After more than a year of negotiations, Visa Inc. has begun to create a debit business in Canada, as the country’s regulatory environment for payments appears to have settled.

Its Visa Canada unit jumped ahead of MasterCard Worldwide when it announced Oct. 18 that the Canadian Imperial Bank of Commerce would be the first financial institution in Canada to issue Visa-branded debit cards (see story). The Canadian Imperial Advantage Card now is available at all 1,069 of the institution’s branches.

MasterCard Canada said it does not yet have any debit card-issuing announcements. Both Visa and MasterCard have been working with various government and other organizations to open Canada’s debit market to competition (see story). 

CIBC also is cobranding its cards with the Interac Association, which operates Canada’s sole PIN-debit network. The issuer will process domestic point-of-sale transactions as PIN-debit purchases through Interac.

Visa will process purchases made online, by phone, by mail or internationally as signature-debit transactions. The interchange rate for such transactions is 1.15% of the sale.

Officials from CIBC and Interac were unavailable for comment by deadline.

Visa’s debit cards in Canada will contain EMV chips, complementing Visa’s migration to chip technology in Canada. Interac expects the country to completely migrate to EMV by the end of 2015.

The Canadian Minister of Finance mandated the cobranding with Interac as part of the code of conduct for the credit and debit card industry, according to Michael Bradley, Visa Canada head of products.

The Canadian Minister of Finance issued the code in April as MasterCard and Visa prepared to enter the country’s PIN-debit market once they found issuers. Visa delayed any bank agreements until it was sure what the code meant for its business, Bradley says.

“The regulatory environment had forced us to reconsider how to introduce the product to the marketplace,” Bradley tells PaymentsSource.

The code promotes fair business practices and helps ensure merchants and consumers understand the costs and benefits associated with credit and debit cards. For example, the code requires merchant acquirers and processors to disclose the effective merchant discount rate for each type of payment card. The code also requires payment card networks to give merchants a minimum of 90 days notice before raising 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 types to encourage use of lower-cost methods.

MasterCard Canada quickly adopted the code. Moneris Solutions Corp., Canada’s largest debit and credit card processor based on annual transactions, and Visa did so by the May 17 deadline.

Had the industry failed to voluntarily adopt the code of conduct, it would have faced government regulation. Canadian lawmakers on March 29 introduced the Payment Card Networks Act, which would have regulated the payments industry (see story). 

The code prevented further regulation changes and helped bring stability to the market, Bradley says. “There was a threat that there might be regulatory intervention, and not really knowing what that was, it could have been very challenging in the marketplace,” he adds.

MasterCard and Visa are entering a market where PIN-debit dominates the small-ticket environment, says Todd Ablowitz, president of Double Diamond Group, a Centennial, Colo.-based consulting firm.

The code does not make the card networks’ entry into Canada’s debit market very lucrative because it forces cooperation with Interac, but “[Visa and MasterCard] are known for bringing innovation,” Ablowitz says. “It’s probably a good opportunity to drive faster adoption towards mobile payments.”

Canadian consumers already are familiar and comfortable with contactless technology, Ablowitz says. MasterCard in particular led the charge in Canada with its PayPass contactless credit card, he adds.

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