Visa and MasterCard have bowed to pressure from Canadian regulators by agreeing to set a 1.5% cap on interchange rates in Canada for the next five years, a reduction of around 10%. The agreement comes after a four-year battle between the schemes and the Canadian Competition Bureau.
Visa and MasterCard will cap interchange in Canada
By agreeing to the cap, which will come into effect by April 2015, the card schemes have avoided the potential threat of binding regulatory measures. In a statement, Visa said: “Visa enters into this undertaking with the full expectation that the government is committed to a level playing field. If Visa or our clients are disadvantaged as a result of entering into this undertaking, Visa reserves the right at any time to terminate or amend it.”
The Retail Council of Canada estimates that as much as $500 million from an annual C$400 billion interchange surcharge will be saved through reducing rates.
Federal Finance Minister Joe Oliver welcomed the changes. “As a result of the voluntary proposals, there is no need for the Government to regulate the interchange rates set by the credit card networks,” Oliver said in a statement, adding that lower costs for merchants “should ultimately result in lower prices for consumers.”
But many industry groups say the move is either inadequate or may have a limited impact. The Small Business Matters Coalition, which represents about 90,000 small businesses, said its members are disappointed.
“We need to bear in mind that several other countries have supported their small businesses by regulating a capped rate that is much lower than that announced today by the Canadian government,” said Gary Sands, chair of the coalition.
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