Reduce interchange fees to reinforce recovery

Despite being deemed essential, COVID-19 has placed tremendous financial strain on the convenience channel. Our stores have remained open throughout the changing retail restrictions across the country. We have continued to serve communities by ensuring they have access to everyday critical products like gas and grocery. Still, convenience stores are grappling with increased operating costs to ensure the safety of the fewer customers coming through the doors and our employees.

During the current budget season, CICC has not only been reminding senior government officials how our sector has given critical support while coping with added costs and decreased shoppers, but we have also shown governments what recovery can look like. Like many businesses, convenience stores are not looking for a handout–but we do need to make sure our businesses can compete tomorrow.

CICC has been working with partners to create the right environment for governments to consider new ways to introduce new products to stores. That includes efforts in Ontario, Alberta, Nova Scotia and New Brunswick to have beer, wine and other alcoholic beverages introduced in our stores. In the weeks leading up to the federal budget, CICC has strengthened our pitch for recovery-focused interventions, such as removing the interchange fee on the HST and GST component of payments and reducing interchange fees overall.

The issue of interchange fees is not a new challenge for Canadian businesses. However, with a preference for contactless payments, customers are using their credits cards more often and for larger amounts. The rising use of premium cards has made this problem worse for retailers. For many retail member companies, fees paid to credit card companies fall just after their costs for space and labour. We have been strongly advocating for the federal government to fulfill their 2019 election promise to reduce interchange fees. The officials we have met with at the Minister of Finance, Minister of Small Business, and Minister of National Revenue’s offices have all heard how unfair it is that convenience stores are subsidizing the premium credit cards of Canadians while these small businesses struggle to make ends meet. Credit card issuers offer lavish rewards programs to entice customers, and then pass those costs onto retailers through higher interchange fees.

Canada has some of the highest interchange fees in the world, starting at 1.4% for standard credit cards. Canadian customers pay merchants at least $4.5 billion more annually in retail prices than they would if credit card interchange rates were comparable to most of the European Union (generally capped at 0.3%), or Australia (capped at 0.8%). The convenience industry was proud to stand with the federal government as part of a 2018 announcement outlining a 0.1% reduction in fees, following a joint agreement with Visa, Mastercard, and American Express. Ottawa should continue its efforts to reduce interchange fees to help retail businesses like those in the convenience store industry recover and follow the example of Australia whose mandated fee reductions, though small, saved merchants $1.1 billion AUD.  

Our industry collects and remits more than $22 billion in combined federal and provincial taxes each year. Taxes on interchange fees are part of this remittance. Prior to COVID, our members paid more than $216 million in credit card processing fees on GST alone - more than $3,700 per store. We anticipate this number to grow this year. This is a heavy burden, given that collecting HST and GST offers no benefit to our industry.

As more vaccines are getting into more arms, Canadians have their sights set on a post-COVID era where they have more freedom and mobility. Until then, Canadians know that convenience stores are there when they need them. CICC will continue working to make sure governments at all levels hear that message loud and clear, especially as business owners are keen to see what recovery measures are in the federal budget. A fair recovery for essential businesses should emphasize the need to level the playing field for merchants, like c-stores, that have stood by Canadians throughout the pandemic. At the same time, governments will be able to see more revenue staying with small businesses, rather than to the shareholders of big credit card companies. Taking steps to reduce this burden is the right thing to do, and it is needed now more than ever.