Credit cards are seen in Montreal on December 12, 2012. Industry groups say small businesses are being hammered by high credit card fees on online purchases as the shift toward e-commerce continues amid the second wave of the COVID-19 pandemic. THE CANADIAN PRESS/Ryan Remiorz

Credit cards are seen in Montreal on December 12, 2012. Industry groups say small businesses are being hammered by high credit card fees on online purchases as the shift toward e-commerce continues amid the second wave of the COVID-19 pandemic. THE CANADIAN PRESS/Ryan Remiorz

Small businesses feeling the pinch of credit-card fees as e-commerce ramps up

CFIB and retail council are calling on the federal government to negotiate lower fees from credit-card firms

Industry groups say small businesses are being hammered by high credit-card fees on online purchases as the shift toward e-commerce continues.

Visa and MasterCard reduced the fees they collect from businesses to an average annual rate of 1.4 per cent from 1.5 per cent under an agreement with Ottawa that took effect last year. But the fees remain higher than in many Western countries, particularly for online transactions, trade organizations say.

The Canadian Federation of Independent Business says the proportion of its 100,000 members that rely on online purchases has doubled to 40 per cent since March, when lockdowns to fight the COVID-19 pandemic shuttered storefronts across the country.

“Smaller companies tend to pay higher fees than large companies do, because they don’t have the volumes,” said CFIB vice-president Corinne Pullman.

She said “there’s no doubt” digital rates should come down, and that fees should be clearer and more transparent for merchants.

While Visa and Mastercard’s overall annual rates sit at about 1.4 per cent in Canada, fees vary by transaction depending on factors that range from business type to whether a PIN code was used.

The rise in e-commerce sales “inevitably squeezes out cash” from vendors, who would otherwise draw more revenue from cash or debit transactions, said Retail Council of Canada vice-president Karl Littler.

“Mastercard did a deeper drop for those in-store transactions, but concurrently hiked the amounts for their online,” he said, referring to recent fee adjustments. “And obviously that has implications given the odd outcomes that COVID has created.”

Online retail sales rose 116 per cent to $3.91 billion in May from $1.81 billion a year earlier, according to Statistics Canada. They were up 68 per cent year over year to $3.07 billion in October, the last month for which figures are available.

Even sharper spikes are likely in more recent months amid the second wave of the pandemic in Canada, prompting heavier reliance on credit-card payments.

The CFIB and the retail council are calling on the federal government to negotiate lower fees from credit-card firms.

Finance Department spokeswoman Anna Arneson said the government “will continue to work closely with small businesses to ensure they have the support” during the pandemic, but cited no plans to bring credit-card firms back to the table.

Visa said e-commerce transaction rates are “lower than they have ever been,” with steeper rate reductions for various small businesses such as restaurants and variety stores.

Mastercard says it is committed to its voluntary agreement with Ottawa that established the 1.4 per cent average rate.

Werner Antweiler, a professor at the University of British Columbia’s Sauder School of Business, said merchants “generally hate the premium cards” in particular due to “excessively expensive” processing fees.

“In a world of digital commerce, the idea to pay two to three per cent on each transaction is a kind of tax, when in fact the transaction has only minimal costs that are nowhere near these amounts and are in fact independent of the transaction volume,” Antweiler said.

The average rate reduction to 1.4 per cent from 1.5 per cent would amount to just $100 worth of savings for businesses for every $100,000 in credit-card sales, according to the retail council.

One goal of the lower rates was to enable smaller firms to avoid a big competitive disadvantage compared to larger companies, which have more leverage in negotiating for reduced fees.

The government has also said the reduction could help consumers because businesses will be able to keep prices lower.

In November 2014, Visa and MasterCard voluntarily agreed to reduce their average effective fees to 1.5 per cent over five years — a period that began in April 2015.

A Finance Department review of the credit-card code of conduct is ongoing.

Christopher Reynolds, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

Coronavirus

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Darlene Curylo scratched a $3M ticket, BCLC’s largest ever scratch and win prize. (BCLC)
Kelowna woman in shock after scratching $3M lottery ticket

This marks the BCLC’s largest ever scratch and win prize

City of West Kelowna mowing services have been moved in house, saving the city from a potential quarter-million dollar increase in costs. (Pixabay)
West Kelowna cuts mowing contract, saves over $200k

Since forming in 2007, the City of West Kelowna has been contracting out their mowing services

The students were told to think about a problem in their lives and what the solution to that problem could be. (Ashly Griffin)
Kelowna teacher brings creative learning to school during difficult time

Teacher Ashly Griffin wanted to take students’ mind off the pandemic

This historic photo is of Kelowna’s dance band ‘The Pettman Imperials’. 

The photo was shared to the Old Kelowna Facebook page by Ali Richardson whose grandfather Charles Pettman played drums in the band. 

While it’s unclear who is playing the saxophone, from the back the members are; Chas Buckland , Harold Pettman, Tiny Walrod. In the front is Carl Buckland, Charles Pettman and Kay Buckland. 

Harold and his brother Charles started the band in the 1930s, and played weekly at the Aquatic Club in City Park.
A look back at Kelowna’s past

The Pettman Imperials: Kelowna’s dance band circa 1930s

Esa Carriere, 23, was the victim of a 2018 Canada Day homicide. (File)
Youth sentenced in Kelowna Canada Day killing

Young woman pleaded guilty to lesser assault charge, sentenced to 15-month intensive support and supervision program

The BC SPCA is adapting its fundraising after cancelling events due to COVID-19 restrictions. (Twila Amato - Black Press Media)
BC SPCA gets creative with fundraising as pandemic continues

The non-profit’s in-person fundraising events all had to be cancelled due to COVID-19 restrictions

(File)
Man allegedly bites Vancouver cop during arrest for outstanding warrant

The officer was treated in hospital for the bite wounds

Black bear cubs Athena and Jordan look on from their enclosure at the North Island Wildlife Recovery Association in Errington, B.C., on July 8, 2015. Conservation Officer Bryce Casavant won the hearts of animal lovers when he opted not to shoot the baby bears in July after their mother was destroyed for repeatedly raiding homes near Port Hardy, B.C. THE CANADIAN PRESS/Chad Hipolito
Supreme Court quashes review of B.C. conservation officer who refused to euthanize bears

Bryce Casavant was dismissed from his job for choosing not to shoot the cubs in 2015

(File Photo)
Interior Health says COVID positivity rates in Fernie area actually 10-12%

IH say the rates are not as high as previously claimed by the region’s top doctor

Francina Mettes and Thomas Schouten with the 200-page document they submitted in December of 2018. (Travis Paterson/News Staff)
Dutch man, 94, facing unwanted trip home can stay in B.C. with wife of 45 years

Immigration offices cuts red tape so couple of 45 years can stay together in Victoria area

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Health Minister Adrian Dix looks on as Dr. Bonnie Henry pauses for a moment as she gives her daily media briefing regarding Covid-19 for the province of British Columbia in Victoria, B.C, Monday, December 7, 2020. THE CANADIAN PRESS/Jonathan Hayward
B.C. Premier, health officials to discuss next steps in COVID immunization plan

Nearly 31,000 doses of vaccine the province expected by Jan. 29 could be curtailed due to production issues

Vancouver Canucks’ Travis Hamonic grabs Montreal Canadiens’ Josh Anderson by the face during first period NHL action in Vancouver, Wednesday, Jan. 20, 2021. THE CANADIAN PRESS/Jonathan Hayward
Horvat scores winner as Canucks dump Habs 6-5 in shootout thriller

Vancouver and Montreal clash again Thursday night

Most Read