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

As of Friday, Alberta has under 10,000 active COVID-19 cases. (Image courtesy CDC)
Alberta reports 2,271 new COVID-19 cases, Red Deer cases rise slightly

Across Alberta, there are 666 people in hospital with COVID-19, including 146 in the ICU

Alberta Health Services locked the Whistle Stop Cafe at Mirror on Wednesday morning after owner Christopher Scott refused to comply with health orders.
Photo by Paul Cowley/Advocate staff
AHS shuts down Whistle Stop Cafe for defying health orders

Health inspectors and RCMP locked doors early Wednesday

Premier Jason Kenney (File photo by THE CANADIAN PRESS)
Chedda’ Heads Grilled Cheese Truck owner Dawson Strome and truck manager Allison Dolan look out from the service window on the truck. (File Photo)
Sylvan Lake’s Food Truck Thursdays expected to return with some changes

The Town is amending the Mobile Vending and Busking Bylaw which has a few changes for the event

A vial of Oxford-AstraZeneca COVID-19 vaccine is seen at a facility in Milton, Ont., on Wednesday, March 3, 2021. An Alberta woman in her 50s has died from a rare blood clot disorder after receiving the AstraZeneca vaccine. THE CANADIAN PRESS/Carlos Osorio - POOL
Alberta confirms blood clot disorder death linked to AstraZeneca vaccine

Both AstraZeneca and Johnson & Johnson vaccines have been linked to VITT in a very small number of cases

FILE - In this March 3, 2021, file photo, a vial of the Johnson & Johnson COVID-19 vaccine is displayed at South Shore University Hospital in Bay Shore, N.Y. (AP Photo/Mark Lennihan, File)
Johnson & Johnson COVID vaccine can be given to adults 30+ who can’t wait for mRNA: NACI

Panel says single shot vaccine can be especially useful for populations unable to return for second shot

A wild rabbit grazes in Nanaimo, B.C. in this Feb.2, 2018 photo. Rabbit owners in Alberta are being warned about a deadly virus that was identified in a southern Alberta household last month. THE CANADIAN PRESS/Dirk Meissner
‘Like a flash fire:’ Rabbit owners warned about outbreak of deadly disease in Alberta

The disease is confined to rabbits and cannot spread to humans

A lady wears a vaccinated sticker after receiving a COVID-19 vaccine at a vaccination clinic run by Vancouver Coastal Health, in Richmond, B.C., Saturday, April 10, 2021. THE CANADIAN PRESS/Jonathan Hayward
Canada may find it challenging to reach herd immunity from COVID-19, experts say

Level of immunity among the population changes with the variants, especially the more transmissible strains

B.C.’s provincial health officer, Dr. Bonnie Henry. THE CANADIAN PRESS/Jonathan Hayward
Dip in COVID-19 cases with 572 newly announced in B.C.

No new deaths have been reported but hospitalized patients are up to 481, with 161 being treated in intensive care

A dose of the Pfizer COVID-19 vaccination is prepared at a mobile clinic for members of First Nations and their partners, in Montreal, Friday, April 30, 2021. THE CANADIAN PRESS/Ryan Remiorz
Pfizer-BioNTech vaccine approved for kids 12 to 15 years old in Canada

The vaccine was previously authorized for anyone at least 16 years of age or older

Prime Minister Justin Trudeau listens to speakers appearing by video during a news conference in Ottawa on Tuesday May 4, 2021. THE CANADIAN PRESS/Adrian Wyld
Canada will align policy on ‘vaccine passports’ with international allies: Trudeau

Trudeau says Canadians could begin travelling outside the country again by summer

Ranging from 11 to 20 in age and representing seven provinces and one territory, the plaintiffs are appealing a Supreme Court judge’s decision to dismiss their lawsuit last fall. (David Suzuki Foundation)
15 youths not backing down in their fight to sue Ottawa over climate change inaction

The group has filed an appeal after their lawsuit was struck down by a Federal Court judge last fall

A 2021 census questionnaire. (Black Press Media file photo)
2021 census responses due May 11

By law, every household must complete a census questionnaire

Calgary Mayor Naheed Nenshi attends a senior’s home in Calgary on Tuesday, April 14, 2020, amid a worldwide COVID-19 pandemic. Nenshi says he’s frustrated to hear that tickets given to people for breaching COVID-19 public health orders are being thrown out in the courts.THE CANADIAN PRESS/Jeff McIntosh
‘Incredibly frustrating:’ Calgary mayor wants courts to uphold COVID-19 measures

Large groups without masks have been gathering in Calgary public spaces in protest of health measures

Most Read