MasterCard Canada says it plans to adopt the code of conduct for Canada’s debit and credit card industry that the country’s finance minister approved April 16. However, Visa Canada and Moneris Solutions Corp., Canada’s largest payments processor, say they need more time to study the code to determine how it affects their businesses.

The code promotes fair business practices and helps ensure merchants and consumers understand the costs and benefits associated with credit and debit cards. The credit and debit card industry have until May 17 to review and adopt the code. If the industry decides not to go along, lawmakers plan to pursue government regulations under the Payment Card Networks Act. The legislation would give the minister of finance the power to regulate the market conduct of the credit and debit card networks and their participants, if necessary.

Finance Minister Jim Flaherty’s decision to issue the code comes as MasterCard and Visa prepare to enter the country’s PIN-debit market once they find issuers. Interac currently is Canada’s sole debit card network.

The government introduced the Payment Card Networks Act on March 29. It is not clear, however, if some industry participants accept the code and others do not whether Canada’s entire payments industry would come under government regulation.

If credit and debit card networks, processors and merchant acquirers adopt the code voluntarily, it would take effect within 90 days of its adoption. During that period, they would need to change their processes to comply with the code.

The code of conduct creates transparency and encourages competition and choice, Flaherty says. “The code promotes fair business practices and ensures that merchants and consumers understand the costs and benefits associated with credit and debit cards,” he said in a statement.

For example, the code requires merchant acquirers and processors to disclose the effective merchant discount rate for each type of payment card from a payment card network. The code also requires payment card networks to give merchants a minimum of 90 days notice before raising fees or introducing debit and credit card fees.

In addition, merchants that accept credit card payments from a particular network would not be obligated to accept the network’s debit cards and vice versa. The code also allows merchants to provide discounts for different payment methods, such as cash and debit card and credit card payments.

Flaherty issued the code after consulting with businesses, the card industry, card processors and merchant acquirers.

The code would protect businesses, he contends. “Businesses have voiced real concerns about the lack of choice they have had in accepting debit and credit card payments and about the costs involved,” Flaherty said in the statement. “These added business costs are borne by merchants and may be passed on to consumers, which makes this an issue of importance to all Canadians. … The code of conduct helps [merchants] control their costs and allows them to pass on saving to their customers.”

MasterCard Canada, which is based in Toronto, immediately accepted the code of conduct. “MasterCard believes the code creates benefits and burdens for all of the participants in the payments value chain. Importantly, the code allows the continued presence of Maestro on Canadian debit cards, allowing consumers to retain the benefits of international debit-purchasing power,” Jennifer Reed, a MasterCard Canada spokesperson, said in a statement. Maestro is MasterCard’s international PIN-based point-of-sale debit network.

Visa Canada, however, expressed concerns about the code, although the company contends it opens the door to pay for goods more widely online, expands international acceptance and acceptance of new payment platforms such as Visa’s contactless payWave product. 

“However, Visa is concerned that it does not go far enough in creating an environment that encourages meaningful competition in the Canadian payments arena and favors merchants at the expense of consumers,” Melissa Cassar, a Visa spokesperson, said in statement. “In the coming days, Visa will further examine the code and its implications. We look forward to meeting with the minister of finance to ask for clarification on specific details of [the April 16] announcement.”

Tim Wilson, head of Visa Canada, said in March 2009 it would offer a cobadged PIN-debit card that contains both a microchip and a magnetic stripe once it enters Canada’s debit card market. The code of conduct would require such cards to be competitive and provide access to more than one debit network.

A spokesperson for Toronto-based Moneris says the company is studying the code of conduct to determine how it will affect the company’s business.

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