The federal government has finalized agreements with Visa and Mastercard that will see small businesses pay lower credit card transaction fees, it announced Thursday.
The government said Visa and Mastercard have agreed to reduce domestic consumer credit interchange fees for in-store transactions to an annual weighted average interchange rate of 0.95%.
Domestic consumer credit interchange fees for online transactions will be dropped by 10 basis points, resulting in reductions of up to 7%.
The reduced fees will apply to small businesses with an annual Visa sales volume below $300,000 or an annual Mastercard sales volume below $175,000.
The federal government estimated the changes will help 90% of credit card-accepting businesses in Canada by reducing interchange fees by up to 27%.
The reductions, which will come into effect in fall 2024, are expected to save eligible Canadian small businesses about $1 billion over five years.
The agreements also include commitments from Canada’s large banks to protect reward points.
“The new agreements secured with Visa and Mastercard will make credit card transactions fairer for small businesses, which have less bargaining power than larger merchants to negotiate lower rates,” Finance Minister Chrystia Freeland said in a press release announcing the changes.
“With lower interchange fees, small businesses will save money that they can use to grow their businesses and create more good jobs.”
The Canadian Federation of Independent Business (CFIB) reacted positively to the announcement, calling it a “big win for small businesses.”
Nearly three quarters of the association’s members will benefit from the rate reductions, CFIB president Dan Kelly said in a statement.
However, the organization is calling for the reductions to be implemented sooner than the fall of 2024, and for the government to ensure other card brands such as American Express take similar measures.
But an association representing small and medium grocers saw the fee-reduction announcement as a “broken promise.”
Because of the thresholds set out by the government, not a single small or medium grocer in the country will see their interchange fees reduced, the Canadian Federation of Independent Grocers said in a statement.
The organization said meaningful reductions in interchange fees for grocers could help manage rising food prices, especially in the rural or remote communities, where these grocers are often the only supermarket.
Senior vice-president Gary Sands said his association’s members have been waiting more than two years for Thursday’s announcement, but called the resulting announcement “baffling” and “a joke.”