American Express charges merchants a percentage of each transaction processed on their network.
eBay customers will no longer be able to use American Express cards to pay for purchases starting this summer. The online marketplace announced on Wednesday that it would cease accepting AmEx cards from August 17, citing the “unacceptably high fees” imposed by the card company for processing transactions.
This decision is a significant setback for American Express, which has gained popularity among Gen Z consumers and is often favored by merchants due to the high spending patterns of its cardholders. Despite its appeal, AmEx’s high transaction fees, which can reach up to four percent, have led to a growing number of businesses abandoning the card.
eBay’s move is part of a broader trend among retailers and merchants pushing back against high payment processing fees. Nearly a decade ago, retail giant Costco also severed ties with American Express, and several smaller restaurant chains have since followed suit. The friction between merchants and payment processors over transaction fees has been escalating, with businesses increasingly scrutinizing the costs of accepting various payment methods.
Two years ago, Amazon engaged in a similar dispute with Visa in the UK, threatening to drop the payment processor over its high fees. This incident highlighted the broader industry tension and the need for a more competitive and transparent fee structure.
American Express, like other payment processors, takes a percentage of each transaction a merchant processes on its network. The fee varies by industry and is often a closely guarded secret, especially for large merchants. According to the National Retail Federation, the average fee for accepting a credit card is approximately 2 percent, but it can be as high as 4 percent for premium rewards credit cards like AmEx.
Scott Overland, an eBay spokesman, emphasized that eBay customers will still have various payment options available. The site has been expanding its payment methods, offering alternatives such as Buy Now, Pay Later services including Klarna, Affirm, and PayPal. This diversification aims to provide customers with more flexibility and reduce reliance on traditional credit cards.
In its official statement, eBay criticized the rising costs of credit card transaction fees despite advancements in technology and investments in fraud prevention and customer protection. “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,” the statement read.
American Express responded by asserting that the costs associated with accepting its cards are comparable to those of similar cards on other networks. AmEx spokesperson Adam Isserlis expressed disappointment with eBay’s decision, stating, “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.” Isserlis also noted that AmEx cardholders typically spend twice as much on eBay compared to other networks.
Under CEO Steve Squeri, American Express has been striving to broaden its acceptance and shake off its image as a card primarily used for travel, dining, and high-end shopping in urban areas. The company claims that since 2019, its cards are now accepted at 99 percent of the locations in the US that also accept Visa and Mastercard.
Despite this progress, analysts at Keefe, Bruyette & Woods estimate that eBay accounts for roughly 0.5 percent of AmEx’s worldwide network volume. While the impact on AmEx’s overall business may be limited, the decision by a major online marketplace like eBay underscores the ongoing challenges payment processors face.
Consumer advocates argue that eBay’s decision highlights the need for Congressional action on processing fees, often referred to as “swipe fees.” According to the non-profit Merchants Payments Coalition, swipe fees have more than doubled over the past decade, reaching a record $172 billion last year when including debit and all brands of credit cards. These fees are typically the second-largest operating expense for merchants after labor and significantly increase costs for consumers.
Doug Kantor, a member of the MPC Executive Committee and General Counsel for the National Association of Convenience Stores, stated, “AmEx is just a symptom of the underlying problem. Visa and Mastercard each centrally price-fix high swipe fees that are uniformly charged by all banks that issue cards under their brands rather than letting the banks compete for merchants’ business.”
As eBay joins other merchants in dropping American Express, the debate over payment processing fees continues to intensify, highlighting the need for more competitive and transparent practices in the industry.
