Interchange fee relief for small and medium-sized Canadian enterprises

On Thursday, May 18, 2023 the Government of Canada officially announced that it had reached an agreement with Visa and Mastercard to allow small and medium-sized enterprises to pay less in transaction fees.

Highlights

• Note that interchange fees are fees paid by enterprises to financial institutions that issue credit cards on each transaction.
• Small and medium-sized enterprises (SMEs), that do not have the same bargaining power, are more often than not subject to interchange fees that are higher than those of large stores.
• Under this agreement, smaller enterprises will benefit from a weighted average annual interchange fee of 0.95 per cent for in-store transactions. This would amount to a 27 per cent reduction in these costs.
• To be eligible, an enterprise must have an annual sales volume of less than $300,000 for Visa, and $175,000 for Mastercard. Qualifying non-profit organizations will also be able to benefit from these advantages.
• In fact, according to the federal government, 90 per cent of enterprises across the country will be eligible for this interchange fee reduction.
• The rewards customers receive for using their credit cards will not be affected by these changes.

Preliminary analysis

While the federal government’s announcement is certainly an important step in the right direction, it is regrettable that the agreement will not take effect until the fall of 2024. Note that the previous agreement with the credit companies came into effect less than six months after it was officially announced. It would also have been preferable to set higher eligibility thresholds so that this agreement could cover a larger number of enterprises. There’s a strong chance that representations will be made to the federal government to this effect.