Acceptance fees that retailers pay on consumer credit and debit transactions were a hot topic during a roundtable discussion at the AFP of Canada Treasury Forum, as Diane J. Brisebois, CAE, President and CEO of the Retail Council of Canada (RCC), debated with her fellow session host, Paul Rogers, Head of Acceptance for Visa Canada.
Premium credit cards are at the forefront of the fee controversy, due to the higher charges retailers incur whenever these cards are used. The credit networks’ and issuers’ rationale is that consumers that use these cards are inclined to spend more, but retailers have not observed any uptick in sales, Brisebois said. She added that most retailers are concerned that the premium cards will eventually dominate the market. “I don’t think merchants should have to pay for that,” she said. “I think the FIs or the networks should pay for it.”
Following the session, Rogers told AFP that the higher fees are tied to greater value provided by the premium cards, but acknowledged that a different approach might be needed. “The issuers have to think about the premium segment differently in terms of how they build their products,” he said. “How those consumers behave is frankly different than on a basic card. For example, a much smaller percentage would revolve their balances as month-over-month, which presents different economics to an issuer. They’re making those premium products work responsibly and in a way that presents a premium customer to a merchant. But what I would accept from today’s session is that we have more work to do with merchants to make them understand that.”
Due to these high acceptance fees, the RCC has been advocating for tougher regulation and more transparency for the past three years. In an interview with AFP, Brisebois said that retailers are pushing to ensure that they are only charged a competitive flat fee on debit transactions, along with the elimination of the high fees on premium cards, and the assurance that retailers will not be charged more for mobile payment transactions as they are becoming more integrated into the mainstream. “We will die on the sword for this one,” she said. “We’ll get regulations. [The credit networks] have not been able to voluntarily comply with the Code of Conduct and have not responded appropriately to complaints in the marketplace because, for them, their customer is the consumer. They really do not care about the merchant.”
Brisebois strongly feels that the retailers have an ally in the government and is confident they will prevail. She noted that Jim Flaherty, Canada’s Minister of Finance, has been very attentive to the retailers’ cause and has introduced a robust voluntary code in order to spur voluntary discipline by the networks, financial institutions and acquirers. “He made it very clear though, that if he did not see movement in that regard, that voluntary code would be ‘involuntary.’ I believe that the Minister is very much aware that if the abuse continues, that there will be no choice but to implement some type of regulation,” she said.
The good news is that the credit networks do not appear inherently opposed to regulation. Rogers told AFP that it would likely be a positive for the industry. “If it’s handled the way it’s been so far, it will be good for the industry because it’s been responsible, balanced, fair, and it’s dealt with good things,” he said. “It’s hard not to argue in favor of transparency. It’s fair for a merchant to have a clear and concise understanding of what their cost of acceptance is. We support that 100 percent.”