The US companies agreed to reduce the average annual interchange rate in Canada by 10 basis points to 1.4% on cards. The new rate takes effect in 2020 and runs for five years. The government estimated that small and medium-sized businesses could save over USD 19,000 over the period.
The agreement follows a similar move in April 2015, when Visa and Mastercard lowered their average interchange rate to 1.5% on Canadian cards in a five-year commitment amid pressure from the federal government.
The change affects Canada’s lenders more than the card companies. Card issuers, which include the banks and credit unions, receive the majority of the swipe fee that’s passed along by the payments-card networks. Lenders use the revenue from those fees to maintain the payments network system, and to pay for loyalty programs and other benefits.
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