The Toronto Star reported today that Canadian merchants say a new study proves they pay some of the highest credit-card processing fees in the world – a cost that consumers partially bear in the form of higher prices for some goods and services.
The study, released by the U.S. Merchants Payments Coalition yesterday, shows Americans pay an estimated $48 billion (U.S.) a year, or $427 per household, in what are sometimes called “swipe” fees.
Canada ranks a close second, while rates in other countries that have clamped down on such fees are much lower, the report says, citing Australia and the European Union as examples.
The report was released as merchants and card issuers gird for battle south of the border over proposed legislation to curb such fees. A similar fight is taking place in Canada.
“In Canada and the U.S. we’re dealing with a completely unregulated market, so they’re able to raise fees whenever and wherever they see fit,” Retail Council of Canada spokesman Mark Beazley said of the credit-card industry.
“What the report also demonstrates is this is not just an issue specific to Canada.”
“Merchants around the world are facing escalating fees.”
American merchants and business owners pay on average 2 per cent of the value of each transaction in processing fees, according to the report prepared for the U.S. coalition of national convenience stores, grocers, gas bars, drug stores and other retailers.
That amounts to about $48 billion a year, or $427 per U.S. household, the coalition estimates.
Canadian merchants pay somewhat less, at 1.5 per cent, while Australians pay just 0.5 per cent and rates in the European Union are lowest at 0.3 per cent, the report says.
Canadian merchants estimate the total cost per year of processing credit cards is $4.5 billion (Canadian), but say they haven’t tried to break that down into per household costs because there are too many variables involved.
They also say only some retailers pass on those costs to consumers, while others are able to absorb them.
Three bills before the U.S. Congress seek to give U.S. merchants more negotiating power with Visa and MasterCard, the two credit-card giants that dominate the market.
Canadian merchants are seeking similar help from government here.
The credit-card companies, which in Canada control 94 per cent of the market, argue the benefits to merchants make up for the costs.
Credit cards provide merchants with a secure payment system and customers with rewards, such as air travel or merchandise.
Canadian merchants are hoping Ottawa will adopt Senate banking committee recommendations that would give them more power to negotiate those fees with banks.
Finance Minister Jim Flaherty has introduced some measures, which would protect consumers, but they have not yet been passed into law. Merchants say those measures don’t go far enough.