Ebay, a leading online marketplace, has announced that it will no longer accept American Express (AmEx) as a payment option, citing “unacceptably high fees” and the availability of alternative payment methods. This move is a significant blow to AmEx, as the company’s customers are often among the most attractive and spend the most on their cards. AmEx has faced opposition from merchants in the past, including the warehouse chain Costco, which dropped AmEx nearly a decade ago.
According to Ebay spokesman Scott Overland, the company has carefully considered the decision and has determined that AmEx’s fees are no longer justifiable. Overland explains that Ebay customers have become aware of alternative payment options, making payments more competitive than ever before. In recent years, Ebay has been offering customers buy now, pay later options through Apple Pay, PayPal, Klarna, and Affirm, among others.
Merchants have increasingly pushed back against payment processors’ high fees in recent years. Amazon faced a similar issue with Visa in the UK, threatening to drop Visa as a payment option over fees. In this case, the two companies eventually resolved their differences, but there is no disruption of service.
The fees that payment processors like AmEx take vary by industry, and the largest merchants typically pay a closely guarded trade secret. The National Retail Federation estimates that the average fee to accept a credit card is roughly 2% but can be as high as 4% on premium rewards credit cards like AmEx.
Ebay Ditching American Express Over Fees Issues
In response to Ebay’s decision, American Express claims that the company’s cost to accept AmEx cards is “comparable to what eBay pays for similar cards on other networks” and that AmEx cardmembers typically spend double at Ebay than on other networks. AmEx has been making efforts to increase its acceptance globally, aiming to be a more widely accepted payment option.
However, Ebay’s decision to drop AmEx may be a significant setback for the company. AmEx has been working to combat its negative image as being less accepted and only available for luxury items or in specific areas. While AmEx claims to be accepted at 99% of the places Visa and Mastercard are accepted in the US, analysts estimate that Ebay may represent only 0.5% of AmEx’s worldwide network volume, making it unlikely that AmEx will compromise on pricing.
Ebay’s decision to stop accepting AmEx payments highlights the ongoing tension between merchants and payment processors over fees. As payment options continue to evolve and compete, it remains to be seen how AmEx will respond to this challenge.
