From September 15, e-commerce behemoth Amazon has implemented a surcharge on its Singapore website, Amazon.sg, for transactions carried out using a Visa credit card.

Amazon justified the move saying that the cost of accepting card payments remains an obstacle to providing the best prices for its customers.

The surcharge of 0.5 per cent, applies to transactions of merchandise like consumer electronics and clothing sold by both Amazon and third parties.

So, is Singapore the canary in the surcharge coalmine, and is this move about to be rolled out in other countries? Or, is Amazon striking early pre-empting the planned increase in so-called interchange fees, which both Visa and Mastercard plan to introduce from April 2022, after delaying the rise this year because of the global pandemic?

The tech conglomerate pointed out that with a plethora of digital innovations across the payments industry driven by financial technology advances, transaction charges should be falling, letting merchants channel any savings into lower prices and improvements for customers. It also urged its customers to switch to alternative payment methods to avoid the surcharge.

Commenting on the surcharge action, Kelvin Phua, head of global payment networks at cross-border e-payment specialist, PPRO Group, says: “Singapore has introduced policies and initiatives to propel adoption of digital payment methods in order to further its ambition to be a leading e-commerce hub in Asia. This has cultivated an environment in which the digital economy is thriving. This move by Amazon may seem counterintuitive, but it does shine a light on the high, and little-understood, costs incurred by merchants when consumers make card transactions.”

Bolstered by the move to digital payments and away from cash during the global pandemic, e-commerce has continued to flourish across Southeast Asia.

According to the recent “e-Conomy SEA” report from Google, Temasek and Bain & Company, online spending in Southeast Asia is predicted to top more than US$300 billion by 2025.

A majority of Singaporeans have more than one credit card, so using an alternative to a Visa credit card should not be an issue.

Amazon’s surcharge penalty will however inconvenience consumers and merchants who use Visa as their preferred payment method, but it might not be punitive enough to drive them away, for now.