Medicine Hat News

Small businesses feeling the pinch of credit-card fees 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 Ottawa 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, referring to 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 creditcard 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 Ottawa that establishe­d the 1.4 per cent average rate.

Werner Antweiler, a professor at the University of British Columbia’s Sauder School of Business, said merchants “generally hate the premium cards” in particular due to “excessivel­y expensive” processing fees.

“In a world of digital commerce, the idea to pay two to three per cent on each transactio­n is a kind of tax, when in fact the transactio­n has only minimal costs that are nowhere near these amounts and are in fact independen­t of the transactio­n volume,” Antweiler said.

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