EBAY will drop American Express cards as a payment option because of “unacceptably high fees,” according to an email reviewed by Bloomberg News that the online marketplace plans to send to customers.
EBay will notify customers this week about the change, which is set to take effect Aug 17.
“After careful consideration, eBay has decided to no longer accept American Express globally effective August 17 due to the unacceptably high fees American Express charges for processing credit card transactions,” the company said in the email.
The two firms have been embroiled in negotiations around the merchant discount rates – also known as interchange fees – charged by Amex at the point of sale. The fees, imposed each time a card is used in a transaction, have long been a headache for merchants. One trade group said retailers paid more than US$172 billion in card-processing fees last year.
Amex, however, said its research shows that its fees are comparable to what eBay must pay to accept similar cards on other networks, such as Visa and Mastercard Inc., while providing more value.
“American Express card members have an average transaction size at eBay that is more than double the transaction size of cards from other networks,” New York-based Amex said in a statement.
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“We find eBay’s decision to drop American Express as a payment choice for consumers to be inconsistent with their stated desire to increase competition at the point of sale.”
Competitors of eBay – including Amazon.com – have made similar moves while bargaining over transaction fees. Amazon threatened to stop accepting all Visa cards on its global network before finally striking a deal. Amex has also lost deals, including its once-exclusive pact with Costco Wholesale Corp., over its terms.
“Ultimately, we agree with AXP’s stance as the company prices to value, and it would be a slippery slope downwards if AXP sacrificed on price,” Keefe, Bruyette & Woods analysts Sanjay Sakhrani, Steven Kwok and Vasundhara Govil said in a note, referring to the company by its stock ticker. “Recall this was a big reason for AXP backing out of the Costco relationship in the past.”
Amex said eBay represents less than 0.2 per cent of its total network volume.
EBay has lost significant market share to other e-commerce giants such as Amazon and Walmart in recent years, and last month provided a weaker-than-expected earnings outlook for the current quarter.
Globally, shoppers will spend US$73.4 billion on the marketplace this year, according to average analyst estimates compiled by Bloomberg. BLOOMBERG
