Economic News/Trends and Analysis — June 30, 2009

MasterCard Welcomes Senate Committee's Rejection of Price Controls and Support of Debit Competition

    But company cautions some recommendations will have negative impact on
    consumers

    TORONTO, June 30 /CNW/ - MasterCard Canada welcomes today's decision by
the Senate Standing Committee on Banking, Trade and Commerce to reject retail
lobbyists' calls for price regulation on credit card payment systems-an
approach that would have resulted in consumers' paying the price for
merchants' credit card acceptance.
    MasterCard also welcomes the Committee's support of competition in
Canadian debit. Both recommendations will serve the best interests of
consumers and merchants.
    "The Senate Committee clearly recognized that price controls are
inappropriate and would harm consumers," said Kevin Stanton, president,
MasterCard Canada. "Australia continues to provide an excellent example of how
such price controls reduce consumer credit card program benefits, and result
in no appreciable decrease in the price of goods and services."
    When Australia regulated the fees merchants pay for credit card
acceptance in 2003, retailers simply pocketed the windfall. Other consequences
of these price controls included:

    -   Consumers' credit card fees and interest rates went up;
    -   Some credit card issuers had to stop doing business, so competition
        and consumer choice was reduced;
    -   Merchants charged consumers extra for using credit and debit cards,
        even though merchants' fees went down; and
    -   Consumers' credit card benefits and rewards had to be reduced or
        disappeared entirely.

    MasterCard also applauds the Senate Committee for recognizing the
benefits to consumers and merchants of introducing competition in the Canadian
debit market.
    The Senate's recommendation of a flat-fee pricing model aligns with how
MasterCard's Maestro debit product is already priced.
    "MasterCard's Maestro debit solution is flat-fee based and is less
expensive to merchants than Interac and will provide significant benefits for
consumers, not the least of which is the ability to pay by debit in countries
around the world," said Stanton. "It is time for a new era in Canadian debit."
    MasterCard cautions that some other Committee recommendations will result
in unintended negative consequences for consumers and small merchants in
particular.
    The recommendation on surcharging-allowing merchants to charge consumers
extra for purchases made on a credit or debit card-essentially asks consumers
to bear the merchant's operational costs, and could lead to the type of
opportunistic surcharging being levied by merchants at the point of sale in
Australia.
    Similarly, the Committee's recommendation on honour-all-cards practices
will create risk, confusion, delay and difficulty for both consumers and
merchants at the point-of-sale.
    "Consumers expect to be able to pay with their card of choice wherever
the brand is displayed," Stanton said. "Arbitrary acceptance by merchants will
create significant risk, unpredictability and confusion at the point-of-sale
for both retail staff and consumers, and could lead to the possibility that
some credit cardholders will be unable to pay for their purchases."
    The recommendation on priority routing of debit payments will take the
technical routing decision out of the hands of the parties-merchants and
issuing banks-paying for the transaction. Specifically, the Senate's
recommendations on priority routing will favour the incumbent debit monopolist
and will in effect reduce competition in debit. It will also inject the very
operational complications and costs the retail lobby was seeking to avoid in a
competitive debit market. It will also result in no benefits and unnecessary
confusion for consumers, who do not pay for debit transactions.
    MasterCard Canada appreciates the opportunity provided by the Senate
committee to participate in the comprehensive examination of Canada's credit
and debit payments system and recognizes it has a role to play in promoting
greater transparency and education to Canadian merchants. It has a number of
initiatives underway to meet this need, including developing model
disclosures, and small merchant education materials.

    About MasterCard Worldwide

    MasterCard Worldwide advances global commerce by providing a critical
economic link among financial institutions, businesses, cardholders and
merchants worldwide. As a franchisor, processor and advisor, MasterCard
develops and markets payment solutions, processes approximately 21 billion
transactions each year, and provides industry-leading analysis and consulting
services to financial institution customers and merchants. Through its family
of brands, including MasterCard(R), Maestro(R) and Cirrus(R), MasterCard
serves consumers and businesses in more than 210 countries and territories.
For more information go to www.mastercard.com.

For further information: Jennifer Reed, MasterCard Canada, (416)
365-6664, jennifer_reed@mastercard.com

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