Credit giant's debit arm aims to lure market with a wave
Visa Canada plans to showcase the first-ever "contactless" debit cards in the country during the high-profile Olympic Games in Vancouver early next year, says a leading supplier of card readers.
The move, believed to be a North American first, comes amid a wave of concern among merchants and small-business owners about the imminent entry by Visa and MasterCard into Canada's $168 billion debit card market. In other countries, where those global giants have introduced debit products, merchants say their processing costs have skyrocketed.
The contactless feature, called payWave, is currently offered on Visa credit cards in Canada. This would be the first time it is offered on a debit card.
"There's an opportunity for Canada to be a showcase for the world," said Christopher Justice, North American president of Ingenico, a Paris-based company that is the world's largest supplier of card readers to banks and retailers. "It's happening right now. Merchants are being signed up right now all around the Olympic village."
A spokesperson for Visa Canada did not confirm the company's plans by late Thursday. Visa is a major sponsor of the 2010 Games and its credit, debit and prepaid cards are the only plastic that will be accepted at Olympic venues.
Given that huge marketing opportunity, Visa is encouraging consumers to contact their banks about getting Visa products before travelling to the Games.
Contactless debit represents a huge opportunity for card companies like Visa to penetrate quick-service markets, like fast food restaurants and coffee shops, where cash is still king.
The cardholder waves the card within a few inches of the reader and does not have to sign or input a PIN. That allows for shorter checkout lines, while also increasing the dollar value of transactions since consumers typically spend more on cards than they do with cash, says Visa.
"The typical debit user is a female, 25 to 45 years old, with two kids in tow. She's in the grocery store getting jerked around. `Can I buy a gumball? Can I have that candy?'" Justice said.
Visa says its contactless cards offer "enhanced security." Every payment generates a unique transaction code that must be verified by the reader before it is accepted.
Visa's payWave card payments are limited to purchases of $25 or less, including tax.
In addition, all Visa debit cards will come with the same "zero liability" guarantee that applies to its credit cards, the company said earlier this year. That means consumers will not be held liable for fraudulent purchases made on their cards.
Interac dominates Canada's debit-card market. The not-for-profit association charges a flat fee per transaction. It has also announced plans to introduce a contactless debit card but it will not be ready until the middle of next year. MasterCard declined to say whether it too would offer its PayPass contactless capabilities on its debit cards.
As Visa and MasterCard move into debit, Canadian retailers are pressing the federal government to set new ground rules before banks begin issuing new cards.
The Canadian Federation of Independent Business has asked the banking industry to agree to a voluntary moratorium on any Visa or MasterCard debit cards until mid-2010.
"One of our greatest concerns is that Canada would lose its low-cost, flat-fee debit card system," the federation wrote in a letter to the Canadian Bankers Association.
In countries where Visa and MasterCard offer debit, fees to process those cards are based on a percentage of the sale. They average 60 to 70 cents per transaction in the United States, ten times the rate in Canada, the letter says.
The bankers' association referred questions about the letter to the credit card companies. Visa and MasterCard have both confirmed they intend to introduce debit card products in Canada but will not give details about the exact timing. Visa has previously suggested that it would like to enter the market later this year.