Visa Inc. has begun to build its debit portfolio in Canada, a sign of its confidence in the state of the country's payments regulatory environment.
The Canadian finance minister issued a code of conduct for the credit and debit card industry in April, which Visa agreed to before entering Canada's PIN-debit market. Had Visa and its peers failed to voluntarily adopt the code, "there was a threat that there might be regulatory intervention," said Michael Bradley, the head of products at Visa Canada.
Visa delayed any bank agreements until it was sure what the code meant for its business, Bradley said. "The regulatory environment had forced us to reconsider how to introduce the product to the marketplace."
Visa Canada announced Monday that Canadian Imperial Bank of Commerce would be the first financial institution in Canada to issue Visa-branded debit cards. The Canadian Imperial Advantage Card now is available in all 1,069 of the institution's branches.
MasterCard Inc.'s Canada business said it does not have any bank-issuing announcements. MasterCard and Moneris Solutions Corp., Canada's largest debit and credit card processor based on annual transactions, have also adopted the code.
The card's point of sale transactions will be processed as PIN-debit purchases through Interac Association, which operates Canada's sole PIN-debit network. The code required that the card companies co-brand their cards with Interac. Visa will process signature-debit purchases made online, by phone, by mail or internationally.
Visa debit cards in Canada contain chips that comply with EMV Integrated Circuit Card Specifications, complementing Visa's migration to chip technology in Canada. Interac expects the country to move completely to EMV by the end of 2015.
The code of conduct was designed to promote fair business practices and helps ensure that 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 from a payment card network.
It also requires payment card networks to give merchants a minimum of 90 days' notice before raising fees or introducing debit and credit card fees.
Visa is entering a market where PIN-debit dominates the small-ticket environment, said Todd Ablowitz, the president of Double Diamond Group, a consulting firm in Centennial, Colo.
The code does not make the card networks' entry into the debit marketplace very lucrative because it forces cooperation with Interac, but Visa and MasterCard "are known for bringing innovation," Ablowitz said.
"It's probably a good opportunity to drive faster adoption towards mobile payments," according to the Colorado consultant.
Canadian consumers already are familiar with contactless technology, Ablowitz said. MasterCard in particular led the charge in Canada with the expansion of its contactless credit card product, PayPass, he said.
Interac said it could not make its executives available to comment Tuesday.
