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Let competition regulate debit and credit card providers: Visa Canada head


March 31, 2009
By The Canadian Press

March 31, 2009 – Regulatory intervention in the credit and debit card industry "could be
harmful to Canadians," the head of Visa Canada says, as the leading
provider of credit cards prepares to expand into debit cards.

Regulatory intervention in the credit and debit card industry "could
be harmful to Canadians," the head of Visa Canada says, as the leading
provider of credit cards prepares to expand into debit cards.

Debit
cards in Canada are now run only by the not-for-profit Interac
co-operative system dominated by the major banks, and Visa's Tim Wilson
told a Bay Street audience Monday that his organization "can offer
value to consumers and to merchants" by entering the space.

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Visa's
plan has provoked some unease among merchants, with the Retail Council
of Canada and the Canadian Federation of Independent Business worrying
that debit cards, now managed by Interac on a "relatively low" flat-fee
basis, could move to a fee based on a percentage of the purchase, like
the interchange fees levied on credit card transactions.

Visa
debit cards would carry "moderate" interchange fees, unlike Interac,
but "we believe that's necessary to promote innovation and investment
in the system," Wilson told reporters after the speech.

"We just don't believe zero interchange is sustainable as the right model over the long term."

There
currently are no rules blocking Visa or competitor MasterCard from the
debit card business, but Wilson expressed concern that political
pressure could cause "future regulations that would limit competition
and therefore innovation and the value we can deliver to consumers."

In
his Economic Club of Toronto speech, he emphasized the advantages to
merchants of the Visa platform, which he said handles up to 7,000
transactions per second globally and 18 per cent of the consumer
payments in Canada.

He noted that merchants benefit from "speed,
efficiency and – most importantly during these times – guaranteed
payment," as card issuers assume the risk of fraud or non-payment.

Additionally,
he noted, "studies have demonstrated that consumers spend more when
they purchase with credit cards versus with cash."

Moving into
the "firmly entrenched debit monopoly" in Canada, as Visa has done in
most other countries, would help consumers use debit cards to pay bills
and make purchases online, as they now do with credit cards, Wilson
said.

He was vague on timing but indicated after the speech that
Visa Canada will be ready to go with debit card technology by this
autumn.

"There's significant development investment required to
enter this market that can sometimes take one to two years," he told
reporters.

"The exact date of the rollout will depend on the decisions the banks make about when they want to issue cards," he added.

"The
banks themselves recognize the value that the Visa debit product can
provide, and we are in ongoing discussions with many of them."

Asked
why retailers are wary of Visa's involvement in debit, Wilson said his
organization needs to promote "our message about the value of Visa
debit" to small merchants who "really like the Interac product right
now – it's what they're used to."


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