Visa Debit – A Reality That’s Coming to Canada

One of Canada’s largest department stores made a huge announcement today that may start the change in tides for the Canadian market place as it pertains to payments.  Sears Canada did a joint press release with Visa Canada today announcing the acceptance of Visa Paywave at it retail store locations across Canada but perhaps what’s more alarming is its announcement of department store’s intention to accept Visa Debit transactions on it’s website.

The acceptance of Visa Paywave at Sears locations is a relatively minor announcement but it does put the department store in a good position to move into future innovations such as mobile payments when the time is right.  But the reality is, Paywave is a product that benefits merchants who need to move line ups quickly (as it doesn’t require a chip or pin) and if the average ticket is less than $50.  Let’s face it,  there are not many people are in a rush to get out of a department store, especially when they’re making a purchase like a fridge or a stove.

But the acceptance of Visa Debit on the Sears website is much more meaningful.  Visa has been trying to make headway into the Canadian market with its debit product and up until now, has had very little success.  A Visa debit transaction carries an interchange fee associated to it and could cost a merchant almost 4 times as much to process as an Interac Debit transaction.  And as such, merchants have vehemently denied Visa Debit entry into the retail space.  And because of this lack of acceptance, the Issuers have only issued Visa Debit cards with online capabilities.  But even so, there is currently only one issuer issuing Visa Debit cards, CIBC.  In the online space, Visa Debit carries a benefit over the incumbent, Interac Online.  The way the transaction fee is calculated could mean a lower fee for processing an online Visa Debit transaction.  Plus, it’s processed like a Visa transaction and that means implementation of this product is much easier than implementing Interac Online.

But merchant needs to be aware of all that this new online product brings.  Visa Debit transactions allow their customers to chargeback on a debit transaction.  And in a space that historically carries the highest percentage of chargebacks, this could be a costly implementation.  Plus, it is still a percentage charged for the interchange fee… which means there is a transaction point which will make processing a Visa Debit transaction more expensive that processing an Interac Online transaction.  And last but not least, the more merchants who accept the product will drive more customers asking for the service which will mean more Issuers.  It won’t be long until customer driven requests could drive this product into being accepted in retail locations.

Interac Online is currently offered by the remaining 4 of the 5 major banks.  Merchants may be wise to consider implementing both Visa Debit and Interac Online on their website to complete their online offering to their customers.

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