Canada reached a deal with Visa and Mastercard to lower interchange fees for small businesses
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
Canada recently managed to negotiate a deal with Visa and Mastercard that will be quite beneficial for the country’s smaller businesses. According to the terms, small businesses will get to enjoy lower credit card interchange fees starting next Autumn.
Details of the new deal
Visa and Mastercard both agreed to reduce the interchange fees for small businesses and non-profits, under the condition that they see under $300,000 in Visa sales, and less than $175,000 in Mastercard sales. Companies that fulfill this requirement will qualify for fee cuts of up to 27%.
The deal will bring in-store transactions to an annual weighted average interchange rate of 0.95%, according to reports. The figure will help a number of small Canadian businesses save an average of $1 billion over the five-year period following the implementation of these new terms.
Furthermore, the deal will also see Mastercard and Visa provide free access to online fraud and cybersecurity resources.
Canada’s minister for small business, Rachie Valdez, stated that reducing the costs on small businesses will help them with making further investments into their own companies, which will allow them to grow. Businesses would be able to grow, develop, and expand faster, all while helping support their current and future success alike.
The country’s Federation of Independent Business also commented on the agreement, stating that it brings some welcome relief. However, it also called for the addition of other credit card providers, despite the fact that Visa and Mastercard are arguably the largest by far.
The matter of excessive interchange fees has been an issue for years
The two credit card giants have seen quite a few confrontations with businesses regarding the interchange or “swipe” fees over the years. Walmart and Visa were in quite a high-profile fight over the fees back in 2017. At the time, Walmart even briefly stopped allowing Visa cards at any of its stores in Canada before a deal was struck in secret to resolve the confrontation.
In other words, the fees do not only affect small businesses in a noticeable way, but even some of the largest retailers in the world. However, while Walmart managed to cut a deal thanks to the fact that it had the leverage that allowed it to pull it off, the same cannot be said for startups and small companies.
Even though small businesses arguably suffer more, and for them, it is a matter of survival, they couldn’t do anything about it. Especially since Canada has some of the highest interchange fees in the world. This is why the new deal is particularly important, and why this is a major victory for the local companies.
