eBay, one of the world’s largest online marketplaces, has made headlines by announcing its decision to stop accepting American Express as a payment method from August 17. The reason? Unacceptably high fees, sometimes as much as 4 percent per transaction, which eBay argues is not aligned with the technological advancements that should otherwise be driving costs down.
Impact on American Express
Despite the setback, American Express remains a dominant player in the payment processing landscape, particularly popular among millennials and Gen Z in the U.S. According to the company, “in the US, the cost of acceptance for American Express is comparable to what eBay pays for similar cards on other networks.”
Although eBay accounts for only about 0.2 percent of American Express’ total network volume, the decision has sparked discussions about the competitive dynamics at the point of sale. American Express asserts, “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.”
Technological Advancements vs. Rising Costs
The ongoing debate highlights a significant issue within the financial industry: despite technological advances and investments in fraud prevention and customer protection, payment processing costs continue to rise. This trend is seen as a lack of meaningful competition in the sector, contributing to unabated cost increases.
eBay spokesperson stated, “At a time when payment processing costs should be declining because of technological advancements, investments in fraud capabilities, and customer protections by merchants like eBay, credit card transaction fees continue to rise unabated because of a lack of meaningful competition.”
eBay’s Market Position and Consumer Adaptability
eBay remains a robust marketplace with 2 billion listings and 132 million active buyers globally, supporting small businesses and creating economic opportunities across 190 markets. The platform’s vast user base shows a readiness to adapt, with many willing to switch to alternative payment methods to continue their transactions on eBay.
The Broader Trend of Rising Swipe Fees
This issue is part of a larger trend observed across the U.S., where swipe fees for credit and debit cards have soared to a record $172 billion in 2023, according to the Merchants Payments Coalition. eBay is not alone in its struggle against high card fees; Costco notably replaced American Express with Visa in 2016 over similar issues.
Competition and Challenges Ahead for eBay
As eBay phases out American Express, it also faces stiff competition from retail giants like Walmart and Amazon, who continue to accept Amex. The first quarter of 2024 has shown weak revenue for eBay, signaling potential challenges ahead in a highly competitive e-commerce environment.
Moving Forward
The discontinuation of American Express as a payment option on eBay marks a significant shift in the competitive landscape of payment processing. This decision highlights the ongoing challenge companies face as they navigate high transaction fees against the backdrop of technological advancements.
As the market continues to evolve, both eBay and American Express will need to adapt to maintain their standing and satisfy their stakeholders.
