In the dynamic landscape of Credit Card processing, the Government of Canada has orchestrated groundbreaking agreements with Visa and Mastercard, aimed at alleviating the burden of credit card transaction fees for small businesses. This strategic move not only fosters financial relief but also safeguards the reward points cherished by Canadian consumers. In this article, we will delve into the transformative measures set to reshape Merchant Accounts and Merchant Processing, providing a much-needed respite for businesses grappling with Payment Gateway expenses.
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Lowering the Interchange Fees Landscape
The cornerstone of these agreements lies in a significant reduction of interchange fees, with small businesses standing to benefit the most. Up to 27% reduction in interchange fees from the existing average rate is expected, resulting in estimated savings of $1 billion over five years. ¹ Visa and Mastercard have committed to reducing domestic consumer credit interchange fees for in-store and online transactions, coupled with free access to crucial online fraud and cybersecurity resources.
Qualification Criteria for Small Businesses
Small businesses with an annual Visa sales volume below $300,000 will qualify for the lower interchange fees from Visa, and those with an annual Mastercard sales volume below $175,000 will qualify for the lower fees from Mastercard. ² This tailored approach ensures that businesses falling within these thresholds, including non-profit organizations, can experience the financial relief promised by the agreements.
“This is great news for Canadian small businesses across the country, which will collectively stand to benefit from savings of about $1 billion over the next five years. With these new agreements in place, our government is following through on our commitment to support small businesses that are facing higher costs because of inflation and increased interest rates. 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.”
– The Honourable Rechie Valdez, Minister of Small Business
Protecting Reward Points and New Rates Implementation
As an integral part of the agreements, Canada’s large banks have pledged to protect Canadians’ reward points. The new rates, ushering in a wave of savings for businesses, are set to take effect in the fall of 2024. The agreements, therefore, not only focus on immediate financial benefits but also ensure the long-term protection of consumer interests.
Real-world Impact on Small Businesses
The direct impact of these agreements is exemplified through real-world scenarios. Small businesses like Malik and Sebastian’s local sport store in Edmonton and Farees and Hadeel’s independent bookstore in Brampton stand to save significantly on interchange fees, providing them with the financial leeway to invest in business growth and development.
Government Initiatives and Holistic Support
Beyond credit card processing agreements, the Government of Canada is committed to supporting diverse entrepreneurs through initiatives like the Black Entrepreneurship Program, the Women Entrepreneurship Strategy, and the 2SLGBTQI+ Entrepreneurship Program. Additionally, the Canada Digital Adoption Program aims to enhance e-commerce presence and digitize business operations for small and medium-sized enterprises.
The finalized agreements between the Government of Canada, Visa, and Mastercard mark a pivotal moment in Credit Card Payment Gateway history. Small businesses, through reduced interchange fees, are poised for significant financial relief. As Canada embraces the NextGen Payment Solutions Canada (NPS Canada), businesses can look forward to streamlined and cost-effective solutions, aligning seamlessly with the progressive changes in credit card transaction fee structures.
FOOTNOTES:
- “Government of Canada announces finalized agreements with Visa and Mastercard to lower credit card transaction fees for small businesses”, Cision, Dec 05, 2023. Cision
- “Deal to lower Visa, Mastercard processing fees will come up short for many retailers, critics say”, Jenna Benchetrit, Dec 09, 2023. CBC NEWS. CA