Visa and MasterCard have both confirmed that they are looking into offering their debit cards in Canada. These would be similar to the Interac cards that we’re familiar with here in Canada. Interac is a non-profit organization, owned by the banks and credit unions, it’s fees are based on the cost of processing transactions.

While normally increased competition is good for the consumer and can lead to lower prices, in this case it will likely mean higher fees. These fees would be charged to the merchants that accept the cards and could easily by twice the amount of the current Interac fees. While the customer won’t be directly paying these fees, the merchants will likely pass this expense on to the customer through higher prices.

There are already a couple signs that we’re in for higher merchant fees in Canada.

• Canada’s existing debit system is “broken,” said Kevin Stanton, president of MasterCard Canada, saying it’s one of the few countries in the world where a non-profit monopoly controls the market, resulting in irrational pricing that precludes true market competition. – Toronto Star
• Interac has asked the Competition Bureau about restructuring itself as a for-profit entity to compete with Visa and MasterCard, which are trying to increase their share of the debit card market. – Toronto Star

• Prepaid Debit Cards – Are They a Good Idea?
• Consumer Debit Card Use Getting Expensive
• Are Prepaid Debit Cards For You?

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