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

RCMP crest. (Black Press Media files)
Head-on collision Jan. 14 claims one life west of Fort St. James

Jenkins said alcohol, as well as road surface conditions, have been ruled out as factors

Brenda Gouglas. (Submitted photo)
Gouglas and Miller running for seat on Fort St. James council

By-election is being held with advance voting opening Jan. 20

Cedar Valley Lodge, LNG Canada’s newest accommodation for workers at the LNG Canada Project site in Kitimat. The most recent outbreak among workers at the project site was just declared over. (Photo courtesy of LNG Canada)
Second COVID-19 outbreak at LNG Canada Project site declared over

The outbreak was first declared on Dec. 16, 2020

A scene from “Canada and the Gulf War: In their own words,” a video by The Memory Project, a program of Historica Canada, is shown in this undated illustration. THE CANADIAN PRESS/HO - Historica Canada
New video marks Canada’s contributions to first Gulf War on 30th anniversary

Veterans Affairs Canada says around 4,500 Canadian military personnel served during the war

Canada released proposed regulations Jan. 2 for the fisheries minister to maintain Canada’s major fish stocks at sustainable levels and recover those at risk. (File photo)
New laws would cement DFO accountability to depleted fish stocks

Three B.C. salmon stocks first in line for priority attention under proposed regulations

Trees destroyed a Shoreacres home during a wind storm Jan. 13, 2021. Photo: Submitted
Kootenay woman flees just before tree crushes house

Pamala DeRosa is thankful to be alive

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Gin, one of the Kantymirs’ two sheep. (Martha Wickett-Salmon Arm Observer)
Sheep start up ATV, sit in cars and go for walks in Salmon Arm

Until they bought two sheep, Ken and Karleen Kantymir didin’t realize just how social the animals are

Heather Lucier, a pastor at Kelowna Harvest Fellowship, speaks to an RCMP officer outside of Harvest Ministries on Sunday, Jan. 10. (Michael Rodriguez - Capital News)
Kelowna church fined 2nd time for violating public health order

Harvest Ministries in Kelowna has previously said they will fight the tickets in court

Powell River-Sunshine Coast MLA Nicholas Simons was appointed to the NDP cabinet as minister of social development and poverty reduction after the October 2020 B.C. election. (Hansard TV)
B.C. job training fund increased for developmentally disabled

COVID-19 has affected 1,100 ‘precariously employed’ people

B.C. driver’s licence and identity cards incorporate medical services, but the passport option for land crossings is being phased out. (B.C. government)
B.C. abandons border ID cards built into driver’s licence

$35 option costing ICBC millions as demand dwindles

sdf
2nd in-school violence incident in Mission, B.C, ends in arrest

RCMP notified of local Instagram page with videos (now deleted) showing student assaults, bullying

Most Read