After a year of haggling
over self-regulation, Visa Canada’s Canadian Imperial Advantage
Card is finally available and Michael Bradley, the company’s head
of products, is confident the country’s enthusiastic users of
electronic payments will welcome it with open arms. Charles Davies
reports.
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After more than a year of
negotiations over self-regulatory policies, Visa Inc has launched a
debit business in Canada, home to some of the world’s most
enthusiastic users of electronic payments, and has plans to offer
payment services new to the market.
Visa Canada announced in
October that the Canadian Imperial Bank of Commerce would become
the inaugural issuer of Visa-branded debit cards. The Canadian
Imperial Advantage Card now is available at all 1,069 of the
institution’s branches.
Michael Bradley, head of
products for Visa Canada, said Visa brings lots of new
opportunities for debit in Canada, as the CIBC Advantage Card is
ideal for consumers seeking wider debit use for both online and
overseas purchases.
According to a recent Visa
survey, 70% of Canadian consumers expressed interest in a debit
card that enabled them to purchase goods and services online. Some
65% of Canadians want to use their debit card when shopping in the
US and internationally.
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By GlobalData
Voting with their
wallets
Consumers around the world
are voting with their wallets and increasingly turning to debit
because it offers greater money management and control, security,
and convenience over cash and cheques – with acceptance atms of
merchant locations worldwide.
For the 12 months ended 30
June, payments volume on Visa Debit cards grew at 18%; similarly,
transactions on Visa Debit cards increased by 18%, as consumers
continue to migrate spending once made with cash and cheques to
electronic payments.
“We exist as an option for
people who want to shop anywhere in the world, which to date wasn’t
really available to Canadians,” Bradley said.
“We are awfully excited about
offering new debit products and services in the Canadian market,
and giving cardholders the capability to online shop
everywhere.
“Visa debit is accepted, to
pay recurring bills without having to produce a voided cheque, and
to leverage Visa’s recourse system, which allows consumers to
monitor bills and pay them with zero-liability
protection.”
Both Visa and MasterCard have
been in lengthy discussions with Canadian regulators about opening
Canada’s debit market to greater competition. The market is
currently controlled by the Interac Association, which operates the
nation’s sole PIN debit network.
CIBC also is cobranding its
cards with Interac and will process domestic point-of-sale
transactions as PIN-debit purchases through Interac. The Canadian
Minister of Finance mandated the cobranding of the CIBC debit cards
with Interac as part of the code of conduct for the credit and
debit card industry, according to Bradley.
The ministry issued the code
in April as MasterCard and Visa prepared to enter the country’s
PIN-debit market once they found issuers. Visa delayed any bank
agreements until it was sure what the code meant for its business,
Bradley said.
It then signed on to the
code, as did MasterCard and Moneris Solutions, Canada’s largest
debit and credit card processor based on annual transactions. That
avoided a legislative fix, and calmed the regulatory
waters.
The code promotes transparent
business practices and helps ensure merchants and consumers
understand the costs and benefits associated with credit and debit
cards. For example, the code requires merchant acquirers and
processors to disclose the effective merchant discount rate for
each type of payment card.
The code also requires
payment card networks to give merchants a minimum of 90 days’
notice before raising or introducing debit and credit card
fees.
In addition, merchants that
accept credit card payments from a particular network would not be
obligated to accept the network’s debit cards, and vice versa. The
code also allows merchants to provide discounts for different
payment types to encourage use of lower-cost methods.
Visa will process purchases
made online, by phone, by mail or internationally as
signature-debit transactions. The interchange rate for such
transactions is 1.15% of the sale.
Bradley said Visa’s debit
cards in Canada will contain EMV chips, helping speed the issuer’s
migration to chip technology. Interac said recently it expects the
country to completely migrate to EMV by the end of 2015.
“We are completing the chip
rollout, so chip-and-PIN transactions are on the ground all over
Canada. Because of that, there is a lot of traction around
contactless debit at the point of sale,” Bradley said.
“We are establishing a strong
base of acceptance for chip-and-PIN, so we can use our global
capabilities to bring real value to merchants and cardholders in
Canada.”
Canada is also well
positioned for contactless payments, Bradley said, adding that Visa
is in a number of trials around the world that could be brought to
bear on the Canadian market.
“In Canada, we can bring the
work we’ve done around the globe to bear on that channel,” he
added.
‘Great
opportunity’
“We have been testing the
platform, including a pilot in Canada with Royal Bank of Canada and
Roger’s [the largest cell phone company in the country] using
near-field communication. It is a great opportunity. The issues are
complex but the framework is developing for mobile payments and the
latent demand is there and consumers are just waiting for
it.”
Canadian retailers criticised
Visa’s new foothold in the $171bn debit market, arguing the new
cards would raise transaction costs for merchants. For example, the
Retail Council of Canada said an online purchase of $150 would cost
the merchant 46.5 cents to process with Interac. With Visa debit,
it would be 1.15 per cent of the $150 or $1.72.
Bradley said the new cards
will bring greater choice and new benefits to Canadian
cardholders.
“Visa debit’s expanded
functionality enables consumers to shop online, over the phone,
in-store atms of merchant locations internationally or to set up
recurring bill payments – with all the security features and
protections that come with using a Visa card,” he said.
“We give merchants the options and let them decide. We
think that we bring a lot of value to the market, and we can offer
merchants a lot of new ways to enhance their revenue.”
