It’s hard to see any deal between Amazon and Visa over card fees being great for customers

A head-to-head battle between two giants of global commerce appears to have ended in a truce after Amazon backed down on its decision to block UK Visa credit cards on its site.

The two companies are now in talks over an amicable solution to the spat which Amazon said was provoked by Visa's high transaction fees.

For shoppers, it means credit card payments won’t be disrupted. A ban would have impacted millions of people who use Visa credit cards, including those issued by other providers such as Barclaycard. They can continue to use their existing cards, although a final deal has not yet been reached and Amazon could still press ahead with a ban in future.

Amazon did not give a reason for its decision but experts speculated that it is likely Visa has offered to reduce the amount it charges for processing payments.

At the centre of the row are fees that Visa charges merchants when they sell goods. These have long annoyed businesses who say that the dominance of Visa and Mastercard has allowed them to keep fees high for what is an essential service.

Amazon and Visa have clashed over the issue in the past. Amazon announced plans last year to introduce a 0.5 per cent surcharge on Visa credit cards in Australia and Singapore.

Amazon is not the only company to take on Visa over this issue. AllSaints, Superdry, and Levi’s are among a group of brands suing the card company over its fees.

In the UK dispute, Brexit has been a factor. While inside the EU, the UK was protected by a cap on what are known as interchange fees for transactions within the single market.

After Brexit, that protection no longer applies, and Visa has increased its fees from 0.3 per cent to 1.5 per cent – the maximum level allowed for cross-border transactions. That’s costly for Amazon, which routes most of its UK sales through Luxembourg to reduce its tax bill.

Clearly, the dispute over fees should be one for regulators to settle. It is hard to see how two monopolistic companies sorting things out among themselves gives the best end result for shoppers. The Payment Systems Regulator is on the case but is moving at the glacial pace that’s customary to UK financial watchdogs.

In fact, a deal made between the two companies risks worsening the situation and reducing competition further. Any deal between Visa and Amazon to cut fees would give the already dominant e-commerce company an edge over other sellers who would be left paying higher charges. In the tight margins of online retail, that is important.

There is reason for cautious optimism among consumers and merchants however. Technology and open banking rules mean that it is becoming easier and cheaper to transfer money directly from a buyer’s to a seller’s account, meaning there is no need for a card provider at all.

Perhaps when the sun sets on the world of card payments, online consumers and retailers will finally get a fairer deal.