Small biz feels credit-card fees pinch as e-commerce ramps up

Industry groups say small businesses are being hammered by high credit-card fees on online purchases as the shift toward e-commerce continues.

Visa and Mastercard reduced the fees they collect from businesses to an average annual rate of 1.4 per cent from 1.5 per cent under an agreement with the federal government that took effect last year. But trade organizations say the fees remain higher than in many western countries, particularly for online transactions.

The Canadian Federation of Independent Business says the proportion of its 100,000 members that rely on online purchases has doubled to 40 per cent since March, when lockdowns to fight the COVID-19 pandemic shuttered storefronts across the country. “Smaller companies tend to pay higher fees than large companies do, because they don't have the volumes,” said CFIB vice-president Corinne Pullman.

She said “there's no doubt” digital rates should come down, and that fees should be clearer and more transparent.

While Visa and Mastercard's overall annual rates sit at about 1.4 per cent, fees vary by transaction depending on factors that range from business type to whether a PIN code was used.

The rise in e-commerce sales “inevitably squeezes out cash” from vendors, who would otherwise draw more revenue from cash or debit transactions, said Retail Council of Canada vice-president Karl Littler.

“Mastercard did a deeper drop for those in-store transactions, but concurrently hiked the amounts for their online,” he said about recent fee adjustments. “And obviously that has implications given the odd outcomes that COVID has created.”

The CFIB and the retail council are calling on the federal government to negotiate lower fees from credit-card firms.

Finance Department spokeswoman Anna Arneson said the government “will continue to work closely with small businesses to ensure they have the support” during the pandemic, but cited no plans to bring credit-card firms back to the table.

Visa says e-commerce transaction rates are “lower than they have ever been,” with deeper rate reductions for various small businesses such as restaurants and variety stores.

Mastercard says it is committed to its voluntary agreement with the feds that established the 1.4-per-cent average rate.