Credit Card Fees and Small Businesses - Glenn Thibeault, MP (Sudbury)
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Transcript of Credit Card Fees and Small Businesses - Glenn Thibeault, MP (Sudbury)
Regulating Credit Card Processing FeesWinter/Spring 2013 Public Consultations
The cost of processing electronic payments continues to hamper the competitiveness of Canadian business.
Retail
Small Business
E-commerce
Results in reduced profit margins for merchants and higher retail costs for consumers.
Lack of robust regulatory framework
The Current Landscape
The Current Landscape
Cost of Accepting Payments
2006 Bank of Canada report
Measured the real cost of cash, debit card and credit card transactions.
The results are striking, and speak volumes about the imbalance that concerns us.
We can see that a $36 transaction costs merchants:
Debit: $0.19
Cash: $0.24
Credit Card: $0.82
The Current Landscape
Introduced in April 2010
Created non-binding rules for credit and debit card networks and their participants
VCC was meant to provide fairness for merchants
Cost of processing payments continues to increase.
New premium credit cards & higher fees for foreign cards
Loopholes being exploited to unfairly penalize merchants
VCC has failed to provide fairness for merchants
Voluntary nature of the code inherently problematic
The Voluntary Code of Conduct
The Current Landscape
The rapid emergence of mobile payments technology will dramatically alter the landscape of the electronic payments system in Canada.
Mainstream adoption of mobile payment technologies is expected within two to four years
Will lead to a complete reworking of the payments value chain.
Regulatory framework needed to protect retail and business community from new payment processing fees.
VCC insufficient moving forward
The Rise of Mobile Payments
On the Horizon
International Perspective
International Context
Australia :
Hard Cap on interchange implemented in 2003
Regulatory approach has reduced the average transaction cost of processing electronic payments
Gives merchants additional freedoms in terms of surcharging and the choice of payment instruments.
New Zealand:
2006: Commerce Commission rules against anti-competitive practices of Credit Card Companies
2009: New Rules introduced, limiting interchange fees and increasing transparency and accountability
International Regulation
International Context
Denmark:
Payment Services Act, adopted in 2009
All fees transaction fees must be reasonably priced; Limits profit margins on interchange and merchant discount rate
Granted the Minister for Economic and Business Affairs the power to specify how fees are calculated
The European Union:
2007: European Commission ruled that MasterCard’s cross-border interchange fee breached EU antitrust rules
2009: Cap on cross-border interchange fees
Transaction fees now average 1/6th of the cost of Canadian average
International Regulation
International Context
Developing robust regulations for electronic and mobile payments, options include:
Using the Australian model as a template for the imposition of a hard cap on interchange fees.
Mandating that merchants be allowed to implement surcharges for credit card transactions.
Banning the ‘honour all cards’ rules forced on merchants.
Tightening loopholes in the pre-existing governance structure of the payments system
Regulatory Options
Regulatory Options
Mandating the full public disclosure of the per transaction cost of merchant discount rates charged by credit card companies and other payment processors
Allowing consumers, at the point of sale, to observe the hidden cost to the retailer of their chosen payment method.
Developing more effective dispute resolution processes for merchants grieving the actions of payment processors and financial institutions.
Regulatory Options
Regulatory Options