The two payment networks submitted proposals to reduce their average effective interchange rate in Canada to 1.5 percent on consumer credit cards, the finance department said in a statement posted on its website today. The rate will stand for five years and take effect no later than April, it said.
Prime Minister Stephen Harper’s Conservative government, which has been rolling out consumer-focused policies ahead of next year’s federal election, pledged in its 2014 budget to take additional measures to lower card fees for retailers, a move that would also reduce revenue for Canada’s banks. Merchant groups including the Retail Council of Canada have been the biggest advocates for government action on the fees, which the government claims are among the highest in the world.
“These commitments represent a meaningful long-term reduction in costs for merchants that should ultimately result in lower prices for consumers,” Finance Minister Joe Oliver said in the statement. “As a result of the voluntary proposals, there is no need for the government to regulate the interchange rates set by the credit card networks.”
In a separate statement, Visa said it is entering the agreement on the expectation there will be a level playing field in the industry.
“If Visa or our clients are disadvantaged as a result of entering into this undertaking, Visa reserves the right at any time to terminate or amend it,” the Foster City, California-based company said today in a statement.
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