Finance Minister Jim Flaherty is putting the final touches on a "voluntary code of conduct" to govern Visa's and MasterCard's entry into Canada's $168-billion debit card market. Flaherty, engaged in intense negotiations with industry stakeholders, is expected to announce the measures in the coming weeks as a complement to his new credit card regulations.
The code of conduct will tackle a number of thorny issues pertaining to both debit and credit, sources said. Those include the priority routing of debit transactions over Visa's and MasterCard's networks; the use of so-called "dual-purpose cards" that have both debit and credit functions; and increased transparency around rates and fees.
"Flaherty is being inundated with complaints about how the card companies plan to process debit transactions. "Visa and MasterCard are in a pissing match over priority routing," said another source."
Visa has said it will allow consumers to choose at the point of sale whether their debit transaction runs over Visa's network or the rival Interac network. MasterCard, meanwhile, has said that if Maestro debit is on the merchant's terminal, the transaction will be priority routed over its network. Consumers would not be given a choice.
Both approaches are flawed, said Jane Savage, president and chief executive officer of the Canadian Independent Petroleum Marketers Association. MasterCard's approach "shuts out" the lower-cost Interac, she said adding Visa's preference fails to treat Interac equally.
Visa, she added, is likely to use the allure of rewards points to get consumers to opt for its network – while merchants are hit with higher fees to pay for those perks. "It scares us, frankly," Savage said.
Dan Kelly, spokesperson for the Canadian Federation of Independent Business, echoed those concerns. "We have a low-cost system based on a flat fee that's the envy of the world. This could be lost within months with Visa and MasterCard's entry into the debit market."
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