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Signage at a Laval, Que., Walmart store is seen on Tuesday, May 3, 2016. Visa is accusing Walmart of using consumers as pawns in its battle to save costs by threatening to ban the popular credit card from its Canadian stores.Ryan Remiorz/The Canadian Press

As Wal-Mart Canada Corp. and Visa face off in a game of brinksmanship, which of the corporate giants has more to lose?

Their squabble surfaced on June 9 when Wal-Mart posted signs in its three Thunder Bay stores warning that it will stop accepting Visa on July 18. Two days later, the retailer elaborated in a statement that it will phase out Visa across all its 400-plus stores because the credit card fees are "unacceptably high." Visa soon shot back, essentially calling Wal-Mart a bully in full-page newspaper ads.

Ultimately, Wal-Mart may fare fine without Visa. The vast majority of its customers here use debit cards, which cost the retailer a fraction of that of credit cards, industry sources say. Only a minority of its customers use credit cards, and Wal-Mart encourages them to use MasterCard, which has lower fees.

Major retailers in some ways have the upper hand over their suppliers. They charge vendors for their shelf space, determine the prominence of product placement and stock their own private-label items to bolster their margins.

That edge is now moving to payments as retailers roll out their own digital payment applications and take control of customer data.

U.S. parent Wal-Mart Stores Inc., the world's largest retailer, last year introduced its Wal-Mart Pay south of the border and, according to sources, could bring it to Canada by 2017, fortifying the retailer further in its fight with Visa.

The mobile payment transformation "is disruptive," said Richard Crone, chief executive officer of payments consulting firm Crone Consulting LLC in San Carlos, Calif.

"What Uber did to taxis, mobile payment is doing to Visa and MasterCard. It's Uber-izing payments."

Mobile payment, unlike plastic cards, provides instantaneous sharing of product information and other data, giving the retailer "a previously unavailable opportunity to provide shopping and loyalty enhancements, as well as new services," he said. "The one who enrolls is the one who controls."

The wrangle between Wal-Mart and Visa escalated this week when Visa lashed out at the retailer in ads for "unfairly" using consumers as hostages in its fight and trying to take advantage of its heft to gain an "unfair advantage" over rivals.

To which Wal-Mart countered that Visa's fees should be lower for all operators, not just for it. "Canadians deserve better than paying a hidden fee that is four times higher than consumers pay in other countries. We are taking a stand for our customers because Visa's high fees can result in higher prices."

The broader battle between retailers and credit card operators has been building for years. As retailers look to lower costs amid increasingly intense competition, they have been fighting for lower credit card fees.

Wal-Mart, which is often viewed suspiciously by smaller rivals for stealing away business, is now in the unlikely position of waving the flag for all retailers in its spat with Visa. Other disputes with the credit card operator are ongoing, including Wal-Mart suing Visa in the U.S. over the right to choose how customers verify debit card purchases at the register.

Home Depot Inc. sued Visa and MasterCard this month over similar issues, with an underlying theme that the credit card operators are trying to maintain market dominance and profits.

At Wal-Mart, Visa fees to merchants in Canada are an average of 1.5 per cent of purchases, compared with about half that proportion (0.75 per cent) in the United States, according to sources, and one-fifth (0.3 per cent) that amount in Britain, where fees are regulated. Those fees in the European Union were set last year at at least 0.3 per cent.

"That's the new standard for the world," according to an industry source who is familiar with payment issues.

Rob Livingston, country manager for Visa Canada, said fees are higher in Canada because of heavier investment in innovation and technology by Visa and its bank partners. Retailers and payment specialists counter that other markets have introduced similar initiatives, such as chip cards and contact-less payments.

Several years ago in Canada, the Competition Bureau challenged Visa and MasterCard for engaging in anti-competitive behaviour in setting their fees, resulting in Canadians paying billions of dollars annually in hidden fees. But the matter simply landed in the lap of the federal government, which got Visa and MasterCard to voluntarily agree to reduce their fees to 1.5 per cent from more than 1.6 per cent and 1.7 per cent, respectively, effective last year.

Robert Jackson, a retired investigator with the bureau, said Visa was probably blindsided by Wal-Mart's decision to stop accepting Visa cards.

"The fact that Wal-Mart has taken the once-inconceivable step of refusing to accept Visa cards entirely is testament to the importance that it and other retailers attach to this matter," Mr. Jackson said. "Visa has to be worried that Wal-Mart and other retailers will soon have alternative payment options that will effectively curtail Visa's market power and force it to lower the interchange fees."

He said the payments situation is in some respects comparable to large retailers using private labels to shore up their profit margins, substituting their own brands for ones previously offered by their suppliers at a higher cost.

Still, there is also the risk of retailers such as Wal-Mart gaining too much power in the payment domain, he said. Consumers can benefit from greater choice and lower prices resulting from the introduction of new private-label products and new payment options. "However, there is always concern that too much monopoly or monopoly power could lead to anti-competitive behaviour that impairs competition."

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