Titans clash north of the border

If you have followed the last two posts you have read about effective rates. You may have been wondering what would happen when you believe that the effective rate is too high. Last month we received a lesson in what happens. Walmart has decided to no longer accept Visa cards at its Canadian locations. Why? Walmart believes they are being charged fees by Visa that are “unacceptably high” and thus have stopped accepting Visa on July 18 at its three stores in Thunder Bay, Ontario with the rest of the country’s 400 plus stores to follow suit soon. For now Visa is urging its customers to visit retailers in Thunder Bay that accept their cards, a move that many of those retailers surely welcome and view as turning the tables on Walmart.
This is the latest clash between the two giants. In 2014 Walmart (along with several other retailers) sued Visa and MasterCard claiming that they were conspiring with banks to fix their effective rate to the tune of $5 billion dollars more than they should have paid. This case was settled out of court but Walmart (and others) opted out of the settlement. The next round came earlier this year when Walmart claimed that Visa was conspiring to get higher fees on the new EMV debit cards by making customers enter a signature rather than a PIN, which would then be routed as a credit card purchase rather than as a debit card. Walmart wants the customers using a debit card to be forced to enter a PIN to not only save them (and potentially the consumer) money but to also cut down on fraud. It should be noted that this issue would be irrelevant in Canada as they use chip-and-PIN EMV cards.
The CBC looked into it and found that Visa Canada’s fees were in line with MasterCard’s at least involving independent retailers but found MasterCard offers a lower rate to larger retailers. So, is this just posturing or just the latest tit-for-tat in a line of bad blood? No one really knows just yet, but one thing many experts are saying it that it is going to be painful for both sides. There are also some experts that believe that it is only a matter of time until this happens in the United States. If Walmart is successful it could result in a massive shakeup to the credit card industry. Stay tuned.