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'To get this right is a massively complicated affair," a spokesman for a Canadian small-business association told The Globe and Mail's Tim Kiladze earlier this week, speaking about efforts to reduce fees charged to retailers by financial institutions on each credit-card transaction.

Well, it is and it isn't.

Interchange, which is the fee in question, can be difficult to understand. But the bigger issue is straightforward. The issue that Canada's Finance Minister, financial institutions and credit-card companies agree is most important is that Canada should become the exemplar of a voluntary roll-back on interchange fees because everywhere else in the world that has turned to regulation has seen results that hurt consumers, merchants and the economy. Canada doesn't need that.

Voluntary action means government and the payments sector avoid potentially costly and disastrous regulation, which is more likely to harm consumers than benefit them. When governments regulated interchange fees in Australia, the United States and the European Union, many valuable customer reward programs were reduced or eliminated, many consumers lost access to credit, and consumers often had to pay surcharges at the cash register. With all that, cost savings from the regulated reductions were not passed along to consumers.

Finance Minister Joe Oliver, following the path of the late former finance minister Jim Flaherty, has said he wants to see a voluntary lowering of interchange fees, in order to avoid the quagmire of unintended consequences other governments waded into.

MasterCard Canada agrees with this approach.

In fact, MasterCard Canada has a proposal before the government right now, with the intention of making changes that keep the system in balance and are fair for all. We can't share the details of our proposal yet, until we are in a position to formally announce it to the marketplace. MasterCard recognizes for some merchants, no reduction will ever be enough. There are those who cling to simplistic assertions that credit and debit should cost the same, when in fact they are completely different transactions – one with credit risk and one without.

Ultimately, MasterCard's role is to balance the interests of all stakeholders: those extending credit, those using it to make purchases and those benefiting from it through their sales. Any one of those stakeholders would probably argue against the interests of another, which leaves MasterCard in the middle as a neutral arbitrator – a role we can play since MasterCard itself receives no money from interchange.

Mr. Kiladze's story mentioned American Express. It might not be bound by any voluntary agreement, certainly not by a unilateral change, meaning it could charge whatever fees it wants, in which case the objective of lowering merchant acceptance costs is not achieved.

Similarly, store-branded credit cards and other payment systems such as PayPal would fall outside a voluntary agreement and could quickly exploit that as a competitive advantage.

A heavier-handed approach by the government would be a mistake, as we've seen in every country that has gone that route.

MasterCard is looking for a solution that is fair to all involved. The government of Canada has been pressing the industry along a thoughtful course to develop a solution that cuts costs for retailers – savings we hope will be passed along to consumers – and maintains a balanced and competitive environment for all that recognizes the benefits Canadians want.

We're looking for a quintessentially Canadian solution – one that demonstrates Ottawa's effectiveness on behalf of small business and consumers, gets merchants the cost savings they say they need in order to keep their costs low, and maintains the business viability the payments sector needs to continue providing the innovation and benefits that Canadians consistently show they want.

For our part, MasterCard Canada is committed to getting to a positive outcome sooner rather than later. It's not easy, but the damage from getting it wrong and the benefits of getting it right will be with Canadians for many years to come.

Betty K. DeVita is president of MasterCard Canada.

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SymbolName% changeLast
A-N
Agilent Technologies
+2.05%147.37
AXP-N
American Express Company
+1.47%227.75
MA-N
Mastercard Inc
+0.24%477.95

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