The Canadian Federation of Independent Business (CFIB) and Mastercard have reached an agreement that will reduce payment card interchange rates for members of Canada’s largest small-business organizations, bringing them on par with large merchants’ rates in the market.
The new arrangement begins April 3, enabling the CFIB’s members to get the same interchange rate as Canada’s largest retailers, which will reduce rates on regular credit cards to 1.26% of the purchase from 1.44%, representing a savings of about 12.5% on most regular credit card transactions, the CFIB said in a Thursday press release.
For rewards credit cards, the interchange rate will fall to 1.38% from 1.77%, and for rewards cards with the richest perks, the interchange rate will drop to 1.9% from 2.06%, a CFIB spokesperson confirmed.
The CFIB’s move follows a standoff last year between Visa Canada and Walmart Canada, in which Walmart temporarily suspended acceptance of Visa cards at some of its stores in Thunder Bay and Manitoba, citing “unacceptably high” interchange fees. The parties resolved the dispute last month, when Walmart resumed Visa acceptance across Canada, without disclosing details.
The CFIB was part of an industry coalition that worked with Visa and Mastercard in 2014 to ensure that credit card interest rates reach an average of 1.5% over five years, beginning in 2015.
“This new agreement is a big deal for small business,” said Dan Kelly, CFIB president, in a press release. “It gives members access to transaction rates that reflect their combined sales of more than $3 billion, and lowers their cost of (card) acceptance.”
“By recognizing the collective contributions and strength of CFIB’s 109,000 members, we expect our agreement will help small businesses continue to grow and give them more opportunity to bring innovative products and services to Canadian customers,” said Brian Lang, president of Mastercard Canada.
Richard Crone, a payments analyst with Crone Consulting LLC, said Mastercard’s willingness to negotiate with Canada’s merchants could suggest a new atmosphere in relations between retailers and card networks in the often-contentious area of interchange rates, with U.S. merchants continuously pushing for lower interchange rates through a combination of lobbying and lawsuits.
“Going the route of negotiation instead of regulation could signal a change in the card networks’ stance on negotiating interchange rates,” Crone said, noting that it’s not uncommon for card processors to negotiate volume and other discounts with card networks, but it’s rare for retailers to enter into collective bargaining with card companies.
A spokesman for the U.S.’ largest retailer association is not so optimistic.
U.S. merchants for years have asked banks and card companies to negotiate over credit and debit card swipe fees—including proposing legislation that would require negotiation, said J. Craig Shearman, vice president of government affairs for the National Retail Federation.
“The card industry lobbied heavily against the legislation and it never saw passage,” Shearman said via email, adding: “Right now the card industry is trying to get the Durbin Amendment revealed so they can go back to driving up swipe fees.”