Canadian federal officials in Ottawa say they’ve reached a deal to have credit card companies lower the fees they charge businesses by 10 basis points.
Government officials announced Thursday that they have reached voluntary five-year deals with Visa, Mastercard and American Express that will help small and medium-sized companies save $250 million each year.
Starting in 2020, Visa and Mastercard will reduce the fees they collect from businesses to an average annual effective rate of 1.4% — down from 1.5% — and narrow the gap between the highest and lowest rates they charge retailers. American Express has agreed to provide more transparency as part of a separate voluntary commitment that recognizes its unique business model.
Ottawa expects the lower interchange rates will enable smaller firms to avoid being at a competitive disadvantage compared to larger companies, which have more leverage in negotiating with credit card firms for reduced fees. The federal government also expects consumers to benefit from the changes because the lower costs to businesses will enable them to keep prices lower.
In November 2014, Visa and Mastercard voluntarily agreed to reduce their average effective fees to 1.5% over five years — a period that began in April 2015.
Federal Finance Minister Bill Morneau announced in September 2016 that an independent audit found that the credit card companies had met their respective commitments. At the time, the government also said it would conduct a review to ensure there was adequate competition and transparency for businesses and consumers when it comes to credit card fees.
"This is an important measure," Dan Kelly, Chief Executive of the Canadian Federation of Independent Business, told CBC News. "It gives greater price certainty because ... the existing agreements expire in 2020, and this gives small firms confidence that not only are rates not going to go up, but they're actually going to come down in the years ahead."
