Who will blink first—Wal-Mart or Visa? The two giants have taken their public spat north of the border, as Wal-Mart announced they will stop accepting Visa in Canada. The following article outlines that the Visa ban will unfold on a limited basis beginning with Thunder Bay, Ontario, on July 18.
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.
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 escalates 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.
Given the limited market area that will initially stop taking Visa, this could very well be a negotiating tactic on Wal-Mart’s part. Both sides are leaving the door open to work out a mutually acceptable solution. However, Wal-Mart does play hardball, as seen in their US suit against Visa over the PIN vs. signature requirements for EMV transactions. But Canada is a heavy credit card-usage country, and Wal-Mart’s customers will not take kindly to the upcoming Visa ban. Expect Wal-Mart and Visa to hammer out an agreement this summer when they realize that they need each other more than they care to admit.
Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group
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