The federal government tabled a voluntary code of conduct for credit
and debit card service providers late last year that will encourage
transparency, competition and flexibility for both consumers and
merchants when making credit or debit service provider choices.
The federal government tabled a voluntary code of conduct for credit and debit card service providers late last year that will encourage transparency, competition and flexibility for both consumers and merchants when making credit or debit service provider choices. The Retail Council of Canada and the Canadian Federation of Independent Business have both lobbied heavily for the government to intervene, as the fees charged to merchants have risen sharply in recent years due to the introduction of premium credit cards and rewards programs. These benefits have costs attached that are often pushed onto the merchants without their prior knowledge. As Visa and MasterCard continue to roll out their new debit cards, this code could save retailers from millions of dollars in extra service fees.
Use of debit cards in Canada ranks second in the world and represents a $168-billion market – only Sweden has a higher rate of use. Since 1984, Interac, a non-profit co-operative, has been the sole provider of debit payment services in this country. The Toronto Star reported that Canadian retailers could pay an additional $300 million in processing fees if Visa penetrates just 20 per cent of the Canadian debit market in 2010. The problem for retailers is that, unlike Interac, which uses a flat fee per transaction (Flowers Canada Retail members pay 10 cents), Visa intends to use a flat fee of 15 cents plus 0.25 per cent of the value of the sale. This could result in an increase in costs of up to 400 per cent. MasterCard’s new debit card, Maestro, claims to offer the least expensive debit service for merchants in Canada but the rate was not published on the com-
pany’s website and under current regulations MasterCard has the right to increase its fees at any time.
The code of conduct will ensure that merchants are free to choose which cards they will accept and clearly see the costs involved. It will also require credit/debit card services to give merchants 90 days’ notice before they can increase fees, and give the merchants the option to discontinue the service without penalty after receiving notice.
With massive marketing power Visa could convert many consumers to using its cards and retailers will bear the brunt of this choice. Visa Canada is targeting the younger consumer who may not yet have a credit card but who will use a debit card, especially to make online and telephone purchases, as stated at www.visa.ca . The convenience of one-step debit purchases (the transaction doesn’t log into your bank account) and attractive features like the Visa Zero Liability Policy through Visa’s security programs will make these cards appealing to consumers.
Retailers will need to stay informed to make the best choices for their businesses. Please refer to www.canadianfloristmag.com for more information.
Point of View appears regularly in CF and offers our readers the opportunity to hear the perspective of other industry members. If you would like to suggest a topic or be part of the Point of View column, please contact Sue at
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
Flowers Canada Retail has released its own statement regarding the code of conduct:
Flowers Canada Retail Optimistic About Code of Conduct
Flowers Canada Retail supports Finance Minister Jim Flaherty and the Government of Canada’s proposal of a voluntary code of conduct for the credit and debit card industry. Although there is still much more progress that needs to be achieved for merchants (and consumers), this announcement is a good starting point towards greater transparency in the marketplace. The proposed code is intended to create a more balanced marketplace that has historically been governed by a few larger organizations.
Flowers Canada Retail is hopeful that the code will help reduce merchant transaction costs for both credit and debit transactions. “Merchants have been facing fee increases and a lack of transparency in agreements for many years and we are optimistic that the government’s proposed code has some controls to regulate these increases,” said Cor Smit, treasurer of Flowers Canada Retail.
“Industry members are particularly pleased that merchants will have the ability to choose the least expensive method for processing transactions,” said Jeff Waters, vice-president of Flowers Canada Retail. “This code will certainly allow our members choices on what cards and debit products they want to offer their customers.”
Flowers Canada Retail will pay close attention to the final release of the code and is hopeful that it will live up to its potential. However, with billions of dollars at stake and the imbalance in the position of merchants and the credit and debit card industry, Flowers Canada Retail will be monitoring the outcome closely. |
|
