An open letter to Visa Canada

In the wake of Visa Canada's proposed fee hikes, president of The Alliance of Beverage Licensees (ABLE BC) Ron Orr wrote an open letter to Canada's leading payment card program, raising his concerns.

"Higher processing fees will only lead to higher prices for consumers because business owners cannot afford all of these increases, especially at the same time," expressed Orr in his letter, highlighting Visa's $1.66 billion net income, and its planned fee increase of six to eight basis points (1/3 increase).

"It’s a very big deal for small businesses," Ian Baillie, executive director of ABLE BC, said to the Vancouver Observer.

Visa is looking to take more from small business and consumers when they can’t afford it—do they really need to make more than 1.66 billion a quarter?"

What this news means for small businesses, and the consumer:

  • The small businesses' already small profit margins will be further reduced because of excessive processing fees. Ninety-two per cent of all credit card transactions in Canada are handled by Visa or MasterCard, adding up to about $322 billion in 2011 and the fees that Canadian merchants are charged to process credit card transactions are among the highest in the world, according to  CBC News article on the topic, forwarded to us by Baillie.

  • It directly impacts the consumer because the increase is so large that the prices will need to go up.

"We are nearing a point where small businesses will hit the breaking point and won’t be able to afford to take credit cards from our patrons," wrote Orr.

Baillie went on to explain the one-sided un-logic of the suggested fee increase, citing Kent Thomson, the lead counsel for Canada's competition watchdog, who Baillie said told the tribunal in Ottawa on Tuesday that the system of fees charged when retailers allow consumers to pay with credit cards goes against competition rules and adds up to $5 billion in fees for the credit card industry annually.

"It’s simply unfair to burden small businesses and consumers when Visa made 1.66 billion in their last quarter. Clearly, their business is not struggling unlike many small businesses in BC and in particular many of our members in the pub and liquor store business," said Baillie.

"Small businesses operate on profit margins and clearly Visa has a fat bottom line. ABLE BC members employ tens of thousands or British Columbians across our province and the money Visa is proposing to charge those businesses might make the difference between a profit or a lost, or the business being able to hire additional workers or support their local community charities."

Please find below Orr's complete letter:

November 21, 2012

Mr. Jim Allhusen
President and Country Manager
Visa Canada Corporation
Scotiabank Plaza
40 King St. West, 37th Floor
Toronto, Ontario M5H 3Y2

Dear Mr. Allhusen:

I’m writing today on behalf of The Alliance of Beverage Licensees (ABLE BC)—the industry advocate for issues affecting Liquor Primary and Licensee Retail Stores throughout British Columbia.

It is with great concern that our members are learning that Visa is planning on raising fees that will directly affect their businesses and patrons. I note with interest that Visa’s net income for the three months ended Sept. 30 climbed 89 percent to $1.66 billion, or $2.47 a share, from $880 million, or $1.27, a year earlier. With this kind of economic performance, it seems hard to justify the proposed rate increase at this time. The reality is Visa’s business is not suffering; however, the same cannot be said for many small businesses, including ABLE BC members, here in British Columbia. It simply defies justification at this time of struggle for small business owners why Visa would see any need or justification for a further increase in fees.

In today’s uncertain economy, small businesses cannot afford the increase in processing payments, especially not along with the new premium cards Visa is introducing and increased rates on foreign cards.  Higher processing fees will only lead to higher prices for consumers because business owners cannot afford all of these increases, especially at the same time. These increases are something that will not only have a negative impact on our businesses and patrons, but your customers as well. 

The increased rate on foreign cards by 40 basis points is also very excessive. Tourists are a significant base of customers for many ABLE members, while other members are completely dependent on them.  In addition, the increasing use by consumers of affinity cards that are charged a higher processing rate, has significantly increased  the fees small business incurs to simply accept credit cards.

We are nearing a point where small businesses will hit the breaking point and won’t be able to afford to take credit cards from our patrons. I hope that it has become clear to you that we are not just dealing with an increase in rates here, but the direct impact on a small business’s ability to sustain itself.  These rates are coming at a time when Visa does not need the extra profits, but small businesses, over 70% of whom use Visa for business purchases, are struggling.  I hope you will reconsider Visa’s proposed changes to processing fees.

Sincerely,

Ron Orr, President

Alliance of Beverage Licensees

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