Visa fights back in high-profile battle with Walmart over credit card fees

Visa says "consumers are the real victims in a high profile battle over merchant fees with Walmart now that the retailer is threatening to ban the credit card from its Canadian stores".

The retailer announced last weekend that "unacceptably high fees" has prompted it to stop accepting Visa cards beginning July 18 at stores in Thunder Bay, Ont. Walmart says it then plans to reject the cards at its more than 400 other Canadian locations.

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"We believe Visa's fees should be lower for everyone, whether they are a large retailer, small retailer or a charity," Walmart said in a statement to CBC News. "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 increased prices."

But Visa says the retailer is being disingenuous and unfair by using consumers as bargaining chips.

"Walmart is unfairly dragging millions of Canadian consumers into the middle of a business disagreement that can and should be resolved between our companies," Visa wrote in an open letter published Thursday morning in several Canadian daily newspapers.

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While declining to break down how much it pays to whom, Walmart says it pays more than $100 million in fees annually to credit firms like Visa, MasterCard and Discover for processing sales transactions at a Walmart store.

Across Canada, credit card companies charge a collective $5 billion in such "interchange" fees every year, and most cards average about 1.5 per cent of the value of any transaction.

Visa says it already gives Walmart one of the lowest rates of any merchant in Canada. But Visa says the world's largest retailer wants more, demanding to pay a lower fee than local groceries, pharmacies, convenience stores, charities and schools pay.

"They are using their size and scale to give themselves an unfair advantage," Visa's letter said.

Security also an issue

While the dispute is mainly about money, the two sides are also engaged in a fight over security. Walmart is suing Visa in the U.S. to force it to require chip-and-PIN technology on its cards, which is more secure than the standard magnetic stripe and signature combo.

Walmart wants customers to have to use encrypted chip-and-PIN technology, but Visa wants to gives customers the option.

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"This suit is about protecting our customers' bank accounts when they use their debit cards at Wal-Mart," Walmart said last month when the lawsuit was announced. "We have long advocated for 'PIN verification' as opposed to the less secure signature verification for debit transactions. PIN is the only truly secure form of cardholder verification in the marketplace today, and it offers superior security to our customers."

Visa also commands a higher fee — about five cents more per transaction — to process a sale made via signature, versus one made via PIN.

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