Credit card fees appear to have finally reached a breaking point for one major retailer. After months of talks stalled, Walmart’s Canadian branch took a first step in what may possibly result in the phasing out of Visa as a payment option at its 400 stores throughout the country. Walmart Canada has already stopped taking Visa cards in three separate stores in Thunder Bay, Ontario.
Walmart Canada indicated in a statement on its web site on July 11 that the interchange fees associated with Visa credit card purchases remain “unacceptably high.” Walmart says the fees it pays Visa in Canada are four times higher than in other countries. Walmart’s U.S. stores work under a different agreement with Visa, and are not affected by the dispute.
The significant number of retailers that opted out of the initial deal — including Walmart (HQ), Amazon and Target — reveal that if these Tier 1 merchants did not feel they were properly compensated by the credit card companies, there’s very little chance any small businesses would feel that way either. (The National Retail Federation was no fan of the original decision and cheered when it was overturned.) Many small businesses often establish credit or debit card minimums for their customers so that the interchange fees don’t take too large a portion of a small transaction.
So even though the $7.25 billion payout seemed enormous at first glance, the vast majority of retailers that joined in the suit likely felt underrepresented, especially if many weren’t going to actually get paid from it.
Since Walmart Canada presently pays more than $100 million CAD (approximately $78 million USD) in annual credit card fees, the decision to say "no" to a major credit card provider may actually be not just a bold, but a valid move from a pricing standpoint. Unlike its parent company, which needs to balance a healthy partnership with Visa with ferocious legal battles going on at the same time, Walmart Canada can slowly shift to phase Visa out of its portfolio and focus on other payment methods for its customers.
Dropping Visa is certainly not a common move by any stretch, especially given the credit card network's dominance worldwide. But as interchange fees continue to drive up prices, brands may need to continue to take action if credit card companies aren’t willing to budge on a cheaper alternative.
- Google Launches Multi-Touch Point Shopping Platform In India
- Walmart Launches E-Commerce Site In Japan With Rakuten
- Walmart Expands Home Products Footprint With Art.com Acquisition
- Klarna And Shopify Partner To Increase Global Payment Options
- Walmart Harnesses Apps And AI To Fuel Associate Efficiency