Decisions by Canadian politicians in early March to launch
probes into credit card interchange fees and the debit payment
system have been welcomed by merchant groups, which are becoming
increasingly vocal in their opposition to the payment networks Visa
and MasterCard.

A series of hearings has been initiated by the Canadian House of
Commons’ Standing Committee on Industry, Science and Technology and
the Standing Senate Committee on Banking, Trade and Commerce. The
actions were sparked by the decision of the bank-owned national
debit system Interac to become a for-profit entity.

Interac has been in talks with Canada’s competition bureau over
its proposed restructuring, which is aimed at fighting off
increased competition from Visa and MasterCard.

Australian legislation could be template

Indeed, the catalyst for the instigation of hearings appears to
be the perceived threat posed by Visa and MasterCard if they enter
the debit card space.

Liberal MP Anthony Rota is leading the charge against the
payment networks, saying that the driver for his motion to hold
hearings was Interac’s proposal to switch to a for-profit
structure, which would lead to a massive overhaul of the Canadian
debit card industry.

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Rota also stated that it was equally vital to investigate
interchange fees and their impact on merchants.

Meanwhile, Senator Pierrette Ringuette has stated that she would
like Canada to adopt a cap on the fees banks can charge merchants
and consumers, similar to legislation already adopted in

Political pressure is building in favour of legislative measures
to keep consumer and merchant fees low at a time of economic
slowdown, and the decision to hold hearings has been applauded by a
raft of merchant interest groups, which claim that their members
will be subject to higher fees and tariffs should the Interac
structure be overhauled.

Diane Brisebois, president and CEO of the Retail Council of
Canada, said: “We must not allow debit card services to end up like
the credit card market, where rates are jacked up to provide
ever-more profit for the card issuers and the card companies.

“We hope the committee will use its hearings to look for a
future structure for the debit card market that is innovative, low
cost, and above all focused on the needs of cardholders and
merchants, not card issuers.”

Meanwhile, Catherine Swift, president of the Canadian Federation
of Independent Business (CFIB), said: “Small businesses in Canada
are facing very serious economic turbulence and fees being charged
by credit card companies and banks, which are increasing at
unprecedented rates, represent an enormous extra cost.

“Our members are not opposed to paying fees, but these costs
need to reflect the services provided. More oversight is needed now
to delay the entry of the credit card firms into the debit market
until this issue and its impacts can be properly assessed.”

Visa and MasterCard shrug off concerns

For its part, Interac has welcomed the chance to appear at the
hearings to explain how it must “innovate and change so that we can
continue to offer Canadian merchants and consumers the best payment
choice,” according to Interac CEO Mark O’Connell.

Visa and MasterCard have shrugged off merchant protests, saying
they welcome the prospect of increased competition in the Canadian

“We appreciate the government’s desire to better understand
electronic payments and hope that any government review does not
result in legislative intervention that would suppress competition
and innovation, and result in harm to consumers and small financial
institutions,” said Tim Wilson, head of Visa Canada.

Kevin Stanton, president of MasterCard Canada, said: “The many
benefits Canadian merchants receive from card acceptance continue
to be downplayed.

“I look forward to the opportunity to discuss the important role
card payments play in helping maintain a well-functioning financial
system in Canada.” (see Region Round-up)