MasterCard Canada: Government Regulation of Merchant Fees May Harm Retailers and Consumers

    New survey reveals Canadians are comfortable and confident with credit

    TORONTO, April 22 /CNW/ - MasterCard Canada today told the Senate
Standing Committee on Banking, Trade and Commerce that it strongly believes
additional regulatory management of payment system fees will result in
unintended consequences for both Canadian consumers and retail merchants.
    "Canada's credit card systems are well balanced and managed to maximize
their value to merchants, cardholders and the Canadian economy as a whole,"
said Kevin Stanton, President, MasterCard Canada. "Canada's current regulatory
framework safeguards the interests of all participants, and direct regulatory
price controls will suppress innovation, reduce competition and harm
    MasterCard believes it is unfortunate that the Retail Council of Canada
(RCC) and Canadian Federation of Independent Business (CFIB) have called for
government regulation before providing recommendations to MasterCard.
    When the RCC and CFIB launched their campaigns in September, MasterCard
reached out immediately to both organizations.
    "This issue involves a commercial dispute in the private sector," said
Stanton. "We met with the CFIB, we had a frank discussion, but they made no
    MasterCard and the CFIB have since agreed to meet in early May to discuss
the recommendations the CFIB made to the Senate Committee. MasterCard is
awaiting a response from the RCC to its offer to meet.

    Canadian credit card holders are active and engaged users of their cards

    MasterCard today also released results of a new survey that finds
Canadian credit card holders are active and engaged users of their cards with
strong comfort and knowledge about making best use of credit cards.

    The MasterCard survey found:

    -   More than three quarters (79 per cent) of credit card holders find it
        convenient to pay with a credit card, including almost half
        (47 per cent) who strongly agree.

    -   Two thirds of cardholders (62 per cent) say they would feel
        constrained in their choices as a consumer without access to their
        credit card. However, only 12 per cent say they have left a merchant
        in the past 12 months because they could not pay with their credit
        card, offering comfort to those merchants who would rather not pay
        the costs of credit card acceptance.

    -   Fifty per cent of cardholders say it would be more difficult to make
        regular transactions without a credit card.

    -   A third (32 per cent) of cardholders say they put as many of their
        purchases as possible on their credit card in order to better track
        and manage their finances.

    -   The vast majority (80 per cent) of cardholders say card rewards
        programs provide extra value. Two thirds (62 per cent) of cardholders
        have used their credit card over other forms of payment in order to
        collect reward points.

    -   Cardholders have a good understanding of their obligations when using
        a credit card. Ninety-four per cent say they understand that as card
        owners they are responsible for how the card is used and for the
        charges incurred; 98 per cent understand they have an obligation to
        pay for what they spend; and 96 per cent understand that if they
        don't pay off their balances, they will have to pay interest charges.

    "These survey findings tell us that credit cards remain one of Canadian
consumers' preferred payment methods," said Stanton. "Canadians are
knowledgeable and sophisticated users of credit cards and increasingly opt for
the benefits, convenience and value their credit cards deliver."

    Introducing debit competition in Canada

    Some retail organizations have called upon the Government of Canada to
take action to suppress competition in debit. Today MasterCard told the Senate
Committee how debit competition will benefit merchants and consumers.
    "By promoting market forces over monopoly, Canada's debit system will
begin to deliver enhanced value to consumers and merchants through choice,
price competition, innovation, and international reach," said Stanton.
"MasterCard believes it is well positioned to provide such competition."
    MasterCard reiterates the following key points regarding interchange and

    (for more information:

    -   Canada has a well-functioning payments system that provides
        significant convenience and security to consumers and merchants. It
        has continued to operate effectively and drive commerce despite a
        global credit crisis. More than $240 billion in Canadian commerce is
        expedited on credit card systems annually.

    -   A merchant that processes a credit card transaction enjoys guaranteed
        payment even at a time of increasing consumer default rates.

    -   Merchants benefit from increased sales, improved payment efficiency,
        reduced cash handling, customer convenience and satisfaction, e-
        commerce facilitation, international purchase handling, automatic
        currency conversion and settlement, among other benefits.

    -   Interchange is a fee that passes between acquirers (who handle card
        processing for merchants) and card issuers. Issuers receive
        interchange to compensate them for significant costs and risks borne
        in offering credit cards including interest-free periods, account
        management, credit losses, fraud protection and processing.

    -   MasterCard's Canadian interchange rates remain well below those of
        other developed markets including the United States and below similar
        fees for American Express in Canada. A sampling of other countries
        with higher blended interchange rates than Canada include Argentina,
        Brazil, Germany, Greece, Indonesia, Japan, Philippines, Poland,
        Portugal, Switzerland, Turkey and Uruguay.

    -   MasterCard receives no revenue from interchange.

    -   Consumers do not pay interchange fees nor merchant fees.

    -   Merchants who choose to accept credit cards pay to participate in
        exchange for the benefits received. The fee accounts for the multiple
        benefits received.

    -   Merchants pay a merchant fee established by their acquirer, not
        MasterCard. Interchange forms a portion, but not all, of that
        merchant fee.

    -   MasterCard's 2008 adjustment to interchange rates was the first in
        seven years. Some rates were reduced.

    -   A merchant can obtain his MasterCard interchange rates via This information has been available for more than
        two years.

    -   When interchange was regulated in Australia, it led to reduced card
        benefits to consumers and there is no evidence that retailers passed
        on savings in reduced prices.


    -   MasterCard Worldwide has a PIN-based debit payment solution -
        Maestro(R) - used by more than 652 million cardholders in over
        100 countries.

    -   MasterCard Canada is preparing to expand its global debit processing
        system in Canada where it would deliver compelling benefits to
        Canadian consumers and merchants.

    -   Using Maestro, Canadian consumers could use debit all over the world.

    -   Accepting Maestro means Canadian merchants could accept international
        travelers' debit cards.

    -   MasterCard will provide technological advancements including greater
        security and fraud protections, innovations like PayPass(TM)
        contactless payment, e-commerce payment capacity, and mobile

    -   MasterCard operates a global debit infrastructure with centralized
        operations that run 24/7. The system delivers significantly greater
        scale than Canada's incumbent debit network. It has had zero downtime
        in more than seven years.

    -   MasterCard will create competition in the Canadian debit market where
        it has never existed.

    About MasterCard Worldwide

    MasterCard Worldwide advances global commerce by providing a critical
economic link among financial institutions, businesses, cardholders and
merchants worldwide. As a franchisor, processor and advisor, MasterCard
develops and markets payment solutions, processes approximately 21 billion
transactions each year, and provides industry-leading analysis and consulting
services to financial institution customers and merchants. Through its family
of brands, including MasterCard(R), Maestro(R) and Cirrus(R), MasterCard
serves consumers and businesses in more than 210 countries and territories.
For more information go to

    This report presents the findings of a telephone survey conducted by
Environics Research Group among a national random sample of 1,001 adults
comprising 500 males and 501 females 18 years of age and older, living in
Canada. The margin of error for a sample of this size is +/- 3.10%, 19 times
out of 20. Interviewing was completed during the period April 5 - 8, 2009.

For further information:

For further information: Julie Wilson, MasterCard Canada, (416)

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