Toronto, July 1, 2009 -- MasterCard Canada welcomes today's decision by the Senate Standing Committee on Banking, Trade and Commerce to reject retail lobbyists' calls for price regulation on credit card payment systems-an approach that would have resulted in consumers' paying the price for merchants' credit card acceptance.
MasterCard also welcomes the Committee's support of competition in Canadian debit. Both recommendations will serve the best interests of consumers and merchants.
"The Senate Committee clearly recognized that price controls are inappropriate and would harm consumers," said Kevin Stanton, president, MasterCard Canada. "Australia continues to provide an excellent example of how such price controls reduce consumer credit card program benefits, and result in no appreciable decrease in the price of goods and services."
When Australia regulated the fees merchants pay for credit card acceptance in 2003, retailers simply pocketed the windfall. Other consequences of these price controls included:
- Consumers' credit card fees and interest rates went up;
- Some credit card issuers had to stop doing business, so competition and consumer choice was reduced;
- Merchants charged consumers extra for using credit and debit cards, even though merchants' fees went down; and
- Consumers' credit card benefits and rewards had to be reduced or disappeared entirely.
MasterCard also applauds the Senate Committee for recognizing the benefits to consumers and merchants of introducing competition in the Canadian debit market.
The Senate's recommendation of a flat-fee pricing model aligns with how MasterCard's Maestro debit product is already priced.
"MasterCard's Maestro debit solution is flat-fee based and is less expensive to merchants than Interac and will provide significant benefits for consumers, not the least of which is the ability to pay by debit in countries around the world," said Stanton. "It is time for a new era in Canadian debit."
MasterCard cautions that some other Committee recommendations will result in unintended negative consequences for consumers and small merchants in particular.
The recommendation on surcharging-allowing merchants to charge consumers extra for purchases made on a credit or debit card-essentially asks consumers to bear the merchant's operational costs, and could lead to the type of opportunistic surcharging being levied by merchants at the point of sale in Australia.
Similarly, the Committee's recommendation on honour-all-cards practices will create risk, confusion, delay and difficulty for both consumers and merchants at the point-of-sale.
"Consumers expect to be able to pay with their card of choice wherever the brand is displayed," Stanton said. "Arbitrary acceptance by merchants will create significant risk, unpredictability and confusion at the point-of-sale for both retail staff and consumers, and could lead to the possibility that some credit cardholders will be unable to pay for their purchases."
The recommendation on priority routing of debit payments will take the technical routing decision out of the hands of the parties-merchants and issuing banks-paying for the transaction. Specifically, the Senate's recommendations on priority routing will favour the incumbent debit monopolist and will in effect reduce competition in debit. It will also inject the very operational complications and costs the retail lobby was seeking to avoid in a competitive debit market. It will also result in no benefits and unnecessary confusion for consumers, who do not pay for debit transactions.
MasterCard Canada appreciates the opportunity provided by the Senate committee to participate in the comprehensive examination of Canada's credit and debit payments system and recognizes it has a role to play in promoting greater transparency and education to Canadian merchants. It has a number of initiatives underway to meet this need, including developing model disclosures, and small merchant education materials.
About MasterCard Worldwide
MasterCard Worldwide advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes approximately 21 billion transactions each year, and provides industry-leading analysis and consulting services to financial institution customers and merchants. Through its family of brands, including MasterCard(R), Maestro(R) and Cirrus(R), MasterCard serves consumers and businesses in more than 210 countries and territories. For more information go to www.mastercard.com .
