Taking a swipe at the debit card competition
Visa and MasterCard interested in offering debit cards in Canada. Two major international credit card companies are poised to enter Canada’s debit market, a move that could dramatically alter the structure of the payments industry in Canada and stoke fears of higher fees for business and consumers.
The move comes amid already heightened concerns about the rising cost of credit card transactions, with some politicians and business groups saying Ottawa needs to step in to regulate the payments industry.
Both Visa and MasterCard confirm they’re interested in offering debit cards in Canada, a market now dominated by the non-profit Interac association, saying their presence would bring more innovation and choice to consumers and merchants.
Consumers could collect points, use their cards in stores overseas and use debit to pay for items online, among other things, they said, while merchants would have a choice of debit card networks at different price points.
“Visa would certainly love to become a participant in the debit market in Canada,” said Tim Wilson, head of Visa’s Canada region, adding that it is in “conversations” with Canadian banks about a potential rollout.
“Ideally, we would love to do it this year,” Wilson said, though the actual timing is unclear.
“Launching a new payment product is a huge technological undertaking for the banks,” Wilson explained.
Canada’s existing debit system is “broken,” said Kevin Stanton, president of MasterCard Canada, saying it’s one of the few countries in the world where a non-profit monopoly controls the market, resulting in irrational pricing that precludes true market competition.
The Canadian Bankers Association declined to comment on the issue. When asked about Visa and MasterCard entering Canada’s debit card market, spokesperson Maura Drew-Lytle said in an email: “We don’t take positions on the business strategies of public companies.”
Interac is owned by the banks, credit unions and other companies that issue cards to consumers or sign up merchants to accept them.
Merchants and small business owners say they fear the credit card companies’ entry into the debit market will mean higher costs for them at a time when they can least afford it, given the economic downturn.
Referring to the average fee now paid by merchants who accept debit cards, Diane Brisebois, president and chief executive officer of the Retail Council of Canada, said: “If it’s six cents now, it will probably be between 12 and 17 cents. When you consider the number of transactions now, that’s billions and billions.”
Business owners will be forced to pass on the increase to their customers, warns Catherine Swift, president and chief executive officer of the Canadian Federation of Small business…
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Posted by Wendy King
on Feb 22 2009. Filed under Barrie, Collingwood, Owen Sound, Stayner, Thornbury, Wasaga Beach.
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Im not surprised they are expanding to Canada, especially during these bad economical times. Business is bad here in the US, so it makes sense to expand globally.
-Jack
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