MasterCard Canada: Government Regulation of Merchant Fees May Harm Retailers and Consumers

MasterCard Canada: Government Regulation of Merchant Fees May Harm Retailers and Consumers

New survey reveals Canadians are comfortable and confident with credit cards

TORONTO, April 22, 2009 – MasterCard Canada today told the Senate Standing Committee on Banking, Trade and Commerce that it strongly believes additional regulatory management of payment system fees will result in unintended consequences for both Canadian consumers and retail merchants.

“Canada’s credit card systems are well balanced and managed to maximize their value to merchants, cardholders and the Canadian economy as a whole,” said Kevin Stanton, President, MasterCard Canada. “Canada’s current regulatory framework safeguards the interests of all participants, and direct regulatory price controls will suppress innovation, reduce competition and harm consumers.”

MasterCard believes it is unfortunate that the Retail Council of Canada (RCC) and Canadian Federation of Independent Business (CFIB) have called for government regulation before providing recommendations to MasterCard.

When the RCC and CFIB launched their campaigns in September, MasterCard reached out immediately to both organizations.

“This issue involves a commercial dispute in the private sector,” said Stanton. “We met with the CFIB, we had a frank discussion, but they made no recommendations.”

MasterCard and the CFIB have since agreed to meet in early May to discuss the recommendations the CFIB made to the Senate Committee. MasterCard is awaiting a response from the RCC to its offer to meet.

Canadian credit card holders are active and engaged users of their cards
MasterCard today also released results of a new survey that finds Canadian credit card holders are active and engaged users of their cards with strong comfort and knowledge about making best use of credit cards.

The MasterCard survey found:

* More than three quarters (79 per cent) of credit card holders find it convenient to pay with a credit card, including almost half (47 per cent) who strongly agree.
* Two thirds of cardholders (62 per cent) say they would feel constrained in their choices as a consumer without access to their credit card. However, only 12 per cent say they have left a merchant in the past 12 months because they could not pay with their credit card, offering comfort to those merchants who would rather not pay the costs of credit card acceptance.
* Fifty per cent of cardholders say it would be more difficult to make regular transactions without a credit card.
* A third (32 per cent) of cardholders say they put as many of their purchases as possible on their credit card in order to better track and manage their finances.
* The vast majority (80 per cent) of cardholders say card rewards programs provide extra value. Two thirds (62 per cent) of cardholders have used their credit card over other forms of payment in order to collect reward points.
* Cardholders have a good understanding of their obligations when using a credit card. Ninety-four per cent say they understand that as card owners they are responsible for how the card is used and for the charges incurred; 98 per cent understand they have an obligation to pay for what they spend; and 96 per cent understand that if they don’t pay off their balances, they will have to pay interest charges.

“These survey findings tell us that credit cards remain one of Canadian consumers’ preferred payment methods,” said Stanton. “Canadians are knowledgeable and sophisticated users of credit cards and increasingly opt for the benefits, convenience and value their credit cards deliver.”

Introducing debit competition in Canada
Some retail organizations have called upon the Government of Canada to take action to suppress competition in debit. Today MasterCard told the Senate Committee how debit competition will benefit merchants and consumers.

“By promoting market forces over monopoly, Canada’s debit system will begin to deliver enhanced value to consumers and merchants through choice, price competition, innovation, and international reach,” said Stanton. “MasterCard believes it is well positioned to provide such competition.”

MasterCard reiterates the following key points regarding interchange and debit:

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* Canada has a well-functioning payments system that provides significant convenience and security to consumers and merchants. It has continued to operate effectively and drive commerce despite a global credit crisis. More than $240 billion in Canadian commerce is expedited on credit card systems annually.
* A merchant that processes a credit card transaction enjoys guaranteed payment even at a time of increasing consumer default rates.
* Merchants benefit from increased sales, improved payment efficiency, reduced cash handling, customer convenience and satisfaction, e-commerce facilitation, international purchase handling, automatic currency conversion and settlement, among other benefits.
* Interchange is a fee that passes between acquirers (who handle card processing for merchants) and card issuers. Issuers receive interchange to compensate them for significant costs and risks borne in offering credit cards including interest-free periods, account management, credit losses, fraud protection and processing.
* MasterCard’s Canadian interchange rates remain well below those of other developed markets including the United States and below similar fees for American Express in Canada. A sampling of other countries with higher blended interchange rates than Canada include Argentina, Brazil, Germany, Greece, Indonesia, Japan, Philippines, Poland, Portugal, Switzerland, Turkey and Uruguay.
* MasterCard receives no revenue from interchange.
* Consumers do not pay interchange fees nor merchant fees.
* Merchants who choose to accept credit cards pay to participate in exchange for the benefits received. The fee accounts for the multiple benefits received.
* Merchants pay a merchant fee established by their acquirer, not MasterCard. Interchange forms a portion, but not all, of that merchant fee.
* MasterCard’s 2008 adjustment to interchange rates was the first in seven years. Some rates were reduced.
* A merchant can obtain his MasterCard interchange rates via This information has been available for more than two years.
* When interchange was regulated in Australia, it led to reduced card benefits to consumers and there is no evidence that retailers passed on savings in reduced prices.


* MasterCard Worldwide has a PIN-based debit payment solution – Maestro® – used by more than 652 million cardholders in over 100 countries.
* MasterCard Canada is preparing to expand its global debit processing system in Canada where it would deliver compelling benefits to Canadian consumers and merchants.
* Using Maestro, Canadian consumers could use debit all over the world.
* Accepting Maestro means Canadian merchants could accept international travelers’ debit cards.
* MasterCard will provide technological advancements including greater security and fraud protections, innovations like PayPassâ„¢ contactless payment, e-commerce payment capacity, and mobile payments.
* MasterCard operates a global debit infrastructure with centralized operations that run 24/7. The system delivers significantly greater scale than Canada’s incumbent debit network. It has had zero downtime in more than seven years.
* MasterCard will create competition in the Canadian debit market where it has never existed.

About MasterCard Worldwide
MasterCard Worldwide advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes approximately 21 billion transactions each year, and provides industry-leading analysis and consulting services to financial institution customers and merchants. Through its family of brands, including MasterCard®, Maestro® and Cirrus®, MasterCard serves consumers and businesses in more than 210 countries and territories. For more information go to

This report presents the findings of a telephone survey conducted by Environics Research Group among a national random sample of 1,001 adults comprising 500 males and 501 females 18 years of age and older, living in Canada. The margin of error for a sample of this size is +/- 3.10%, 19 times out of 20. Interviewing was completed during the period April 5 – 8, 2009.

For more information, please contact:
Julie Wilson
MasterCard Canada

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