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Walmart Canada to stop taking Visa at the checkout
Walmart Canada has decided the fees it pays to accept Visa are too high and will cease accepting the cards at its 370 stores across the country beginning with a location in Thunder Bay on July 18.
According to the retailer, the company pays over $100 million (Canadian) in fees to accept credit cards each year. These fees are, in turn, passed on to consumers in the form of higher prices. Walmart Canada will continue to accept American Express, Discover and MasterCard after it stops accepting Visa.
According to reports, Visa Canada claims to charge retailer fees that range from 1.42 to 2.08 percent. The company, which is used by more Canadian consumers than any other card, claims Walmart is charged among the lowest rates.
In the U.S., Walmart was among a group of retailers that opted out of a class-action settlement with MasterCard and Visa over interchange fees. In doing so, it maintains the right to seek its own remedies through the court system. The legal settlement that some have signed onto saw MasterCard and Visa agree to hold interchange fees at 1.5 percent for five years.
- Walmart Canada Statement Regarding Visa Credit Card Purchases – Walmart Canada
- Walmart Canada to stop accepting Visa cards due to ‘unacceptably high’ fees – The Canadian Press/CBC News
- Walmart Canada Will Stop Accepting Visa Cards, Citing Fees – Bloomberg
- Walmart Canada to stop accepting Visa, says fees too high – Reuters
Discussion Questions
DISCUSSION QUESTIONS: Who will be hurt most by Walmart Canada’s decision to stop taking Visa in its stores? How do you see the ongoing fight between retailers and credit card companies over fees panning out?
Poll
BrainTrust
Steve Montgomery
President, b2b Solutions, LLC
Ryan Mathews
Founder, CEO, Black Monk Consulting
The only thing I can say about this is that if the credit card companies think retailers’ anger about some of their practices is just a storm that will blow over, I think this, along side the various lawsuits, is proof these disputes are not just going to fade away — in the minds of retailers and in the minds of consumers.
Right On, Nikki! The payment industry is being disrupted, and with emerging options on the horizon, credit card companies need to take notice and re-think their engagement model with retailers.
Walmart’s stance is more likely to hurt it than Visa. Not all customers carry multiple cards and even those that do have reasons why they might prefer to use a Visa card at Walmart. It will be a difficult decision to explain and communicate to customers.
On the other side of the issue Visa will also incur some of the consumers’ wrath, but they are not a retailer. They will not have to face angry customers at the checkout who didn’t get the message that their Visa card is not an acceptable form of payment. If they do get contacted they can lay the blame at Walmart’s feet.
Costco stops accepting Amex cards this month. Walmart Canada will now stop accepting Visa but will continue accepting Amex. Is this a question about the credit card companies themselves, or about the deals and requirements that individual retailers have? Why is Amex acceptable to Walmart in Canada but not to Costco in the U.S.? Similarly, why is Visa acceptable to Costco in the U.S. but not to Walmart in Canada? I think the answer is in the individual deals each retailer can strike. The real question is: can retailers influence the rate that major companies will charge? Is this an opportunity for new credit card entries into the market (doubtful)? Questions are many, answers are few.
Bob has hit on a key point: that there is inconsistency among retailers in negotiations with card payment networks on a regional basis. It is easier to explain Costco dropping Amex in the U.S. than Walmart Canada dropping Visa. The logic of these moves are based on pure economics, but that logic falls apart seeing Walmart Canada continue to accept Amex.
For our customer-centric group here, we all probably agree that the customer stands by with a dazed look of misunderstanding while the big retailers and payment companies fight their battles. Fortunately, consumers have short memories and probably won’t punish Walmart in the long term.
Obviously Visa will be hurt. I would guess just about everyone has one of the top four cards in their wallet. Stores don’t need to take all of them. Some of the most successful grocers in the U.S., such as Woodman’s and WinCo, don’t even accept credit cards. Costco tries to narrow it to one. Walmart is the world’s largest retailer. They deserve special treatment and respect, and they are going to make sure they get it.
The Canadian consumer is more actualized to the benefits associated with tender and the rewards earned than U.S. consumers. Their preference by a wide margin is debit cards, not credit. If they don’t have the funds to pay your balance they are loathe to use a card with high APR. Two dominant providers duke it out and the result? The consumer loses out on choice per their preferences. All about the negotiation and in this case a divorce results with Visa losing out on revenue, though I doubt Canadian consumers will move their preferred Visa card down their wallet as a result.
The move by Walmart Canada to cease accepting Visa cards is part of Walmart’s long-term strategy to reduce payment processing costs. The question is, what is their real objective and, once achieved, will it benefit consumers?
One should assume that Walmart and Visa have already negotiated heavily and that Walmart enjoys the best, or nearly the best, merchant discount rates from Visa among all retail. If that is true, then the decision to drop Visa in Canada speaks more to a longer-term goal, that Walmart wants to take the banks out of the picture altogether.
Walmart was a supporter of MCX for several years and only recently pulled away from that group as they announced development of their own mobile payment solution. Maybe the goal for Walmart is to build on the motivations for MCX, but go one step further by developing, owning and operating its own payment system. It may believe it can sell this system to other retailers and create a business model at the intersection of MCX and Amazon Payments.
Whatever transpires, consumers should know that in every instance in the world where interchange regulations have been put into place, there is no evidence that retailers pass the savings along to their customers in the form of lower prices. The argument of “we have to pass card fees to the consumer” rings hollow when savings are not shared so willingly.
In the short term, there will be much confusion at checkout with lots of confused and angry customers blaming Walmart, not Visa, for this move. While the giants of payments and retail battle it out, consumers just want to buy diapers and beer and get on with their lives.
Well, the obvious immediate victim is the consumer, especially if Visa is — in fact — the preferred credit card of Canadian shoppers.
And, again if the Visa market share is correct, some portion of Walmart’s sales will become collateral damage, as will some of Visa’s profits.
But, Nikki is right. This isn’t a battle that is going away. Rather than arm wrestling for fractions of a percentage point and adopting intractable positions Visa and Walmart need to understand that — in the long term — it is to their mutual advantage to bury the litigious hatchet and strike a compromise.
If they don’t everyone loses.
So Walmart Canada is not going to take the credit card that is used by more Canadians than any other card. I’ll go out on a limb and say that the percentage is even higher for Walmart customers, who I’d guess would be less likely to have an Amex card than the general population. It doesn’t seem like the smartest business move to me.
Who’s running the show up there? First it’s getting rid of fitting rooms, now it’s limiting purchase options. What’s next?
Walmart is definitely going to be the loser with these moves. Limiting customers ability to buy is not a smart or sustainable strategy.
“…Fees are, in turn, passed on to consumers in the form of higher prices….” Or, I suspect, in the form of lower profits. It is, of course, WMT’s choice which — if any — cards to accept, but I don’t think starting with the most popular card is going to helps anyone but competitors … both Walmart’s and VISA’s