June 7, 2024
Online marketplace giant eBay said that it will no longer take American Express, citing "unacceptably high fees" and the fact that users have other payment choices for shopping online.
It is a significant blow to American Express, whose clients are frequently the most appealing to businesses and spend the most money every month on their cards. However, this is not the first time retailers have walked away in protest of AmEx's business tactics, with the warehouse company Costco doing so over a decade earlier.
"After careful consideration, eBay has decided to no longer accept American Express globally effective Aug. 17 due to the unacceptably high fees American Express charges for processing credit card transactions," said Scott Overland, a spokesperson for eBay.
Overland stated that eBay users are now aware of different ways to pay for products, making payments more competitive than ever before, and that AmEx is no longer a vital partner for eBay. eBay is progressively providing users the option to buy now and pay later on transactions made using Apple Pay, PayPal, and other firms such as Klarna and Affirm.
"We know that the vast majority of eBay customers are willing to use alternative payment options to continue enjoying buying and selling on our marketplace," Overland stated.
In recent years, online retailers have grown increasingly contentious with payment processors about the fees they charge for accepting payments. Amazon had a similar struggle with Visa in the United Kingdom around two years ago, threatening to eliminate Visa as a payment acceptance type due to what it claimed exorbitant costs.
Visa and Amazon subsequently settled their issues, and there was no disruption in service.
AmEx, like other payment processors, charges a portion of each transaction that a merchant does on their network. The cost varies by business, and the larger merchants' fees are usually a well kept trade secret. According to the National Retail Federation, the typical credit card acceptance charge is around 2%, although it can reach 4% on premium rewards credit cards such as American Express.
In a statement, American Express claims that eBay's fee to take AmEx cards is "comparable to what eBay pays for similar cards on other networks" and that AmEx cardholders often spend twice as much on eBay as they do elsewhere.
"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," Adam Isserlis, a spokesperson for American Express,
Under current CEO Steve Squeri, AmEx has been on an aggressive campaign to become a more universally accepted payment option across all merchants in an effort to combat the negative image that AmEx is less accepted and only available to its cardmembers for travel, dining, high-end shops, or in dense urban areas. AmEx claims that its cards are now accepted in 99% of the places Visa and Mastercard are accepted in the United States, a measure it attained in 2019.
But there have been some obstacles along the road.
When Costco announced in 2015 that it will abandon American Express, it dealt a significant blow to AmEx, as Costco represented around 10% of cardmember loans and $80 billion in network traffic. It was also one of AmEx's most notable collaborations.
Analysts at Keefe, Bruyette & Woods estimate that eBay may account for 0.5% of AmEx's global network volume, and AmEx is unlikely to change its pricing strategy with eBay.