Will we be out of the woods with the passage of Bill C-9? If only it were that straightforward....
I stood at Minister Flaherty's side when he announced the code of conduct, because our members believe the code will go a long way towards providing greater cost certainty. I did so in the full expectation that the code is but the first step and that ultimately regulation will be required.
Retailers have long experience with card company practices, both here and abroad. Already we're seeing some disquieting signs. Some players have been signalling that they intend to delay their acceptance of the code, while others have been pushing merchants to lock in the new contracts before the code takes effect.
More troubling still is that while the government has taken steps to level the playing field and create downward pressure on fees in the debit world, fees in the credit world continue to rise for our members.
One example is the emergence of a new so-called super premium card, which carries fees as high as 3%. With low single-digit profit margins, a 3% fee can take a devastating bite out of merchants' profitability. What we are seeing is a concerted drive by some players to undermine the intent of the code by switching the emphasis over to credit and away from debit.
This was brought home to me recently at the atrium at Toronto's Eaton Centre, in exactly the spot where the Minister of Finance made his announcement less than four weeks ago. Two weeks later, the atrium was taken over by half a dozen peppy salespeople for one of the major banks, along with a dozen instant sign-up screens, all pushing the use of their 2% cashback card.
As you will see from the page we will be circulating later, the pitch is to get people to put daily purchases on their credit cards, items bought at drug stores, grocery stores, and gas stations, all things that people would typically pay for with debit or cash. What is clear is that if the code's new rules on debit cards won't give issuers and card networks the high fees they were hoping for, these actors will steer consumers to use credit cards instead, and they will introduce even more expensive credit products.
From the merchant perspective, the voluntary code will be successful if--and only if--all the players in the card payment system accept the code's underlying principles and do not attempt to sidestep them by other means. We are encouraged by the minister's clear statement that non-compliance will be met with regulation. It would suggest that one very important measure of compliance must be that those who had hoped to drive up fees on debit transactions do not compensate by extracting ever higher amounts from credit transactions.