http://www.theglobeandmail.com/report-on-business/divisions-over-credit-debit-card-code-of-conduct/article1434135/
"The most controversial part of the code, based on recent talks and submissions to the government, is one that would give retailers the ability to choose which types of debit cards they'll accept. In cases where one debit card is configured so that it could be used on two networks (such as the Interac network or the Visa network), the merchant will be allowed to route the sale over the network that charges it the lowest fee."
Oh, the merchants debates to process payment at the lowest fee. What about the consumers?
"The code of conduct was first proposed by the Canadian Federation of Independent Business (CFIB), which feared payment costs would rise once the credit card giants break into the debit market. MasterCard already has some debit cards in the market, while at least one major bank has delayed the launch of Visa debit cards as it awaits clarity from Ottawa."
Well, consumers, look again. Do you need control on the processing fee? I mean, do you really care about the processing fee today? In the old day, credit card processors charge merchants at a fixed percentage fee. Nowadays, most of the big processors only take a small processing fee and pass the interchange charge back to merchants. While the processing fee is fixed, the interchange fee is vary depending on the card you use (ie. personal, corporate, international), the transaction amount (ie. small ticket) and identification method (ie. signature or PIN). For sure the cost on interchange fee may be passed back to consumers depending on the elasticity of the product, but do you pay the same level of attention when the players are spending big bucks in advertisement?
You are misled, people! The key change to consumers is not on the control of processing fee. The question is whether you can get your credit card at all! We can see the same thing happen in the US.
You may think that U.S. has the best credit card products with lowest promotional interest rate as their advertisements are everywhere. In fact, at least in my opinion, they are only interested to get those who can afford the interest payment but not bankruptcy on board to generate profit in the credit card business. (check out the documentary movie: Maxed Out) Don't get me wrong. They are not VISA or Mastercard, but the banks who get you on board by offering free t-shirts and pokers. Many Americans with good credit history cannot get a credit card for two reasons: they are not the target customers, which we have just talked about; and the banks do not lose any business because all bank cards are bundled with debit credit processing.
In Canada, you only see the Interac logo on your bank card. It means you can use it to make debit payment. In the U.S., most, if not all, bank cards have the credit card logo on them. It is what the news is about. Visa and Mastercard want to be bundled with your bank card and process your debit payments. That's the key change to everyone of us. Nowaday, credit card companies have to compete to get more people to use their credit card products. In the future, you are bundled to use their debit product with your debit card and you will be selected to be their premium credit product customers under their "strategic" qualification criteria. If you are in the retail business like mine, you can see how many people are processing their debit payment through the VISA/Mastercard interchange in the U.S.
It is nothing new and has nothing wrong. It is normal market consolidation which will eventually create efficiency, meaning lower processing fee, in the market. In the meanwhile, fasten your seatbelt and prepare for the roller coaster ride: don't be surprise when you don't get your credit limit increase with your good record of credit history. You are not their cup of tea!
