at higher costs, holidays can be a smart choice for a credit card. Despite the average £2,417 spend accruing as much as £208 in interest and taking just over two more months to pay off than to save up, credit cards can provide security on payments, meaning you’re better protected against problems with flights and hotels.
Save for Season Ticket, Spend on the Trainers
More affordable equipment like a mountain bike or sports trainers can be paid off quickly and improve your credit score without accruing any interest, but for a football season ticket, which you can plan to buy well in advance, there’s no significant advantage to buying on card. Instead of paying the additional £27 in interest over three months, you’re better off spending the average £794 after saving up for 2.3 months.
Smarter Smart Phone Buying
A high-end smart phone like the iPhone could cost nearly £50 in interest on a credit card, making saving up the better option. But for a cheap laptop, it might be much lower interest of around £15 or less – and many retailers offer finance options for smart phones and laptops, making it sensible to research your shopping before you buy.
Split the Costs When Getting Together
Weddings are expensive events – so it makes sense to split up the cost as much as possible. Saving up for purchases like the dress and photography, and putting the cheaper payments such as cake and groom’s outfit on credit card, may be the best way to minimise interest payments. Using a card to cover the venue can be helpful as well, as this can protect you against any last minute problems.
Top Tips from MoneySuperMarket
While the study provides some details of smart ways to use your credit cards, some of the top tips include:
- Only make applications for credit cards you think will be accepted or for which you're pre-accepted.
- Use "credit builder credit cards" to improve your credit score.
- Use a cashback card if you're able to pay off your card consistently.
Below, Rune Sørensen, at Nets, explores with Finance Monthly the impact that sophisticated card infrastructure can have on mobile-led banking.
All this innovation is pushing and pulling card infrastructures in ways no-one could have predicted a decade ago. Mobile banking, ecommerce integration, loyalty and rewards schemes and even IoT payments all link to cards. That’s a lot to ask of a back-end system.
So the question is: how can issuers balance a need to be perceived as innovative with providing a reliable, compliant and fit-for-purpose payment infrastructure?
Payment revenue is falling, so issuer’s profit margins are being squeezed. Technological change is advancing faster than internal systems can be updated, and the demand for developers with the skills to design and implement back-end solutions is growing faster than supply. As a result, the most forward-thinking banks are taking a critical look at their go-to-market strategies, and questioning if a business model where they design, implement and maintain their own systems is still feasible.
Technological change is advancing faster than internal systems can be updated, and the demand for developers with the skills to design and implement back-end solutions is growing faster than supply.
Take payment gateways as an example. Banks need a payment gateway to the card schemes as they are the backbone of broad e-commerce payment acceptance for their customers, thereby enabling banks to benefit from the international e-commerce market - set to grow to $4.5 trillion by 2021[1]. To avoid locking themselves in with a single scheme, these gateways must also be card scheme agnostic. Issuers now have the choice of whether to develop and maintain these gateways themselves, or to prioritise reliability and time to market by working in collaboration with a trusted partner.
The debate around outsourcing infrastructure has been simmering under the surface for the last few years, and was brought into focus by the Second Payment Services Directive (PSD2). Open banking is bringing huge opportunities to banks because the importance of national borders in the provision of financial services is diminishing. This opens up the market and benefits consumers, and enables banks to target whole new countries of potential customers. However, these opportunities come hand in hand with two significant challenges.
Open banking is bringing huge opportunities to banks because the importance of national borders in the provision of financial services is diminishing.
First, banks must ensure that their payments infrastructure is compliant not only with EU and their own national regulations, but the domestic regulations of any other international markets they intend to enter, as well as the complex and constantly evolving requirements of the card schemes. Card scheme compliance alone is a great responsibility, demanding increasingly more resources as the service portfolio diversifies and becomes more complex, predominantly driven by mobile payment enablement. This is an enormous undertaking – and one difficult to justify when there are dedicated providers of back-end systems offering full compliance for less than it would cost a bank to create and maintain it themselves.
