OTTAWA, Ontario -- In Canada,Visa and MasterCard submitted separate and individual voluntary proposals on November 4 to reduce their credit-card interchange fees to an average effective rate of 1.50% for the next five years.
Joe Oliver, Minister of Finance, welcomed their proposed reductions. "In total, the two commitments represent a reduction in credit-card fees of approximately 10%," he said in statement . "These commitments represent a meaningful long-term reduction in costs for merchants that should ultimately result in lower prices for consumers. As a result of the voluntary proposals, there is no need for the Government to regulate the interchange rates set by the credit-card networks."
The proposals from Visa and MasterCard will:
- Voluntarily reduce their respective credit-card fees for consumer cards to an average effective rate of 1.50% for a period of five years.
- Ensure that all merchants receive a reduction in credit-card fees.
- Provide a greater reduction for small- and medium-sized enterprises and charities, which have the least amount of bargaining power.
- Require annual verification by an independent third party to ensure compliance.
Visa and MasterCard have committed to start implementing these reductions no later than April 2015.
"The purpose of these voluntary commitments is to reduce the cost of credit-card acceptance for merchants in order to keep prices low for consumers," the statement continued. "If the reductions in interchange fees are not passed along to merchants or the overall cost of accepting credit cards increases at any time during the period covered by these commitments due to actions taken by Visa or MasterCard, the government reserves the right to rescind its acceptance of the voluntary commitments. If Visa or MasterCard do not comply with their public commitments, the government will take all necessary measures to keep prices low for all consumers."
Click here to view the full statement.
The Canadian Convenience Stores Association (CCSA) and its members responded. "We thank Minister Oliver and Finance Canada for their attention and efforts to address our concerns regarding these fees," said Alex Scholten, president of the CCSA. "Credit-card swipe fees in Canada are amongst the highest in the world, and our retailers have suffered."
A five-year "freeze" on the rates noted in the statement is also welcomed relief for retailers as swipe fees have risen sharply over the past several years, he added. Continued rate increases would have had severe impacts on small-business members across Canada.
"Although any rate relief is welcomed, a reduction to only 1.5% is disappointing and will offer little relief for our small-business retailers," said Scholten.
The CCSA is concerned that it will limit the ability of retailers to use the expense savings to hire more people, invest in their businesses or reduce consumer pricing. "Canada's c-store retailers would have great concern about this, and our associations will continue to express that concern to Minister Oliver."
Governments in other jurisdictions such as Australia and the European Union have imposed rate caps in the range of 0.5% based on research that indicated such rates would not have a detrimental effect on credit-card payments. "The CCSA and its members are hopeful that beyond the voluntary rate reduction, the Canadian government will consider this approach."
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