Regulatory intervention in the credit and debit card industry “could be harmful to Canadians,” according to the head of Visa Canada, which is preparing to expand into debit cards.
While debit cards in Canada are now run only by the not-for-profit Interac co-operative system dominated by the major banks, Visa’s Tim Wilson told a Bay Street audience Monday that his organization “can offer value to consumers and to merchants” by entering the space.
Visa’s plan has created unease among merchants, with the Retail Council of Canada and the Canadian Federation of Independent Business worrying that debit cards, now managed by Interac on a “relatively low” flat-fee basis, could move to a fee based on a percentage of the purchase, like the interchange fees levied on credit card transactions.
Unlike Interac, Visa debit cards would carry “moderate” interchange fees, but “we believe that’s necessary to promote innovation and investment in the system,” Wilson told reporters after the speech.
“We just don’t believe zero interchange is sustainable as the right model over the long term.”
There currently are no rules blocking Visa or competitor MasterCard from the debit card business, but Wilson expressed concern that political pressure could cause “future regulations that would limit competition and therefore innovation and the value we can deliver to consumers.”
In his speech, he emphasized the advantages to merchants of the Visa platform, which he said handles up to 18% of consumer payments in Canada.
He noted that merchants benefit from “speed, efficiency and—most importantly during these times—guaranteed payment,” as card issuers assume the risk of fraud or non-payment.
Additionally, he noted, “studies have demonstrated that consumers spend more when they purchase with credit cards versus with cash.”
Moving into the “firmly entrenched debit monopoly” in Canada, as Visa has done in most other countries, would help consumers use debit cards to pay bills and make purchases online, as they now do with credit cards, Wilson said.
He was vague on timing but indicated after the speech that Visa Canada will be ready to go with debit card technology by this autumn.
Asked why retailers are wary of Visa’s involvement in debit, Wilson said his organization needs to promote “our message about the value of Visa debit” to small merchants who “really like the Interac product right now—it’s what they’re used to.”