Citing ‘Unacceptably High’ Fees, Wal-Mart To Stop Accepting Visa Cards in Canada

Wal-Mart Stores Inc.’s 400-store Canadian unit announced Saturday that it will no longer accept Visa payment cards in its stores beginning with phased discontinuance starting July 18.

“Following an evaluation of credit card transaction fees in Canada and the rest of the world, we have concluded the fees applied to Visa credit card purchases remain unacceptably high,” Walmart Canada said in a statement. “To ensure we are taking care of our customers’ best interests and delivering on our promise of saving customers money, we constantly work to reduce our operating costs, including credit card fees. Unfortunately, Visa and Walmart have been unable to agree on an acceptable fee for Visa transactions.”

Walmart Canada said it pays over C$100 million (U.S.$78.1 million at current exchange rates) to accept credit cards each year. “Lowering costs such as these is necessary for us to be able to keep our prices low and continue saving our customers money.”

The Visa discontinuance will begin in Thunder Bay, Ontario, on July 18, and then be rolled out in phases across the rest of the country over an unspecified time period.

Walmart Canada will continue to accept Interac debit cards as well as MasterCard, American Express and Discover cards.

While the fees to accept credit cards are mostly similar in Canada, Adam Atlas a Montreal-based attorney who works with U.S. and Canadian payments clients, says another factor—issuing revenue—may have played a role in the decision. Walmart, through its Walmart Canada Bank unit, has issued a MasterCard Inc. cobranded card since 2010. In 2014, Walmart switched its U.S. card portfolio to the MasterCard brand from Discover Financial Services.

In a bit of speculation, Atlas says while Walmart Canada cries foul over fees, one “cannot but wonder what large retailers are earning on issuing with their cobranded cards. Is this another way not of only of reducing their acquiring costs, but getting more issuing profits?”

Walmart Canada likely calculated the impact on its consumers who use Visa cards, Atlas says. “I’m not sure that its customers in Canada who are accustomed to paying with Visa [cards] are going to like it,” he says. Will they want to or be able to get approved for the Walmart MasterCard Rewards card, he wonders.

How long the dispute with Visa will last is unclear. Refusing Visa card acceptance clearly is a hardball tactic on the the part of the world’s largest retailer, but the parties have five weeks before Wal-Mart pulls the trigger. “We sincerely regret any impact this will have on our customers who use Visa and remain optimistic that we will reach an agreement with Visa,” the statement says.

In an emailed statement, Visa Canada said “we regret Walmart’s decision to no longer accept Visa at its Canadian stores and the negative impact their decision will have on loyal shoppers across Canada. Walmart made this business decision despite Visa offering one of the lowest rates available to any merchant in the country. We are disappointed that Walmart chose to put their own financial interests ahead of their own consumers’ choice.”

Indeed, rejecting such a big payment card brand as Visa holds the potential of hurting Wal-Mart’s sales. The action recalls the time when Wal-Mart briefly stopped accepting MasterCard-branded debit cards in the U.S., but industry experts estimated that MasterCard debit transactions accounted for only about 1% of Wal-Mart’s sales at the time. The MasterCard dust-up was one chapter in Wal-Mart’s long-standing dispute with Visa and MasterCard over debit acceptance costs and rules that dated back to a 1996 class-action lawsuit led by Wal-Mart. The networks and merchants settled the case in 2003 for about $3 billion.

Wal-Mart recently sued Visa in the U.S., accusing the network of encouraging signature-debit transactions with EMV chip cards when Wal-Mart wants the transactions to be routed to PIN-debit networks.