Credit cards are seen in Montreal on December 12, 2012. Industry groups say small businesses are being hammered by high credit card fees on online purchases as the shift toward e-commerce continues amid the second wave of the COVID-19 pandemic. THE CANADIAN PRESS/Ryan Remiorz

Credit cards are seen in Montreal on December 12, 2012. Industry groups say small businesses are being hammered by high credit card fees on online purchases as the shift toward e-commerce continues amid the second wave of the COVID-19 pandemic. THE CANADIAN PRESS/Ryan Remiorz

Small businesses feeling the pinch of credit-card fees as e-commerce ramps up

The rise in e-commerce sales ‘inevitably squeezes out cash’ from vendors

Industry groups say small businesses are being hammered by high credit-card fees on online purchases as the shift toward e-commerce continues.

Visa and MasterCard reduced the fees they collect from businesses to an average annual rate of 1.4 per cent from 1.5 per cent under an agreement with Ottawa that took effect last year. But the fees remain higher than in many Western countries, particularly for online transactions, trade organizations say.

The Canadian Federation of Independent Business says the proportion of its 100,000 members that rely on online purchases has doubled to 40 per cent since March, when lockdowns to fight the COVID-19 pandemic shuttered storefronts across the country.

“Smaller companies tend to pay higher fees than large companies do, because they don’t have the volumes,” said CFIB vice-president Corinne Pullman.

She said “there’s no doubt” digital rates should come down, and that fees should be clearer and more transparent for merchants.

While Visa and Mastercard’s overall annual rates sit at about 1.4 per cent in Canada, fees vary by transaction depending on factors that range from business type to whether a PIN code was used.

The rise in e-commerce sales “inevitably squeezes out cash” from vendors, who would otherwise draw more revenue from cash or debit transactions, said Retail Council of Canada vice-president Karl Littler.

“Mastercard did a deeper drop for those in-store transactions, but concurrently hiked the amounts for their online,” he said, referring to recent fee adjustments. “And obviously that has implications given the odd outcomes that COVID has created.”

Online retail sales rose 116 per cent to $3.91 billion in May from $1.81 billion a year earlier, according to Statistics Canada. They were up 68 per cent year over year to $3.07 billion in October, the last month for which figures are available.

Even sharper spikes are likely in more recent months amid the second wave of the pandemic in Canada, prompting heavier reliance on credit-card payments.

The CFIB and the retail council are calling on the federal government to negotiate lower fees from credit-card firms.

Finance Department spokeswoman Anna Arneson said the government “will continue to work closely with small businesses to ensure they have the support” during the pandemic, but cited no plans to bring credit-card firms back to the table.

Visa said e-commerce transaction rates are “lower than they have ever been,” with steeper rate reductions for various small businesses such as restaurants and variety stores.

Mastercard says it is committed to its voluntary agreement with Ottawa that established the 1.4 per cent average rate.

Werner Antweiler, a professor at the University of British Columbia’s Sauder School of Business, said merchants “generally hate the premium cards” in particular due to “excessively expensive” processing fees.

“In a world of digital commerce, the idea to pay two to three per cent on each transaction is a kind of tax, when in fact the transaction has only minimal costs that are nowhere near these amounts and are in fact independent of the transaction volume,” Antweiler said.

The average rate reduction to 1.4 per cent from 1.5 per cent would amount to just $100 worth of savings for businesses for every $100,000 in credit-card sales, according to the retail council.

One goal of the lower rates was to enable smaller firms to avoid a big competitive disadvantage compared to larger companies, which have more leverage in negotiating for reduced fees.

The government has also said the reduction could help consumers because businesses will be able 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.

A Finance Department review of the credit-card code of conduct is ongoing.

Christopher Reynolds, The Canadian Press

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

The aftermath of Thursday morning’s car crash at Greenwood’s Deadwood Junction, Jan. 14. Photo courtesy of Midway RCMP
Midway RCMP looking driver who left crash outside Greenwood café

Cpl. Phil Peters said Mounties were called to the scene early Thursday morning, Jan. 14

A woman wearing a protective face mask to curb the spread of COVID-19 walks past a mural in Victoria, B.C., on Monday, Dec. 7, 2020. THE CANADIAN PRESS/Marissa Tiel
115 new COVID-19 cases, no new deaths in Interior Health

There are now a total of 4,970 cases in the region

Defence counsel for the accused entered two not guilty pleas by phone to Grand Forks Provincial Court Tuesday, Jan. 12. File photo
Grand Forks woman pleads not guilty to assaulting peace officers

The alleged assaults took place in March 2020

Powell River man pleads guilty to sexual interference of a minor in Grand Forks

The man is awaiting sentencing pending a psychological assessment

A woman wears a face mask and shield to curb the spread of COVID-19 while walking in North Vancouver, B.C., on Wednesday, January 6, 2020. THE CANADIAN PRESS/Darryl Dyck
536 COVID cases, 7 deaths reported as B.C. find its first case of South African variant

Henry said 69,746 people have received their first dose of the COVID vaccine.

Alan Davidson was sentenced to almost six years for abusing seven boys in the late 1970s and early 1990s. (Canadian Press file)
Full parole granted to former Mountie, sports coach convicted of sex abuse of boys

Alan Davidson convicted of abusing boys in B.C. and Saskatchewan in late ’70s, early ’90s

The first COVID-19 vaccine arrives in B.C. in temperature-controlled containers, Dec. 13, 2020. (B.C. government)
More vaccine arrives as B.C. struggles with remote COVID-19 cases

Long-term care homes remain focus for public health

The first Pfizer-BioNTech COVID-19 vaccine dose in Canada is prepared at The Michener Institute in Toronto on Monday, Dec. 14, 2020. THE CANADIAN PRESS/Frank Gunn
Doses of COVID-19 vaccine expected in 60 B.C. First Nations by next week

B.C. has allocated 25,000 doses of COVID-19 vaccine to First Nations for distribution by the end of February

Kamloops-South Thompson MLA Todd Stone questions the NDP government in the B.C. legislature, Feb. 25, 2020. (Hansard TV)
Todd Stone says he’s not running for B.C. Liberal leadership

Kamloops MLA was widely viewed as a front-runner

Wireless voice and data services are out for those on Telus as of Thursday (Jan. 14) afternoon across Western Canada, Telus Support said in a recent Tweet. (Black Press file photo)
UPDATE: Telus services restored across Western Canada

Telus said they are monitoring the situation to ensure connections remain stable

Screenshot from video.
2 students arrested in assault of transgender girl at Lower Mainland school

Mother says daughter was targeted because of how she identifies

Constable Ken Jaques broke a window and crawled into a home to rescue an elderly man who had be laying on the floor for days. Jaques was the officer who provided oversight for the 2020 Remembrance Day services and is shown here in a picture with his son. Photo Andrea DeMeer
Senior who fell and spent days lying on floor of home saved by Princeton cop

He broke the glass and crawled into the house, while calling for assistance from BC Ambulance

Luke Marston works on the seawolf mask for Canucks goalie Braden Holtby. (Mike Wavrecan photo)
B.C. Coast Salish artist designs new mask for Canucks goalie

Braden Holtby’s new mask features artwork by Luke Marston inspired by the legend of the seawolf

Most Read