Second, scalability is key. In the increasingly globalised world of financial services, exciting new products must be made available to all customers at the same time, without any of the downtime associated with launching new products and systems. Stability and security are fundamental to banks; innovation alone means nothing.
It’s clear that, in an era where banking and financial services are evolving faster than ever before, banks need to put their money where it counts. A flexible and reliable card infrastructure will be crucial to a successful transition as more and more financial services move to being predominantly mobile – and in the future, maybe even mobile-only.
Although most consumer-facing financial institutions now offer mobile applications, that doesn’t mean that they are ready for a world where smartphones are the primary point of contact with their customers. This is a new reality, and as the industry changes issuers must evolve too. Those that survive and thrive will be the banks that focus on their delivered customer journey and value-adding core business areas – and it’s time to ask if this really includes developing and maintaining back-end systems.
So, put your cards on the table. Is your infrastructure up to the challenge?
[1] https://www.shopify.com/enterprise/global-ecommerce-statistics
In 1880, we introduced the first ever credit voucher, which led the way as a pre-curser to credit cards and the likes, followed by the reveal of metal deferred payment cards from Western Union in 1914 and subsequently several appearances of payment or credit cards that allowed to users to credit shop at specific stores, like Diner’s Club, the first independent credit card company in the world.
Since American Express made credit cards popular in 1958, the idea of buying with cash that isn’t yet available to the buyer has evolved into the concept of cashless buying with money we do have. The accessibility, ease and efficiency of credit cards led to a culture, globally, that accepts plastic cards as the norm. The industry 4.0 revolution now presents the next stage in said evolution, whereby we are experiencing the proliferation of contactless payments, both via plastic debit cards and more recently, via smartphones.
2017 marked ten years since contactless was introduced, so it may still be another 10 years until we see an almost complete eradication of cash from western society. Currently, contactless payments account for just over a third of all payments in the UK. Equally over a third agree that the UK will be cashless in another 10 years. The further spread of contactless via mobile, which would only go to shorten those 10 years, is however hindered by the need to link a bank account with the customer’s smartphone, making this option inaccessible to a greater part of the world’s consumers.
A recent study conducted by Forex Bonuses reveals that Canada is currently number one in the list of top cashless countries worldwide , with 57% of transactions nationally being made without cash, as opposed to 2% in Sweden and France, 52% in the UK, and 10% in China. In China however, 77% of people said they were aware of cashless options, which could mean potential for a huge boost of cashless transactions in years to come. All in all though, 83% of global transactions are in cash, according to Western Union.
The ease of cashless transactions proves the potential for revolutionary popularity, as with a flick of a finger or a swipe of the thumb, all liquid assets can be accessed and moved around. The secondary benefits are the effect a cashless society can have on crime, both in terms of banks & financial institutions, as well as street crime and potential for muggings. In addition, though most cash payments do result in a printed receipt, digital records of transactions are few and far between, and whether by blockchain or other, documenting digital footprints for transactions has the capacity to help governments better set policy, tax citizens and stop fraud, as well as help banks to better monitor financial spheres and adjust rates and inflation accordingly. The introduction of Open Banking will also only go to facilitate these benefits in the digital payments sphere.
So, why are we not already making the world completely cashless and sending all our money to be burnt? One question we should ask first is whether this is truly something people want. Bloomberg reports that a recent move by Indian authorities to remove 86% of cash in circulation proved to be difficult, and shocked many cash dependent markets. The poor especially depend highly on using cash, and making everything digital could put lower earners at a serious disadvantage and the prospect of governments and banks having so much control of people’s finances does pose further concerns. Another major issue is that while street crime and fraud could be better monitored and prevented, cybercrime could rise in equal or greater measure, depending on the vulnerability of transaction systems.
Further on the topic of cybercrime, back in the day ‘looking over your shoulder’ referred to watching your back for pickpockets; that then became about being aware of criminals stealing your PIN, but the new risks are money swiping and the potential for losing your contactless card, which can then be used by whoever finds it or picks it up. Equifax recommends lining your wallet to eliminate the risk of signal and antenna making contact in a money swipe grab, which in essence, is today’s version of pickpocketing.
