The card networks have come under pressure to lower interchange rates in number of countries, providing ammunition for retailers demanding similar cost adjustments in the U.S.

After years of pressing the card brands to lower rates, the Canadian government has announced Visa and MasterCard would cut interchange to 1.5%, under a five-year standard taking effect in April 2015.

"I think from a policy perspective, we watch pretty closely what happens in other countries," said Douglas Kantor, a lawyer who has represented the National Association of Convenience Stores in the swipe-fee antitrust case in the U.S. against the major card brands. "The big anomaly between U.S. interchange rates and overseas rates definitely strikes us as showing what a big problem the major card networks’ operations are here."

The ongoing antitrust contest pitting U.S. retailers against Visa and MasterCard will not change interchange rates directly, but some retailers say the $5.7 billion settlement of the swipe-fee complaints is not sufficient reimbursement, and the American interchange rates put them at a disadvantage.

Canada’s move toward lower rates falls in line with the wishes of the European Commission, which has hammered the card brands for several years regarding transaction fees. Ultimately, MasterCard lowered its rates and Visa, more recently, agreed to cap its rates, effective in early 2015.

"I am not sure it is a straight-line connection [between the change in Canada and what U.S. retailers are seeking], but certainly it provides additional evidence that more changes need to take place in the U.S. in order to get to some sense of operating a fair market," Kantor maintained.

Joe Oliver, minister of finance in Canada, issued a statement saying that the card brands’ reduction to an average rate of 1.5% per transaction over the next five years would represent a fee reduction of 10% for retailers.

"These commitments represent a meaningful, long-term reduction in costs for merchants that should ultimately result in lower prices for consumers," Oliver said iin the statement.

MasterCard, which says interchange represents the cost of doing business and is not regarded as a revenue generator, voluntarily reduced rates in Canada, said Betty DeVita, president of MasterCard Canada.

"Our focus is on sustaining the right environment to deliver safe, secure and convenient payment innovations like mobile and contactless while increasing the value of electronic payments for merchants and customers," DeVita said in MasterCard-issued statement.

In a statement from Visa, the card brand said it was reducing its interchange with "the full expectation that the government is committed to a level playing field."

Visa has reserved the right to terminate or amend its interchange reduction at any time it chooses, the card brand said in its statement.

Visa also expressed its belief that, by reducing rates voluntarily, the country can avoid "the kinds of regulatory measures that, when attempted in other markets, have left consumers worse off."

Canada has been more active in reducing rates, as evidenced by the debit transaction rate reduction instituted several years ago [2007], said Richard Mader, retailer consultant and president of Bernville, Pa.-based Mader International Consulting.

Because Canada doesn’t have nearly as many banks as the United States., it likely makes it easier for the government to obtain the lower interchange rates, Mader said.

"I’m not sure how any of it would equate down here, but the answer in the U.S. is for the retailers and the card brands to all work together and end their war," Mader advised.

Based on what U.S. merchants pay, it is not surprising they are interested in how the card brands interact with retailers in other countries, said Brian Riley, senior research director and analyst with Boston-based CEB TowerGroup.

The European Commission has reported that Visa Europe has agreed to 30 basis points, or 0.30% on its multilateral interchange fees on consumer credit card transactions it controls.

Basis points in interchange translate to 1/100th of 1%. At 30 basis points, the merchant would pay $1.50 on a $500 transaction.

Interchange rates represent a complex system in the payments industry, as rates vary for card-present and card-not-present transactions, as well as for types of cards and domestic or international transactions. On average, Canada and Europe would be around 42 basis points, while the U.S. interchange sits as high as 175 basis points, Riley estimated.

"The pricing in the U.S. market for interchange is absolutely the highest in the world," Riley said.

Because of what has happened recently in Canada and Europe, Riley said, "I think the whole pricing issue is about to go into another ugly challenge here with more litigation."

Apple Pay’s recent ability to negotiate a lower interchange, reported at between 15 and 25 basis points, amplifies that the U.S. is the most expensive market and has plenty of wiggle room, Riley added.

Recent international developments should "make some impact on decision makers here in the U.S. that we are behind the rest of the world and should not be putting our merchants at a competitive disadvantage compared to others," Kantor said.

The appeals process in the U.S. swipe fee case continues this month at the Second Circuit Court of Appeals.

Merchants appealing the swipe fee settlement ruling have filed with the court, but have the opportunity to file reply briefs comes later this month, Kantor said.

Once the briefs have been submitted, a panel of three appellate judges will determine when oral arguments will begin.

The panel will listen to arguments against Judge John Gleeson’s approval in December 2014 of the swipe fee settlement.

Merchants and trade associations filed the suit in 2005 against Visa, MasterCard, and several banks. The plaintiffs alleged price fixing and other anti-competitive trade practices in the credit card industry.

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