MasterCard and Visa Drop Interchange Rates in Canada (Nov. 4, 2014)
MasterCard Canada and Visa Canada are reducing interchange fees to an average net effective 1.5 percent rate for the next five years for consumer credit cards. The networks’ separate plans follow a four-year investigation by Canada’s federal Competition Bureau, and the new pricing is set to go into effect by April 2015. Credit interchange in Canada today ranges between 1.5 and 3 percent, according to the Competition Bureau.
“We brought forward a voluntary solution that avoids the unintended consequences of regulation as we have seen in other countries,” said Betty DeVita, president, MasterCard Canada.
Canada’s Minister of Finance Joe Oliver agreed that the networks’ voluntary actions negated the need for government intervention. “In total, the two commitments represent a reduction in credit card fees of approximately 10 percent. These commitments represent a meaningful long-term reduction in costs for merchants that should ultimately result in lower prices for consumers,” he said. “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 Retail Council of Canada, a trade group which represents 75 percent of retail sales volume in the country that’s not automotive, estimates that interchange accounts for 80 percent of the CA$5 billion total fees Canadian retailers pay to process credit card transactions.
In a statement, Visa noted it “enters into this undertaking with the full expectation that the government is committed to a level playing field. “If Visa or our clients are disadvantaged as a result of entering into this undertaking, Visa reserves the right at any time to terminate or amend it.”
Minister Oliver also said today that the government is examining potential changes to the voluntary Code of Conduct for Debit and Credit Cards, which it hopes to announce in the near future.