Government of Canada announces finalized agreements with Visa and Mastercard to lower credit card transaction fees for small businesses
From: Innovation, Science and Economic Development Canada
December 5, 2023 – Ottawa, Ontario
The Government of Canada today announced it has finalized agreements with Visa and Mastercard to lower credit card transaction fees for small businesses. The agreements also protect reward points offered to Canadian consumers by Canada’s large banks.
Small businesses pay fees to process credit card transactions, with the largest component being the interchange fee paid to credit card–issuing financial institutions, such as banks. These new agreements will help more than 90% of credit card–accepting businesses in Canada qualify for lower rates and see their interchange fees reduced by up to 27% from the existing weighted average rate. These reductions are expected to save eligible Canadian small businesses about $1 billion over five years.
For qualifying small businesses, Visa and Mastercard have agreed in the finalized agreements to:
- reduce domestic consumer credit interchange fees for in-store transactions to an annual weighted average interchange rate of 0.95%;
- reduce domestic consumer credit interchange fees for online transactions by 10 basis points, resulting in reductions of up to 7%; and
- provide free access to online fraud and cybersecurity resources to help small businesses grow their online sales while preventing fraud and chargebacks.
Small businesses with an annual Visa sales volume below $300,000 will qualify for the lower interchange fees from Visa, and those with an annual Mastercard sales volume below $175,000 will qualify for the lower fees from Mastercard. Small businesses will need to qualify with each credit card network individually. Non-profit organizations with transaction volumes below these thresholds will also benefit from reduced rates.
As part of these new agreements with Visa and Mastercard, Canada’s large banks have agreed to protect Canadians’ reward points.
The new rates will come into effect in the fall of 2024.
“This is great news for Canadian small businesses across the country, which will collectively stand to benefit from savings of about $1 billion over the next five years. With these new agreements in place, our government is following through on our commitment to support small businesses that are facing higher costs because of inflation and increased interest rates. Reducing costs on small businesses will enable them to further invest in their business and its growth, while helping support their success now and into the future.”
– The Honourable Rechie Valdez, Minister of Small Business
- These new agreements will deliver significant savings for small businesses, as outlined in the following examples:
- Malik and Sebastian own a small local sport store in Edmonton that has $300,000 in annual credit card sales ($200,000 in Visa sales and $100,000 in Mastercard sales). They currently pay $4,000 in interchange fees on these credit card transactions every year. Because of the new agreements secured by the federal government, they are expected to see interchange savings of 27% or $1,080 per year. Malik and Sebastian can use that $1,080 to advertise and grow their business.
- Farees and Hadeel own an independent bookstore in Brampton that has $120,000 in annual credit card sales ($70,000 in Visa sales and $50,000 in Mastercard sales). They currently pay $1,600 in interchange fees on these sales every year. Because of the new agreements secured by the federal government, they are expected to save 27% or $432 per year in interchange fees, which they can use to open a new online marketplace and grow their business.
- The government is also investing in removing systemic barriers faced by diverse entrepreneurs through programs like the Black Entrepreneurship Program, the Women Entrepreneurship Strategy and the 2SLGBTQI+ Entrepreneurship Program, as well as support for Indigenous entrepreneurs.
- In addition, the Canada Digital Adoption Program is helping small and medium-sized enterprises boost their e-commerce presence and digitize how they run their businesses behind the scenes. The program provides funding and expertise to businesses, as well as training and work opportunities for young Canadians.
Director of Communications
Office of the Minister of Small Business
Innovation, Science and Economic Development Canada