Canada’s credit card industry is overwhelmingly dominated by giants Visa and MasterCard, and a new federal policy that would allow banks to offer both brands will do nothing to change that, two national business associations said Tuesday.
Competition Bureau commissioner Sheridan Scott said in a recent letter that the agency believes the two major credit card brands will remain independent because they are now publicly traded companies, rather than owned by banks.
“By allowing banks to issue multiple credit cards, consumers will benefit from increased choice and better service,” Scott concludes in a letter dated Nov. 7.
Historically, Canada’s big banks were required to choose between one of the two major card brands, with CIBC, Royal, Scotiabank and TD offering Visa and Bank of Montreal lined up with MasterCard.
Peter Woolford, the Retail Council of Canada’s vice-president of policy development, said the group “respectfully disagrees” that consumers will benefit from allowing banks to carry both brands.
“Every time you or I use our credit card at the point of sale, the merchant is returning about 2% of that to Visa or MasterCard. So it’s like a tax,” said Woolford.
“Visa and MasterCard will compete with each other for issuers. They will compete very vigorously to persuade different financial institutions to carry and offer their cards,” he said.
“Fortunately for Visa and MasterCard, they don’t have to cover the costs of those [inducements]. They’re able to simply pass them through to the merchants, who have no choice but to accept it.
“So Visa and MasterCard will compete vigorously for issuers, but they’ll be using our money,” Woolford said.
Catharine Swift, president of the Canadian Federation of Independent Business, said Tuesday that smaller businesses have little choice but to pass Visa and MasterCard’s higher costs to consumers.
“This is a duopoly, for all intents and purposes,” Swift said.
“I mean, there is [American Express] but in terms of our constituency AmEx is way too expensive for most of our members to use,” said Swift.
The CFIB, which represents a wide range of small to mid-sized businesses including retailers, has complained recently that Visa and MasterCard have been issuing a “proliferation” of new premium cards to consumers that carry higher fees for merchants.
The CFIB has filed a formal complaint with the competition commissioner about the new cards and feels “it’s an abuse of dominant position, which is one of the Competition Bureau’s offences.”