Bitcoin and the blockchain are proving useful in the payments security sphere, but in their short-lived popularity have already displayed weaknesses and risks that will need time to fix. Equally, infrastructure will have to keep up, as Visa have already showed that IT outages can cause serious disruptions, leaving users unable to make or take payments. On top of this, connections are required to record and document the data, as well as transfer information between the buyer, seller and bank; if the connection is affected in any way, this can create major difficulties. With cash, these issues don’t really exist.
Though no longer king, cash is still the biggest way of actioning transactions around the world, and the physical act of exchanging money still feels the most secure and manageable for most. It’s still also the go-to fall back when the ole’ chip and pin doesn’t work, so it’s still very much in play, in fact the growth of cash circulation outpaced economic growth over the last 10 years. Despite the fact there has never been more cash in circulation worldwide, we are slowly moving towards a cashless society, but the eventuality of a 100% cash free world is still highly debatable.
What do you think? Would you be prepared to burn all your cash in return for liquid assets and the promise of a risk-free digital payments sphere?
Sources:
https://www.thetimes.co.uk/article/ten-years-of-contactless-payments-ck00rsx9p
http://www.theukcardsassociation.org.uk/history_of_cards/index.asp
https://www.finance-monthly.com/2018/07/over-a-third-think-the-uk-will-be-cashless-in-10-years-or-less/
https://www.finance-monthly.com/2017/02/a-cashless-society-the-urban-myth-of-2017/
https://www.finance-monthly.com/2018/08/high-level-of-cyber-security-and-cashless-go-hand-in-hand/
https://www.thetimes.co.uk/article/why-contactless-is-quick-and-easy-for-fraudsters-8dg6dfbfq
https://www.equifax.co.uk/resources/identity_protection/how_to_avoid_contactless_card_fraud.html
https://www.finance-monthly.com/2017/02/a-cashless-society-the-urban-myth-of-2017/
https://money.cnn.com/2017/11/20/news/economy/cash-circulation-payment/index.html
According to ONS’ most recent crime report, “Bank and credit account fraud” was the most common type of fraud experienced (2.5 million incidents or 75% of total fraud) in the UK, followed by “consumer and retail fraud” 6– such as fraud related to online shopping or fraudulent computer service calls (0.7 million incidents or 22% of total fraud). More than half (1.9 million incidents or 57%) were cyber-related.
Below Sundeep Tengur, Banking Fraud Solutions Manager, SAS UK & Ireland, comments on the progress that FS organisations are making on tackling fraud.
“It’s encouraging to see that the financial services industry is starting to give fraud the attention it deserves.
“With increasing instances of the misuse of alternative currencies like Bitcoin and difficulty in securing the electronic payments industry, the financial sector is rising to the occasion. But there is still plenty of work to be done as fraudsters continue to adapt their tactics.
“Whether it is against low-level bank account and card fraud or more serious attacks on organisations, financial services can’t afford to leave their doors open to fraud. They must continue to tighten defences and improve their capabilities to detect and resolve instances of fraudulent activity.
“To stay secure and instate confidence, organisations must derive actionable intelligence from the information available. Spotting the tell-tale signs of improper payments and transactions means they can get one step ahead and stop any financial or personal assets being compromised.
“Advanced analytics will be at the core of these efforts, crucial for helping firms mine their ever-increasing datasets for these invaluable insights. At the same time, artificial intelligence and machine learning will prove to be just as beneficial as more and more financial institutions are automating the process of fraud detection, improving the speed and efficiency of their response.
“The fraud factor is never going to go away. Yet those businesses that are proactively interrogating data will have a better chance of preventing fraud’s most devastating effects.”
It's war on cash: Credit card giant Visa plans to pay Britain's shops and restaurants to ditch coins and notes.
