Wal-Mart cancels Visa service in Thunder Bay stores

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Wal-Mart Canada Corp. followed through on its threat to terminate the use of Visa Inc. credit cards in three Thunder Bay locations amid a dispute over service fees.

The retailer is threatening to do the same in its 405 stores across the country if Visa refuses to lower its transaction charges, although a specific time frame has yet to be provided.

Wal-Mart has cited "unacceptably high" interchange fees, noting $100-million in annual credit-card expenses it pays.

The bottom line, says Alex Roberton, director of corporate affairs at Wal-Mart, is to save Canadians money.

"We work very hard to take costs out of the business and operate as efficiently as possible so we can keep our prices as low as possible," Mr. Roberton said. "Every penny we save on credit-card fees allows us lower prices for our customers."

Visa had the largest share of the Canadian credit-card market by purchase volume in 2015 with 60 per cent, followed by MasterCard's 35 per cent and about 5.4 per cent for American Express, according to the Nilson Report, an industry newsletter.

"Visa remains committed to doing everything reasonable to ensure Canadians can use their Visa cards everywhere they wish to shop – including at Wal-Mart stores," the company said in an e-mail. "Until an agreement can be reached in this commercial dispute, we encourage shoppers to use their cards at the more than 5,200 stores in Thunder Bay that accept Visa."

Visa in June referenced a 2014 agreement established with the federal government "to lower the cost of electronic payments to a reasonable and fair level" and that it "offered Wal-Mart one of the lowest rates of any merchant in Canada."

A spokesman for Finance Minister Bill Morneau says he's waiting to receive a report on a 2014 voluntary 10-per-cent fee reduction by Visa and MasterCard before deciding "how we can ensure this market stays competitive in the future."

Part of Wal-Mart's argument is that these fees are far higher than in other markets around the world.

"We've taken a position that these fees are grossly inflated compared to other markets," said Karl Littler, vice-president at Retail Council of Canada. "They carry significant costs not only to retailers but to the broad mass of consumers who end up bearing higher prices in consequence."

In many countries throughout Europe, he says, interchange fees are markedly lower, capped at about 0.3 per cent. "They run them far less in a multitude of countries, including Australia, Switzerland and Israel and yet in Canada we're forced to pay a multiple of five times what those fees are in Europe for the same services."

The average retailers must pay in Canada is 1.5 per cent, he said. These fees are also non-negotiable.

"If you accept any of their credit cards, you're required to accept every one of their cards no matter how much it costs," he said. "You've got one option which is to vote with your feet."

These fees have a trickle-down effect, Mr. Roberton said.

"They're not just too high for us, they're too high for all merchants, large and small, charity, organizations and it has an impact on consumers, obviously," he said. "It's a cost that affects all of society and it's a cost we want to tackle."

Wal-Mart started informing customers of the change on June 9, Mr. Roberton said. This happened in-store and on its website. Some cashiers even offered customers a chance to sign up for a Wal-Mart MasterCard. Patrons can still pay with cash, Interac, MasterCard, American Express and Discover, according to a Wal-Mart news release.

Some Thunder Bay residents aren't too pleased about the change.

"I'm not too happy about it," Marlene Gosparini said Monday as she lugged five plastic bags filled with supplies across the street from the Ontario city's oldest Wal-Mart store to Truck & Diesel Hydraulics, where she works in shipping and receiving. Her employer spends about $500 a month at the retailer, and she'll spend $150 a week on her own, often on Visa, she said.

"We won't be shopping there any more because we have a company Visa card," said Ms. Gosparini, 55. "And now that we have to go somewhere else, I'll probably buy my personal stuff elsewhere, too."

Lea Bostan, a 73-year-old retiree and Visa cardholder echoed the sentiments of many shoppers when she said she's not bothered by the change. "I come here all the time," she said. "I'll still come here but I'll just use cash."

Mr. Roberton said Thunder Bay was a logical choice to boycott the credit card because the market there "has a strong leadership team and the right infrastructure to do this as seamless as possible for our customers here."

Despite such a move and strained relations between the two multinational corporations in recent months, Wal-Mart is "committed to continuing discussions with Visa and we're optimistic we'll reach an agreement," Mr. Roberton said.

With reports from The Canadian Press and Bloomberg