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Two years after talk started that the major card networks had designs on Canada’s debit card market, Canadian Imperial Bank of Commerce and Visa Canada announced Monday that CIBC was introducing the country’s first Visa-branded debit card. The card, dubbed the CIBC Advantage Card, is good in Canada only for online and phone-based purchases and ATM transactions, but cardholders can use it abroad wherever Visa is accepted.
For point-of-sale purchases within Canada, Advantage Card transactions will be routed over the long-established Interac Association network. The card thus meets a key requirement of Canada’s new “voluntary” code of conduct for the payment card industry—that the networks whose logos appear on so-called co-badged debit cards do not compete for the same transaction. The code, developed by the national government’s Department of Finance with input from merchants and banks, was born out of controversies about rising card acceptance costs and merchants’ fears that a big-time entry by Visa and MasterCard Inc. into debit would undercut the popular and low-cost Interac network (Digital Transactions News, April 19).
The card opens up to debit the card-not-present market that until now could only accept credit cards, which is a plus for both consumers and merchants, according to Mike Bradley, head of product at Toronto-based Visa Canada. “From a consumer standpoint, it means that their debit card does more,” he tells Digital Transactions News. And while Interac does have some agreements with American electronic funds transfer networks that let Canadians use their debit cards in the U.S., the Visa logo opens the card to spending at about 29 million merchant locations worldwide.
The card will cost Canadian card-not-present merchants less to accept than credit cards. Its interchange rate is 1.15%, compared with 1.65% to 2% for Visa Canada’s credit cards, according to the network’s 2010 interchange schedule. “We think there is a strong merchant story in terms of lowering their acceptance costs,” says Bradley.
A spokesperson for Toronto-based CIBC, which the Toronto Star newspaper says is Canada’s largest credit card issuer, did not respond to a Digital Transactions News call for comment. “The CIBC Advantage Card combines the same debit card that our clients value today with new features that allow our clients to do so much more,” CIBC executive vice president Stephen Forbes said in a statement.
More Canadian issuers are likely to join CIBC as Visa debit issuers, though Bradley would not name any institutions. “We’re more of a debit card company around the world than a credit card company, so we’re real excited,” he says. “We’re in discussion with lots of major institutions on how they can improve their debit capability by adding Visa capability to it.”
Visa also is a planning a debit card marketing campaign in Canada. “There will be a substantial investment in establishing the Visa brand as a debit card,” Bradley says.
According to the Toronto Star, CIBC delayed its Visa debit card for more than a year because of the time needed to develop the new code of conduct. A spokesperson for the Retail Council of Canada, which had strongly opposed the international card networks’ debit expansion, did not respond to a Digital Transactions e-mail.
The new CIBC cards will come with smart chips as Canada continues its shift to the EMV chip-and-PIN card system that will eventually replace magnetic-stripe cards.
