Don't Fight in front of the Children


Many of you who follow my columns, know I am not a big fan of large monopolies, especially in the retail industry. You can appreciate how excited I was when I heard that Visa and Walmart were having a fisticuffs session over the interest rates charged by the credit card giant.

The very first element reported by media outlets was that 57% of Walmart's Canadian revenue comes from Visa transactions. Surely the execs at Walmart are preparing for a potential nervous breakdown. Not to mention Visa's losses may bring the roof down on the financial dictatorship.

Having heard the news, I took a step backward, exhaled slowly and looked at what the figures really meant. First of all, from a Walmart Corporate perspective, the company operates 11,527 stores in 28 countries. Canada has 404 of them, which translates into about three and a half percent of the entire business. The annual revenue for the entire company is $485 billion, so I question if head office even knows about the divorce.

What about Visa? The loss for them has to be substantial if my math is correct, and I emphasize my math, because neither company discloses Canadian figures. It is reported, however, that Walmart pays over $100 million in fees to credit card companies.

So why are these two giants battling it out in public, in front of all their customers and suppliers? Visa claims they never wanted a public fight, and claim the retail giant (Walmart) is using its’ own customers as negotiation leverage by stating they will no longer accept Visa cards at Walmart stores. A spokesperson for Walmart recently said, “We believe Visa's fees should be lower for everyone, whether they are a large retailer, small retailer or a charity. Canadians deserve better than paying a hidden fee, 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.”

Visa stated they had lowered their fee base for Walmart to the lowest level in Canada. Certainly not something they offer small businesses, who constantly struggle in an extremely competitive and uphill market.

I am not leaning toward either side, as I do not approve of strong arm tactics of major retailers to leverage their size and strength in forcing suppliers to bend to their wishes. At the same time, I scorn companies who can successfully charge 20% interest annually in a somewhat misleading manner.

For example, let's say your Visa statement period is June 1st to June 30th. In this case, the end of your statement period will be June 30 and the payment due date will be July 21st. If you pay your entire Visa account balance by July 21st, you will not be charged interest. If you do not pay your entire Visa account balance by July 21, on July 22, you will be charged interest on the purchases you made in June. Here is where it gets interesting. The interest on your June purchases will be charged daily, starting on the transaction date of each purchase. You will continue to be charged interest on your June purchases, every day until your entire balance has been paid in full.

Using this scenario , if your bill is $2,000 and you miss the due date by 1 day you will be charged $66 for being one day late. Without sending your brain into mathematical overdrive, it means you will be paying a boatload of interest.

Back to our corporate battle; Visa recently offered Walmart one of the lowest rates of any merchant in Canada, but Walmart is demanding more. They believe their cost to accept Visa cards should be much lower than all other merchants — lower than local grocery stores, pharmacies, convenience stores — and yes, charities and schools too. This statement is according to Visa, clearly the self-proclaimed underdog in this war.

Walmart's size allows them to stand up to larger institutions, where small businesses cannot. Costco recently made breakthrough history when they discontinued their agreement with American Express, and now only accept MasterCard. Could this be a new trend? Should Visa be concerned, especially with Apple Pay bulldozing its way into Canadian markets?

At the time of wordsmithing this document, Visa was planning on sending a letter to all of its cardholders explaining their side of the situation. Who really gets hurt here? Will you stop shopping at Walmart, because you only use Visa? Will you cancel your Visa card and switch to MasterCard? Maybe you will cut up all your cards, and use only cash or Interac? Or maybe you will switch all of your buying to small, local retailers? I'm not sure how wise it is for these corporate giants to bring all of this boardroom infighting into our living rooms. Isn't it always suggested to keep your arguments away from your children? Gee, I hope mom and dad can learn to get along here.

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