Seeing an opportunity to advance international and online debit transactions and take advantage of a growing mobile payment market, MasterCard is working to establish a debit card presence next year in Canada.
MasterCard previously pushed hard to establish debit in Canada around 2010, but could not break the hold Interac Association has on the country's debit system.
But the card brand has gained momentum and favor in the country with some merchants and, more importantly, with federal regulators.
Two months ago, Capital One and MasterCard landed the Costco Wholesale account to accept MasterCard credit cards, replacing American Express. And Visa and MasterCard revealed earlier this month that they would lower their interchange rates in Canada, after much pressure from the government to do so.
Now, with MasterCard supporting the Apple Pay mobile payment system, the card brand may feel the time is right to make some inroads on the Canadian debit landscape.
"We are working actively with a number of financial institutions to launch MasterCard debit in Canada," Betty DeVita, president of MasterCard Canada, stated in an e-mail sent to PaymentsSource. "Our focus is to offer Canadians more choice with payment options including the convenience of MasterCard debit for international and e-commerce purchases."
Canadian consumers have long used debit cards, and Interac, with its flat-fee rates, has been at the focal point of that trend. For any card brand to make a debit play in Canada, it would have to convince merchants and acquirers that it is a better option than Interac.
"MasterCard has been trying to enter the debit space in Canada for some time," said Caroline Hubberstey, head of external affairs for Interac, a not-for-profit organization that operates the national debit network.
"We are hearing they are ramping up their efforts and that is not surprising," Hubberstey said. "We welcome competition if it is built on a level playing field where merchants are not forced to accept [certain cards] and consumers have choice."
In a previous push by both MasterCard and Visa to increase debit transactions in Canada, the card brands approached the country with the concept of following the "honor all cards" rule, saying if merchants accepted credit from a brand, they should also accept debit, Hubberstey said.
"The government told them if they wanted to come into Canada, they had to do like American Express and Discover and sell your value proposition to the financial institutions and merchants, and let them decide," Hubberstey added.
Canadian merchants will surely compare transaction rates, knowing that it costs them about 6 cents on average per transaction of the total purchase price. The cost of a debit transaction in the U.S. (under Durbin Amendment mandates) is about 22 cents.
MasterCard would be able to adjust that rate in Canada to be more competitive.
As DeVita pointed out, MasterCard will first look to lure Canadian consumers to use MasterCard debit when traveling or when making online purchases, maybe even through Apple Pay.
Interac plans to extend its platform into the mobile space at some point as well, Hubberstey said. "We'll be where the consumers want to pay."
Interac is studying all mobile options, from developing its own mobile wallet to approaching Apple about its service, Hubberstey said.
"Financial institutions have always been free to offer Visa debit or MasterCard debit in Canada; there is nothing preventing them from doing so," Hubberstey said. "If financial institutions decide to accept it to bring in more revenue, the bigger question is whether merchants want to accept it."