Deal to lower Visa, Mastercard processing fees will come up short for many retailers, critics say

The federal government says it has hammered out the final details with Visa and Mastercard to lower credit card transaction fees for merchants, but small business advocates say the deal doesn’t go nearly far enough.

The deal concerns what is called an interchange fee, also known as a “swipe fee,” which sets aside a percentage of every sale for credit card companies and banks that issue the cards.

Until very recently, the fee could range from fractions of a per cent to more than two per cent for some premium cards.

And it’s not just an issue for small retailers either: Visa and Walmart waged a high-profile fight over the fees in 2017, which saw the world’s largest retailer briefly stop allowing Visa cards at any of its Canadian stores before the two sides struck a secret deal to settle the matter.

Walmart managed to cut a deal because it had the leverage to do so, but small businesses have long maintained the fee takes money out of their pockets — and those of their customers.

Canada has some of the world’s highest interchange fees in the world. When they’re imposed across hundreds of millions of transactions every year, “it is billions and billions of dollars that is collected from merchants across Canada every year,” said Dan Kelly, CEO of the Canadian Federation of Independent Businesses (CFIB).

Prior to the deal announced this week, the average interchange on a Visa card in Canada was 1.4 per cent. As per the terms of the new agreement, the annual weighted average fee for in-store transactions will be reduced to 0.95 per cent, while the same fee for online transactions will be reduced by 10 basis points.

“For small companies, they’re going to see a specific reduction oriented at them,” Kelly said. “This has been a long time coming and we’ve been lobbying hard to make it happen.”

The agreement will also give small businesses free access to online fraud and cybersecurity resources.

Small businesses with a Visa sales volume below $300,000 a year will qualify, as will those with a Mastercard sales volume under $175,000 a year. The country’s big banks have “agreed to protect Canadians’ reward points,” as per the government’s announcement.


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