Checks are back as small businesses try to avoid high credit card transaction fees: Bank of Canada

Checks are back in popularity as small businesses look to offer more payment options to avoid the high transaction fees associated with accepting credit cards, according to a Bank of Canada study.

“Merchants mentioned accepting a wider range of payment methods as they need to make sales and similarly cater to a wide range of consumer payment preferences,” the report, entitled: says.2021–22 Merchant Acceptance Survey Pilot Study(MAS), published on 4 January.

As first reported by Blacklock’s Reporter, the survey, conducted over the phone among 488 merchants with fewer than 50 employees and not part of a chain or franchise, found that these retailers’ I noticed that the check was revived in .

“Check acceptance increased to 54% in 2021-22 compared to the 2018 MAS survey results (34%), but remains below retailer survey levels in 2015 (64%).” said a survey conducted in the fall and spring of 2021. 2022.

Check usage was highest in Atlantic Canada at 70%, followed by Great Plains (67%). Ontario and Quebec were tied at 54%, but British Columbia was the exception, with a higher than average check acceptance rate (41% in 2018), which now ranks last at 37%. I’m here.

Business owners told the central bank that cash was still “the fastest and most reliable payment method with the lowest fees,” but credit cards had the worst ratings (fees) compared to cash and debit cards. was the highest).

Swipe fee regulation

In 2021, the Federal Ministry of Finance will Start online consultation Regarding the regulation of credit card exchange fees. The law has not yet been enacted.

The Financial and Consumer Agency of Canada also launched a voluntary “Credit and Debit Card Industry Code of Conduct” ever since 2010urges card issuers to increase transparency and disclosure when changing transaction rates.

Countries that regulate credit card fees include: Australiacentral bank imposed a cap of 0.5% on Visa and MasterCard interchange fees in 2003.of European Union This was followed in 2015 by the adoption of the Interchange Tariff Rule, which capped the toll at 0.3%.

Clearly Payments is a Vancouver-based payment processor, State on its website The interchange rate for Classic Visa cards is 1.25%, while for Basic Mastercard it is 0.92%.

According to Blacklock’s Reporter’s findings, Visa and MasterCard, which process 94% of all credit card transactions in Canada, collect an estimated $5 billion in fees from retailers annually.

Bloc Québecois MP Alexis Brunelle-Duceppe introduced Bill C-243, An Act To Amend The Payment Card Networks Act, to Congress. July 2020has called for mandating federal regulation of swipe fees.

“The purpose of this bill is to regulate interchange fees, which have been negotiated behind closed doors in banks for too long,” said Brunel Duceppe.

“SMEs [Small and Medium-Sized Enterprises] Especially during COVID, we are more than ever dependent on our credit card companies for nothing. ”

Gary Sands, senior vice president of the Canadian Association of Independent Grocers, testifying before the Commons Finance Commission in June 2020: Said Tight profit margins of around 1.5% for some small businesses were squeezed by swipe fees.

Minister of Finance Chrystia Freeland 2022 Autumn Economic Statementthe federal government has begun negotiations with credit card companies, banks, payment processors, and businesses to “ensure small businesses in a way that does not harm other businesses and protects consumers’ existing reward points.” We will reduce credit card transaction fees.”

“If the industry does not reach an agreement in the coming months, the government will implement this legislation at the earliest opportunity in the New Year to proceed with regulation of credit card transaction fees,” Freeland said in a statement. November 3rd.

“No economic justification” to regulate

Jack Carr, emeritus professor of economics at the University of Toronto, has a different take.In testimony before the Commons Fiscal Commission June 2009he argued that the arguments of those who said exchange fees were detrimental to the interests of merchants were “flawed.”

“The first drawback is that merchants benefit from payment card systems,” says Carr.

“They are increasing sales and increasing convenience. When people shop using credit cards and make larger purchases, it brings in new types of purchases and lower transaction costs. Because sales increase, merchant sales increase.”

The professor compared swipe fees to labor costs.

“When I go and put gas in the car, they don’t need that many employees because I pay for it myself. I put the card in the machine. If everyone paid cash, It’s a huge line-up, and merchants don’t have to hold cash balances, which are typically costly.”

He added that cost-based regulation has no economic justification.

“Cost is one factor, but it is not the only factor. I can’t explain the benefits of each.”

“The third drawback is that retailers are not forced to accept credit cards as a payment method,” he said.

Isaac Theo

Isaac Teo is a Toronto-based reporter for the Epoch Times.