A group of Canadian retailers and other businesses are pushing for lower credit-card fees from major payment networks amid a long standing battle over what they claim are inflated Canadian rates.
The two largest credit-card companies, Visa Canada and MasterCard Canada, charge businesses an average of 1.5% of their transactions for accepting the plastic, with some interchange fees ranging to 2.5% or more.
But business groups say the Canadian rates are much higher than those in Europe and Australia, and can drive up consumer prices. In Britain, for example, the rate is capped at just 0.3%; in France, at 0.28%; and in Australia, 0.5%. However, when these caps were implemented it should be noted that it did not result in lower prices for consumers.
For its part, American Express Canada has even higher fees – between 3 and 3.5% for small merchants.
Now the Canadian Federation of Independent Business (CFIB,) which represents 110,000 SME’s, is set to unveil with JPMorgan Chase a deal to reduce Amex fees by almost 50 % – to 1.8% – for some members in a bid to try to shake up the staid Canadian credit-card market.
“We think this will lead to an expansion of American Express coverage in the small-business marketplace therefore creating, we’re hoping, some more competition between three major electronic payment companies, as opposed to the two big ones right now,” said Dan Kelly, president of CFIB.
The Amex agreement is a sign of the fight that retailers and other businesses are waging for more affordable credit-card fees, a battle that was highlighted in 2016 when Walmart Canada stopped accepting Visa in its Thunder Bay and Manitoba stores after the discount giant complained the fees were “unacceptably high.”
The standoff ended in early 2017 when Walmart reached an agreement with Visa to lower its fees to an undisclosed level – less than 1%, according to sources – a far cry from what many small businesses pay and a reminder that they don’t have the clout of the big players.
CFIB’s deal with Amex follows one the group struck with MasterCard Canada last year that reduced most CFIB members’ fees by 12.5% to 1.26% of the value of a customer’s purchase from 1.44% previously – the new levels being ones that are offered to just a small number of the country’s largest merchants.
Still, other business groups say they don’t want to negotiate special deals for their members with credit-card companies but rather call for federal policy changes to pave the way for broader fee reductions.
In response to rising tensions between businesses and credit-card companies over the fees, federal Finance Minister Bill Morneau said in 2016 he would review the Canadian payments system.
A Finance Department spokesman recently said its officials are meeting with “several stakeholders including all major credit-card networks, card issuers, acquirers, merchant groups and consumer groups.”