eBay to block American Express cards, citing high swipe fees

David Paul Morris/Bloomberg

Citing "unacceptably high" credit card card network fees American Express charges merchants, eBay on Thursday said it will no longer honor Amex cards beginning in mid-August.

The San Jose, California-based e-commerce platform will begin notifying its customers Wednesday that after August 17, 2024, it will reject American Express cards. It will continue to accept Visa, Mastercard, Discover credit and debit cards, along with PayPal, Apple Pay and Google Pay, eBay said.

"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 said in a statement.

The online auction firm, founded in 1995, noted that its internal research suggests most eBay customers are willing to use other payment options.

"We are disappointed that eBay made the decision to stop accepting American Express Cards," Amex said in a statement. "By doing so, they will limit customers' payment choices and take away the service, security and rewards that customers value when paying with American Express."

Amex said its research indicates eBay's cost to accept Amex cards is "comparable" to that of similar cards on other networks, adding that eBay transactions account for less than 0.2% of Amex's total network volume.

Rising swipe-fee gripes

It's not the first time a merchant has blocked a specific card network because of claims that card acceptance fees were too high. A smattering of merchants, mostly small-business firms, routinely eschew Amex cards. And Walmart banned Visa cards at certain stores in Canada in 2016, as part of negotiation tactics to win a lower card-acceptance rate from the San Francisco-based card network. That dispute was settled within about six months and Walmart continues to accept all major credit cards, including Visa. 

The move by eBay against Amex marks a shift in ongoing tensions between merchants and card networks because it's a categoric ban on a single card network by a major merchant. It's also unusual because until now, Amex has escaped some of the heat merchants have directed at Visa and Mastercard about the rising cost of credit and debit card interchange, due to its relatively lower share of overall transaction volume. 

Card network operating rules require merchants to pay interchange as part of a card-processing fee, to card-issuing banks (or directly to American Express and Discover, which issue most of their own cards), and Amex's card-processing rates reportedly are higher than other credit card networks. Amex's interchange fees typically range from 1.43% of the sale to 3.3% plus 10 cents, compared Discover's fee of about 1.4% to 2.4% of the sale plus 10 cents, and Visa and Mastercard at about 1.15% of the sale to 2.4% plus 10 cents, according to data from Bankrate.com. 

In terms of overall U.S. credit card purchase volume, Visa has about a 52% share, Mastercard has about a 24% share and Amex has about a 20% share, with Discover a distant fourth with single-digit share of purchase volume, according to Bankrate.com.

Merchants have long grumbled about rising credit card swipe fees, which amounted to $100.7 billion in 2023, up from $93.2 billion the previous year, according to the Washington D.C.-based merchant lobbying group Merchant Payments Coalition. 

The MPC, and many individual merchants, are backing the proposed Credit Card Competition Act, which would require that credit cards be routed over at least two unaffiliated networks that could be Visa, Mastercard, American Express, Discover or independent payment networks like NYCE, Star or Shazam. 

Amex and Discover (which Capital One Financial Corp. has proposed to acquire for $35 billion, pending regulatory approval) were not part of the most recent proposed agreement Visa and Mastercard reached in March with merchants that would broadly lower credit card interchange fees merchants pay. That agreement has not been finalized. The MPC said the proposed swipe-fee cut "token, temporary relief," when merchants seek permanent reforms to the existing system.

Amex makes no secret of the premium benefits customers may reap from Amex card rewards. Amex executives in April boasted during its Investor Day that younger adults in the Generation Z and Millennial cohorts are its fastest-growing customer category, with those groups driving more than 75% share of new premium-level accounts, including the $695-a-year Platinum card and the $250-a-year Gold card. 

Over the last year, Amex has refreshed perks on its premium cards, which provide users with hundreds of dollars' worth of hotel credits, airline fee credits, access to Amex's elite global travel lounge network and statement credits for streaming video services, said Amex's CEO Steve Squeri at the event. He noted at a different investor event in May that "every time we do a [perk] refresh, [card] acquisition goes up and existing spending from our cardholders goes up." 

eBay's payments journey

Strategic juggling of payment methods has long been key to eBay's growth, and it's also been a source of ongoing negotiations under eBay's own roof.

In 2002, eBay acquired PayPal for $1.5 billion in eBay stock, cementing PayPal as the default payment method for most eBay customers. While eBay also continued to support other payment methods, one in four closed auction listings were transacted via PayPal, which provided significant benefits and cost savings for eBay.

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Under eBay's ownership, PayPal's robust online checkout service spread to other e-commerce websites and its share of online transactions surged, accelerated by PayPal's 2013 acquisition of Braintree for $800 million. Braintree had acquired Venmo the previous year for $26 million. 

In 2014, eBay spun off PayPal as a publicly traded company. In 2018, eBay chose Netherlands-based Adyen as its primary payment processor, with an agreement to gradually wean eBay from heavy reliance on PayPal checkouts.

It took several years. PayPal at the time of its spin-off from eBay earned about 20% of its revenue from fees related to processing eBay transactions, accounting for about 40% of the payment company's profits, PayPal's former CEO Dan Schulman said last year. By September of 2023, PayPal earned less than 2% of its revenue and profit from eBay, according to Schulman.

In recent years, eBay has faced rising competition from other e-commerce giants including Amazon and Walmart, along with smaller online marketplaces like Etsy. Early this year, eBay laid off 9% of its full-time workforce, or 1,000 workers, the Wall Street Journal reported. 

Amid these pressures, eBay's revenue for the 12 months ended Dec. 31, 2024 was $10 billion, up 2% over 2023, while gross merchandise volume was $73.2 billion, down 1% over the prior year.