[ad_1]
“This is a big deal,” says Dan Kelly, president of the Canadian Federation of Independent Small Business (CFIB). “While Canada has had two earlier rounds of negotiated Visa and Mastercard fee reductions, many of the benefits accrued to larger merchants. This announcement focuses attention on small businesses who have very little market power to negotiate lower fees on their own. The reductions are sizable and will provide welcome relief to many small firms.”
Under the deal, small businesses with up to $300,000 in annual Visa sales and $175,000 in annual Mastercard sales will now qualify for an average 0.95% interchange fees for in-store sales and a 0.1% reduction for online transactions. These reductions are expected to save eligible Canadian small businesses approximately $1 billion over five years.
This agreement was originally announced in May as part of the federal government’s Budget 2023. The deal also provides businesses with access to free online fraud and cybersecurity resources.
“Reducing costs on small businesses will enable them to further invest in their business and its growth, while helping support their success now and into the future,” said Rechie Valdez, Minister of Small Business in a news release.
Critics point out that this agreement only applies to Visa and Mastercard, so there are no benefits to merchants for customers using American Express, for example.
What’s more, while the $300,000 annual threshold for Visa might sound like a lot, that’s only about $822 in sales per day. Medium-sized businesses, like grocery stores and convenience stores with higher sales volumes (and lower margins), are left stuck paying the 1.5% interchange fee. And those fees can add up. In a June 2023 article in Canadian Grocer, the owner of an independent IGA grocery store in Quebec reported paying $153,000 in interchange fees last year.
“While this deal will cover many small businesses, the thresholds are fairly low and will exclude a good number of independent businesses,” says Kelly. “CFIB’s data shows that approximately 75% of our small business members will benefit from these reductions…Still, we have heard from many small and medium-sized firms who will be excluded from these savings. This would include larger independent restaurants, small grocery stores and many others.
[ad_2]
Source link