Wal-Mart Canada dumps Visa over high transaction fees

Dive Brief:

Wal-Mart said it will no longer accept Visa card payments in its Canadian stores. The new policy will go into effect on July 18 in the retailer's Thunder Bay, Ontario locations before rolling out in phases nationwide across more than 370 stores.
Wal-Mart Canada said the change was instituted after it failed to reach an agreement on an “acceptable fee for Visa transactions,” according to a blog post.
A Visa spokesperson said the company is “disappointed” that the decision was made “despite Visa offering one of the lowest rates available to any merchant in the country,” CBC News reports.

Dive Insight:

Retailers in general (and Wal-Mart in particular) have a long-running beef with credit card companies. The two sides have recently squabbled over the security of EMV chip-enabled cards, which retailers say would be more secure if a personal identification number [PIN] were required; credit card companies and banks maintain that a signature suffices. Retailers have also long expressed frustration over fees incurred every time a customer swipes a debit card or credit card.

A lawsuit filed last month by Wal-Mart Stores in the U.S. ties those two issues of contention together: In it Wal-Mart alleges that Visa is forcing the retailer to allow customers to use a signature in EMV transactions. Debit cards are used 70% of the time a card-based payment is made at Wal-Mart: The retailer says that PINs are more secure, but Visa earns five cents more per transaction when a signature is used.

Wal-Mart Canada's move to dump Visa esclates that war, although its press release indicates that the company remains “optimistic that we will reach an agreement with Visa.” A Wal-Mart Canada spokesperson told CBC News it is starting with its stores in Thunder Bay because those locations “have the infrastructure to easily make the change,” a curious statement from a company that has spent billions on its technology.

While Wal-Mart over the years has become famous for playing hardball with suppliers and rivals alike when it comes to price wars, retail futurist Doug Stephens told CBC News that both Visa and Wal-Mart will feel the effects of the retailer’s actions.

"At the end of the day, when we strip everything out of the debate, we're dealing with the potential that six out of 10 customers will come into a Wal-Mart store and be disappointed that they can't use their credit card," Stephens said. "Competition is extremely tough. This is not a good time to limit your consumer's ability to buy from you.”