Canadian Merchant Accounts

Forewarning, This is one of the few posts on this blog that is going to contain some self promotion, but just a little.

We recently began taking the steps to move into Canada to provide services to Canadian businesses. We will be one of the first independent ISOs in Canada, and treading this new path is very exciting. I have learned a lot about the differences between the way merchant services work in Canada and the US, and it looks to me like Canada is moving in a much more positive direction compared to the US. Both for providers, and for businesses.

US vs. Canada
The biggest difference in consumer card use in Canada, is that PIN debit takes up a majority of transactions. In the US, PIN debit is only a percentage of total credit and debit transactions. It is growing in acceptance and popularity, but it still has a long way to go. This PIN debit use is one of the shaping factors in the entire Canadian system.

The positives in Canada: The best thing I have seen regarding the Canadian processing scene, is the interchange fee structure. In the US there are literally hundreds of interchange fees and levels, and the entire setup is extremely confusing. Canada is completely opposite. There are about 10 interchange levels, and that’s it. Retail, MOTO / Ecommerce, ARU, Corporate and a few levels based on processing volume and nothing else. What is also great is that there is no transaction fee for Canadian processing. There is a processing percentage, and we’re done. No transaction fee, no other surcharge fee, just a processing percentage.

Oh yeah, there are no downgrade charges in Canada!

The negatives: The processing equipment situation in Canada is at best, very ugly. In the US you can go online and buy processing equipment at near cost, from a variety of online retailers. I know this because the primary online function of my company’s website is equipment sales. In Canada, the situation is again, completely opposite. In Canada you must purchase pre-encrypted equipment from the bank you are going to process through. To purchase a terminal that would cost about $300 in the US, you will pay at least $1200 in Canada, and most likely $2000. Equipment from the US in not compatible in Canada either (I learned this one the hard way). Leasing and renting are most common and offer a somewhat reasonable monthly cost, but compared to the US, it is far more expensive for equipment. Leases and rentals in Canada start at about $50 per month for basic equipment and go up to about $100+ per month for higher-end and wireless equipment. Ouch!!

Unfortunately, there’s no way to get around it that we have found. The banks control the encryption, and businesses must have encrypted equipment to process or they lose more than half their customers. Hopefully the equipment conundrum will change in the next few years, but for now businesses are stuck dealing with the bank’s nasty equipment pricing.

Now the self promotion:
Since we don’t yet have a significant presence in Canada we are looking for businesses, websites, and people in Canada that are interested in becoming merchant account sales agents there. You will be able to offer businesses rates starting at about 2% for retail businesses, and about 2.5% for online and MOTO businesses. These rates should beat most any bank’s quoted rate in Canada. We are looking for friendly, honest people that are not wanting to rip off a bunch of businesses, because that’s not how we do business. Check out our Canadian Agent Program for more information if you are interested.

And Finally:
It’s very exciting to see Canada open it’s doors to an ISO structure. I’m not sure how soon, or even how probable it will be for the banks there to ease up on their equipment monopoly, but the fee structure is looking good enough to almost completely offset it.

Canada has a very simple and efficient system, and that is not something that I would like to see change. The last thing Canada needs is an interchange table with three hundred different levels on it, and thousands of confused and angry business owners that have no idea how to understand it.