A lot of things are changing in Canada’s financial sector. Finance Minister Bill Morneau has made a major announcement. Three payment card networks are collaborating on lowering costs for SMEs. A very positive development for the industry, assuming it will work as advertised.
Lower interchange fees are a blessing for businesses in any country. It allows for more investment options, growth opportunities, and creating more jobs. Especially this latter part will become more important as the financial industry continues to evolve as a whole. It is good to see all of these changes come to Canada at such a crucial time.
Canadian SMEs Stand to Benefit a lot
It is not too common for the major payment card networks to agree on a joint strategy. Visa, Mastercard, and American Express will reduce their interchange fees in the near future. The average will be lowered to 1.4% for the next five years. It is an important step toward creating a more competitive ecosystem for all Canadian SMEs.
It is expected these changes will result in saving $250m per year for Canadian SMEs. That is a steep figure. It also shows how much money is “wasted’ on these outdated fee structures first and foremost. An SME with a credit sale rate of $5m per year will see a 10 basis point reduction in interchange fees. Over the next five years, that will help save close to $25,000.
The Finance Minister is quite pleased with this agreement. It remains unclear if it will be extended after the five-year period comes to an end. For Canadian SMEs, this is a very positive development which gives the local economy some breathing room for growth. One can only hope such lower interchange fees make their way to other countries in the near future.