Q&A with Corinne Pohlmann

Tell us more about the recent credit card changes for small businesses.

As of October 19, lower interchange fees for small businesses took effect after the federal government reached a deal with two major credit card companies. Both Visa and Mastercard have reduced their interchange fees by up to 27%, a move that will benefit the majority of small businesses.

Who qualifies? Small businesses with up to $300,000 in annual Visa sales and $175,000 in annual Mastercard sales can be eligible for a 0.95% average interchange rate for in-store sales. 

Depending on the type of card, businesses may see savings of $300-400 per $100,000 in Visa transactions, and about $200 per $100,000 in Mastercard transactions.

What about fees when you pay with a credit card online?

The most recent Visa and Mastercard reductions did include, for the first time, an e-commerce rate reduction of 0.1%. This should save merchants $100 per $100,000 in sales. It’s not much but it’s progress.

How does the credit card industry work?

Credit card fees are split between three major players: the largest portion goes to the bank that issued the card, another share to a payment processing company that enables transactions such as Chase or Moneris, and a small share to a credit card company such as Visa or Mastercard.

Small businesses are on the hook for high fees every time a customer pays with a credit card. And if a business accepts a premium card or corporate card, those fees can jump even higher. That’s why we encourage Canadians to pay by debit or cash instead. 

Will all small businesses see the cost savings?

Ahead of the October 19 implementation date, we reached out to over a dozen major payment processors asking if they’re planning to pass on fee reductions to small businesses. Several of them, such as Chase, have committed to the implementation.

Some players, like Shopify or Square, weren’t as quick to jump on board but did so after CFIB’s public advocacy efforts.

However, as of mid-November, a huge ecommerce player Stripe, along with Lightspeed and FreshBooks, have not yet committed to passing on the savings to small businesses. This is disappointing, especially as the federal government made it clear that it expects all members of the credit card industry, including payment processors, to play by the rules. CFIB is pressuring these companies and the government to change course and offer the reductions to their clients.

With the rise in credit and debit card use in recent years, are there any implications for small businesses?

Payment fraud and information security are some of the biggest challenges related to payment processing. Fraudulent payments and chargebacks (when customers dispute transactions) can cause great stress and lead to financial losses. 

Cybersecurity attacks are also quite prevalent targeting big and small businesses alike. In fact, our research has found that with the rise in artificial intelligence, an overwhelming majority of business owners are worried that fraud will become more sophisticated and harder to detect.

Investing in employee training and security awareness, regularly updating software, and implementing stricter verification processes for payments are just some of the measures small business owners can take to keep their workplace secure.

Governments also have a role to play in helping small businesses protect themselves from fraud, including enhancing the Code of Conduct for the Payment Industry so there’s a better process for merchants to challenge chargebacks. 

What type of emerging trends do you foresee for the payments industry?

Credit card fee reductions are a welcome step, but we will continue encouraging the payments industry to increase the thresholds to allow more small firms to qualify for the cost savings. 

Open banking also has big potential, with a significant impact on small businesses. I doubt that many small business owners are aware of what open banking is, and I suspect many will be initially reluctant to jump on board and share their data. If Canada were to implement this system, it needs to be accessible and easy to understand. Overall, we support the idea of open banking as it could lead to innovation and competition among existing players and hopefully reduce costs and provide more options for small businesses.