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MASTERCARD (MA)
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MasterCard : Credit card firms to trim merchant fees, but retailers group 'underwhelmed'

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08/09/2018 | 02:15pm CEST

The federal government says credit card companies have agreed to trim the fees they charge the country's businesses by 10 basis points.

Ottawa announced Thursday it has reached voluntary, five-year deals with Visa, Mastercard and American Express that the feds expect will help small and medium-sized companies save a total of $250 million per year.

Starting in 2020, Visa and Mastercard will reduce the fees they collect from businesses to an average annual effective rate of 1.4 per cent — down from 1.5 per cent — and narrow the gap between the highest and lowest rates they charge retailers. American Express has agreed to provide more fairness and transparency as part of a separate voluntary commitment that recognizes its unique business model.

But a spokesman for the Retail Council of Canada said he was "underwhelmed" by the scope of the expected change because it would amount to just $100 worth of savings for businesses for every $100,000 worth of credit-card sales.

"In the sense that the trajectory is in the right direction, that part's good," said Karl Littler, vice-president of public affairs.

"We see this as a pretty small step relative to what might have been done."

Littler said there are far lower interchange rates in many other jurisdictions around the world.

The changes, which the government says could help consumers, were unveiled at a Farm Boy grocery store in Ottawa by Finance Minister Bill Morneau and Mary Ng, the new minister for small business and export promotion.

The government says the reductions could help smaller businesses save thousands of dollars over the five-year period — and it is hoping the extra funds will encourage owners to invest, expand and create jobs.

Ottawa expects the lower interchange rates will enable smaller firms to avoid being at a big competitive disadvantage compared to larger companies, which have more leverage in negotiating with credit card firms for reduced fees.

The government also expects consumers to benefit from the changes because the lower costs to businesses will enable them 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.

Morneau announced in September 2016 that an independent audit found that the companies had met their respective commitments. At the time, the government also said it would conduct a review to ensure there was adequate competition and transparency for businesses and consumers when it comes to credit card fees.

Andy Blatchford, The Canadian Press

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© 2018 Abbotsford News. All rights reserved., source Newspapers

Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN EXPRESS COMPANY -0.37% 106.73 Delayed Quote.3.72%
MASTERCARD -1.91% 203.06 Delayed Quote.32.35%
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Financials ($)
Sales 2018 14 954 M
EBIT 2018 8 331 M
Net income 2018 6 456 M
Finance 2018 2 929 M
Yield 2018 0,49%
P/E ratio 2018 33,07
P/E ratio 2019 27,29
EV / Sales 2018 13,9x
EV / Sales 2019 12,2x
Capitalization 211 B
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Mean consensus OUTPERFORM
Number of Analysts 41
Average target price 231 $
Spread / Average Target 13%
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Ajaypal S. Banga President, Chief Executive Officer & Director
Ari Sarker Co-President-Asia Pacific
Richard Neil Haythornthwaite Chairman
Edward McLaughlin President-Operations & Technology
Martina Hund-Mejean Chief Financial Officer
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