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The Canadian Federation of Independent Business wants the Canadian arms of Visa Inc. and MasterCard Worldwide to charge a flat, per-transaction fee when banks associated with the networks begin issuing their PIN-debit cards, perhaps starting this fall.
The Toronto-based federation, which represents 105,000 companies, including retailers, farmers and doctors, is asking MasterCard and Visa to charge seven or eight Canadian cents per transaction instead a percentage of the sale, Catherine Swift, the organization's president and CEO, tells ATM&Debit News. Interac, which operates Canada's sole existing debit network, similarly charges a flat rate, she says.
Interac is a nonprofit entity, but it is seeking to change its status to a profit-making business to compete with the international card brands.
Swift's comments took MasterCard by surprise, as it says it always has offered flat-fee pricing for its Maestro PIN-debit product. MasterCard wants to use Maestro to enter Canada's PIN-debit market (no issuers in Canada issue signature-debit cards).
"MasterCard has made public commitments to that pricing approach on many occasions, of which (the Canadian Federation of Independent Business) is well aware," Deborah Rowe, a MasterCard spokesperson, writes in an e-mail message. "Maestro's flat-free transaction cost for merchants is substantially less than that of Interac, which recently increased it fees by 60%."
Visa also took issue with the federation's demands. "Visa's debit interchange-rate structure is a combination of fixed and variable, with the emphasis on fixed for the majority of transactions," Tim Wilson, head of Visa Canada, wrote ATM&Debit News in an e-mail message.
"We believe that the interchange rate structure that has been established for Visa debit is appropriate and will assist in encouraging consumers to use the card, and retailers to accept it," Wilson says.
Visa Canada announced in March plans to issue a "co-badged" PIN-debit card that contains both a microchip and a magnetic stripe.
Neither Visa nor MasterCard has set a date to enter Canada's PIN-debit market, but some industry insiders expect some action to occur this fall.
Recently, the federation demanded that Visa and MasterCard adopt a code of conduct for Canada's small-business sector or face calls of government regulation of the payments industry.
Swift later described the code of conduct as a working paper designed to resolve some issues, such as call for a flat fee.
In response to the federation's call, MasterCard said a "nonregulated solution to small-merchant concerns about credit and debit card acceptance is best."
Visa says it is still discussing the issue with the federation. Canada is an attractive market because per-person debit card use is the second highest in the world, according to the Bank of International Settlements in Basel Switzerland.
Canada's per-individual debit card use was second behind Sweden, but ahead of the United States, the Netherlands and the United Kingdom, according to the Bank of International Settlements. In 2007-the latest statistics available-individual Canadians made 104 transactions annually with their debit cards compared with 125 transactions per individual by Swedes. U.S. residents paid with their debit cards 100 times per year; the Dutch paid 97 times per year, and the British paid 83 times per year.
