Visa to lower credit card fees for grocers

Grocers miffed by high credit card interchange fees will get some relief this fall.

Visa Canada will reduce the fee to grocery stores on standard credit cards as well as Visa’s Infinite card.

Fees on Visa’s standard card will drop to 1.23% from 1.33%. The fee on Infinite cards will be 1.42%, down from 1.52%.

The new rates take effect in October.

The change is welcomed by the Canadian Federation of Independent Grocers, which has led the fight against high credit card fees.

“This is a good step by Visa,” Gary Sands, vice-president of public policy at CFIG, told Canadian Grocer. “From where we’ve come two or three years ago, it’s a big step.”

Just a few years ago, interchange fees were around three per cent for supermarkets, meaning that for every $100 a customer paid using a credit card, the store had to pay an fee of three dollars.

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Visa’s lower fees will likely be felt the most by independent grocers. Large chains tend to have the clout to negotiate their own interchange rates. But indies, with just one or a few stores, don't have as much sway.

Butchers, bakeries, dairies, and confectionary and candy shops will also welcome the rate adjustment since Visa has now elected to group these shops in its grocery category. So those stores will also pay the new lower rate.

The interchange fee, which goes to banks, is one of several fees paid by stores every time a customer pays with a card. Others include a network assessment fee, which goes to the credit card company, and an acquirer markup fee, which goes to payment processors, such as Chase or Moneris.

Interchange fees are the highest of the three, and Visa’s reductions could save grocers thousands of dollars a year.

High interchange fees have been among the top concerns for retailers in recent years. The introduction of premium credit cards, along with their higher fees, particularly roiled store owners.

Three years ago the Competition Bureau declared Canada’s credit card interchange fees “among the highest in the world” and estimated they cost Canadian businesses at least $5 billion annually.

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That spurred the Stephen Harper government to act. In November 2014 the government, Visa and MasterCard agreed to a five-year rate freeze and a target of 1.5% on interchange fees as of April 2015.

A year later, there was disagreement on whether that target was hit. Dan Kelly, president of the Canadian Federation of Independent Business (CFIB), told Canadian Grocer last month that it had been reached. He said interchange fees had come down an average of 10% to 15%. By comparison, fees rose 30% to 40% between 2007 and 2015, he said.

But CFIG said that its members were still paying, on average, 1.68% in interchange fees, down from more than 2% a year ago.

On Wednesday, Sands told Canadian Grocer that Visa to date had been “much more engaged” in working with grocers to lower credit card fees than MasterCard, which he said lags Visa in hitting the government’s 1.5% target for grocery stores.

READ: Dollarama to test credit cards in B.C.

Meanwhile, Ottawa could take another look at the credit card fees.

In February, Linda Lapointe, a Liberal representing the Quebec riding of Rivière-des-Milles-Îles, introduced a private member’s bill that would give Ottawa the power to limit fees.

She noted that interchange fees remain high compared to other countries. For instance, in Australia fees are 0.5% of the transaction price. And the European Union recently lowered its fees to 0.3% from 0.5%.

Lapointe, who formerly managed a Provigo and grew up working in her father’s grocery store in Boisbriand, Que., said the aim of the bill was to reduce costs to retailers.

Though private member’s bills rarely become law, the introduction of the bill could spur parliamentary hearings into credit card fees.