Global fintech and funding innovation ecosystem

Visa and MasterCard Set to Decrease Average Interchange Fee to Under 1% in Canada

CBC News | Pete Evans | May 18, 2023

Unsplash Stephen Phillips Hostreviews.co .uk visa and mastercard - Visa and MasterCard Set to Decrease Average Interchange Fee to Under 1% in Canada

Image: Unsplash/Stephen Phillips - Hostreviews.co.uk

In a landmark agreement, Visa and MasterCard have consented to lower their interchange fees in Canada to below 1%.

  • Interchange fees are paid by the merchant, but many have started to pass them on to consumers directly.  These fees, previously a point of contention for merchants, allow credit card companies to retain a percentage of every transaction.
    • This deal signifies an average in-store transaction interchange fee reduction to 0.95%, promising retailers at least $99 on a $100 purchase, as opposed to $97 in some instances.
    • This agreement, representing a 27% average decrease in fees (for merchants), is projected to result in savings of around $1 billion for retailers over five years.
    • It also aims to bring greater fairness to credit card transactions for small businesses, which traditionally have less negotiating power for lower rates than larger merchants.
    • The reduction in fees is set to impact businesses with an annual Visa sales volume below $300,000 and those doing less than $175,000 from MasterCard.

See:  Biden Proposes Cap on U.S. Credit Card Fees to Save Consumers $9 Billion

  • What It Means:
    • This change will affect Canadian consumers, as merchants have recently been given the right to pass on these fees directly to them. While consumers might face higher costs because of the fees, the overall lowering of interchange rates may alleviate some of this burden.
    • This agreement is a significant shift in the credit card industry in Canada, bringing the country in line with many other jurisdictions such as the European Union, the United Kingdom, Israel, Australia, China, and Malaysia, that already cap interchange fees at less than 1%.
    • It underscores a commitment by the government to create a fairer environment for small businesses and addresses concerns regarding the disproportionate power of major credit card companies.
    • However, the implementation of the new fee structure is targeted for the fall of 2024, and organizations like the Canadian Federation of Independent Business (CFIB) are urging for an expedited timeline and broader inclusion of other card brands like American Express.

Continue to the full article --> here


NCFA Jan 2018 resize - Visa and MasterCard Set to Decrease Average Interchange Fee to Under 1% in CanadaThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

Latest news - Visa and MasterCard Set to Decrease Average Interchange Fee to Under 1% in CanadaFF Logo 400 v3 - Visa and MasterCard Set to Decrease Average Interchange Fee to Under 1% in Canadacommunity social impact - Visa and MasterCard Set to Decrease Average Interchange Fee to Under 1% in Canada

Support NCFA by Following us on Twitter!







NCFA Sign up for our newsletter - Visa and MasterCard Set to Decrease Average Interchange Fee to Under 1% in Canada




 

Leave a Reply

Your email address will not be published. Required fields are marked *

five + 2 =