A credit card giant is planning to declare war on cash by offering to pay shops and restaurants in Britain to reject notes and coins.
Visa claims that preventing customers from paying in cash would make transactions more secure.
Any switch from coins and notes to credit and debit card payments or services such as Apple Pay would also be of huge benefit to Visa, which makes money from transaction fees.
But consumer groups warned last night that it would put millions of elderly people and others who rely on cash and cheques at a huge disadvantage.
Tory MP Jacob Rees-Mogg said the firm should be referred to the competition authorities if it tried the move. 'It is essentially the behaviour of a monopolist and I do not think it should happen,' he said.
'People should be entitled to settle their bills using legal tender. The most deprived in society who do not have bank accounts and the elderly will be most affected by this.'
Visa has already begun a trial in the US which offers $10,000 (£8,800) to retailers who are prepared to update their payment terminals.
However, they can only get the deal if they agree to stop accepting cash transactions. A similar trial is expected to be launched in the UK. Jack Forestell, Visa's head of global merchant solutions, told The Daily Telegraph the company had its sights on Britain. 'We very much hope to bring a similar initiative to the UK in the near future,' he said.
'The UK is a bit further ahead than the US in terms of contactless use and cashlessness, so the initiative may look different but watch this space.' But James Daley, director of consumer group Fairer Finance, accused Visa of 'bribing companies to stop using cash more quickly' to make more money.
Consumer champion Which? said cash was still 'widely used' by shoppers. It added: 'Businesses should be led by how their customers want to pay, and not by the incentives offered by card firms.'
And the Federation for Small Businesses said the proposal could make businesses unattractive to tourists who wanted to use cash and was 'impractical' for rural areas with slow broadband speeds.
Its chairman, Mike Cherry, said: 'The vast majority of our members recognise the importance of offering cashless payment options. However, many have high volumes of customers that still want to pay in cash.'
In 2015 the amount of payments made electronically in Britain surpassed the number using coins and notes for the first time. However, cash was still by far the most popular way of paying in pubs, clubs and newsagents. A Treasury spokesman last night stressed that the Government remained committed to cash.
He added: 'The UK leads the way in financial technology such as contactless and digital payments. It's important that consumers have choice in how to pay for goods and services, and paying cash remains a legitimate and useful way to pay.'
(Source: News Capital)
A third of Brits believe their partner is lying to them about how much money they spend. According to a survey conducted by Paymentsense on 2000 people in a relationship in the UK, people aren’t always honest to their partners about their spending habits.
Shockingly, 40% of women admit to lying to their partner about what they spend their money on, and how much they spend. However, it’s not always women that tell little white lies, 38% of men also admit to lying about money.
What the different genders lie about are quite different – 1 in 10 women lie about how much they spend on food and 23% of men have lied about how much they spend on alcohol. Throughout their relationship, men estimate they have lied about spending £73 on gambling and 1 in 20 men have admitted they have lied about spending money on strippers!
Women tend to be more trusting with their finances than men- almost a third of women admit their partner knows their chip and pin number and 43% say they trust their partner with their credit card. However, women are a bit sneakier than men. 16% of women admit they lie and say things were in sale so they can say purchases were cheaper than they were.
Does being in a relationship for longer mean you lie more or less?
Those who have been in a relationship for 4-7 years tend to lie to their partners about spending the most, and those who have been together 7 years+ lie the least. Quite worryingly, almost a third of people who have been in a relationship less than a year admit their partner knows their chip and pin, and 45% admit they trust their partner with their credit card. Only 46% of married people trust their partners with their credit cards.
The younger we are the more we lie about what we save, whether we save more than we say or less than we say – 30% of 18-24 year olds have lied about what they save. This age group are also the biggest fibbers when it comes to spending, 51% of this age group admit to lying to their partner. Almost 1 in 10 18-24 year olds admit to lying to their partner about how much they have spent on drugs, and 12% of 35-44 year olds have lied about how much they spend on nights out.
(Source: Paymentsense)
