In a move aimed at providing relief to small businesses, Canada has finalized a deal with Visa and Mastercard to lower credit card interchange fees. This agreement, which is expected to bring significant cost savings to eligible businesses, represents a positive step towards supporting the growth and success of small businesses in the country.
Fee cuts for eligible businesses
Under the terms of the agreement, small businesses and nonprofits with less than $300,000 in Visa sales and less than $175,000 in Mastercard sales will be eligible for fee cuts. Starting from next autumn, these businesses will benefit from fee reductions of up to 27%, helping alleviate some of the financial burden on small businesses in Canada.
Cost-saving benefits
The government estimates that bringing the interchange rate for in-store transactions to an annual weighted average of 0.95% will result in substantial cost savings for eligible small businesses over a five-year period. In fact, the government predicts that this initiative will save Canadian small businesses approximately $1 billion.
Added benefits from Visa and Mastercard
One of the notable aspects of this deal is that Visa and Mastercard have committed to providing free access to online fraud and cybersecurity resources. By offering these resources, the credit card giants aim to support small businesses in safeguarding their operations against online threats, thus ensuring their long-term success.
Government’s stance on fee reduction
Rechie Valdez, the Minister for Small Business, welcomes the fee reduction as a means to empower small businesses. Valdez emphasizes that by reducing costs, businesses can allocate their resources towards investing in their growth and future success. This initiative underscores the government’s commitment to supporting the small business sector, which serves as a crucial driver of the Canadian economy.
Response from the Canadian Federation of Independent Business
The Canadian Federation of Independent Business (CFIB), while appreciative of the fee reduction, believes that more can be done to benefit small businesses. The CFIB calls for the inclusion of other credit card providers in the agreement, which would expand the cost-saving benefits to a wider range of businesses. Additionally, the CFIB suggests raising the sales thresholds so that more businesses can qualify for the fee cuts. These proposed changes would ensure that a greater number of small businesses can avail themselves of the financial relief offered through lower interchange fees.
Visa and Mastercard’s initiative to lower interchange fees for small businesses in Canada is a significant development that can positively impact the financial health of these enterprises. By implementing fee cuts for eligible businesses and providing free access to fraud and cybersecurity resources, Visa and Mastercard demonstrate a commitment to supporting the growth and success of small businesses. While the agreement has been received with some enthusiasm, the Canadian Federation of Independent Business urges the inclusion of other credit card providers and the adjustment of sales thresholds to ensure that more businesses can benefit from these cost-saving measures. As the fee reduction plan takes effect, it is anticipated that it will contribute to the thriving small business landscape in Canada, promoting economic growth and sustainability.