The 2023 federal budget says Ottawa aims to have small businesses – which it says make up 90 per cent of card-accepting businesses – see their credit card fees reduced by up to 27 per cent from their current average rates.David J. Phillip/The Associated Press
The federal government said it has worked out a deal with Visa and Mastercard to lower the transaction fees that small businesses pay every time a customer uses their credit card.
The 2023 federal budget, released Tuesday, said the government expects other credit card companies to make similar pledges. Ottawa aims to have small businesses – which it says make up 90 per cent of card-accepting businesses – see their credit card fees reduced by up to 27 per cent from their current average rates, which could total $1-billion in savings over the next five years.
Merchants that accept credit card payments lose a small percentage off every transaction, with the fee split between credit card companies, payment processors and banks.
The average fee is 1.4 per cent, but can vary widely depending on geography, industry, type of transaction and the annual sales volume of the merchant. Small businesses tend to pay above the average, while large stores pay less.
Reducing the fee has been a long-time demand from business groups, and successive federal governments have chipped away at it over time. But the formula for calculating the fee remains opaque and complicated, and it was not immediately clear which businesses will be covered by the new rules.
“More details, including eligible businesses, will be released in the coming weeks,” the budget said.
Business groups welcomed the announcement, though some had reservations.
Dan Kelly, president of the Canadian Federation of Independent Business, said the promise was “significant” for many small businesses.
Gary Sands, senior vice-president of the Canadian Federation of Independent Grocers, said he welcomed the news but that the “devil’s in the details.”
He said the government told him during consultations that the weighted average of transaction fees in the grocery sector was 0.95 per cent of each sale. But the lowest fee he had heard among his members was 1.2 per cent, leading him to believe the fees paid by large chains are substantially lower than the average.
Karl Littler, senior vice-president for public affairs at the Retail Council of Canada, said the government could have saved businesses and consumers money by having these changes affect all sizes of business. He estimated the government’s reductions would only reduce the total transaction fees charged in the economy each year by about 2 per cent.
“The government missed a big opportunity to save Canadian families money in challenging times,” he said.
The Canadian Bankers Association said it supported the lowering of fees for small businesses.
“Banks in Canada are committed to working collaboratively with the federal government and all stakeholders involved in our country’s credit card system to ensure it continues to function well for both individuals and retailers,” spokesperson Mathieu Labrèche said.