Finance minister promises to review credit card fees

Groups representing independent grocers, retailers and other small businesses say the 1.5% average fees paid to Visa and Mastercard are still way too high, but are encouraged that the federal government will conduct an assessment of credit card fees.

Finance Minister Bill Morneau said Wednesday that the government will conduct a further review of the interchange fees charged to merchants by credit card companies “to ensure that there is, in fact, adequate competition and transparency for Canadian businesses and consumers.”

The announcement came after Visa and Mastercard released audits of promised credit card merchant fee reductions that showed the average overall rate retailers pay is 1.5%. In 2014, the previous government and Visa and Mastercard agreed to reduce Canadian fees to an average of 1.5% – from an average 1.6% to 1.7% respectively.

“We’re pleased to see the new government’s response,” said Gary Sands, chair of the Small Business Matters Coalition and vice-president of the Canadian Federation of Independent Grocers. “They basically acknowledged ‘yes, we’ve got an issue here and we have to gather more information and take another look.’ That is what we’ve been asking for.”

The 1.5% rate is too high, and grocers and other small businesses are paying more than that, said Sands. Investment firm Nesbitt Burns has dismissed Visa and Mastercard’s fee reduction as having “no positive financial impact” for merchants.

Sands wondered why the 1.5% figure was chosen, given that the overall average merchant fee rates in Europe and the U.K. are 0.3% and 0.5% in Australia.

If other jurisdictions can pay lower rates, “why do they have to be so much higher in Canada?” An explanation has not been provided, he said.

However, the situation in the U.S. is similar or even worse. Credit card fees are comparable, and the country doesn't have the equivalent of Interac and credit cards double as debit cards.

“These excessive interchange rates mean that Canadian consumers pay at least $4.5 billion more for all credit purchases each year than they would if our rates were comparable to those in the EU," said Karl Littler, vice-president of public affairs at Retail Council of Canada, in a statement.

Sands added that Costco Canada and Mastercard signed an exclusivity deal last year. While the rate has not been divulged, “we know it’s going to be pretty close to zero.” He has been told privately that the Costco deal has been incorporated in Mastercard’s fee reduction figure, meaning that small businesses “are subsidizing the bigger guy.”

Meanwhile, Walmart Canada has announced it will stop accepting Visa in its 16 Manitoba stores on Oct. 24 as part of its battle over fees. Walmart previously announced it would not accept Visa at its three Thunder Bay, Ont. stores.

“Walmart is the biggest (retailer) in the world and they feel that they’re getting screwed,” on the fees they pay, Sands notes. “The Walmart decision keeps this issue hot.”