Canada expands credit card choice for bank issuers
By Lynne Olver
TORONTO (Reuters) - Canada's competition watchdog has freed Canadian banks to offer both MasterCard (MA.N) and Visa (V.N) credit cards, lifting decades-old restrictions that made the banks choose one brand or the other.
Canada's Competition Bureau has told financial institutions that it is no longer concerned about possible conflicts if they issue both cards as MasterCard and Visa are no longer owned by member banks.
Even so, it may take some time before these issuers make changes to their card lineups.
"This isn't just a flick of the switch for anybody," Kevin Stanton, president of MasterCard Canada, said in an interview.
"The banks have to work out what this means at a strategic level, they've been operating in a non-dual environment for 35 years now, so this is a fundamental change to the business model in Canada."
The top three card issuers in Canada are Visa issuers Canadian Imperial Bank of Commerce (CM.TO) and Royal Bank of Canada (RY.TO), and MasterCard issuer Bank of Montreal (BMO.TO).
MasterCard became a commercial organization several years ago, and went public in 2006. Visa became a public company earlier this year.
The Competition Bureau said issuers and acquirers are no longer involved in most of the governing decisions of the major credit card networks, so it is no longer concerned about potential overlapping interests and influence.
Anne Koski, head of payments innovation at Royal Bank's global cards division, said that RBC welcomes any change that increases competition and might allow it to better meet client needs.
"As the announcement was just made, it is too soon to comment whether we will be considering offering MasterCard products," Koski said in an emailed statement.
Bank of Montreal said it was watching the competitive landscape as well.
The other large Canadian card issuers, Toronto-Dominion Bank (TD.TO) and Bank of Nova Scotia (BNS.TO), are Visa issuers.
Stanton said MasterCard has an opportunity to expand its products and services in Canada, but noted that dealing with a single card brand is "hard-wired" into the banks' existing technology.
"I would say typically you'd be looking at at least 200 touch points within a bank's technology that have to be analyzed and changed in order to take advantage of this," he said.
Until banks consider the strategic and technological implications -- which could take months or years -- "they won't be in a position to have serious conversations with us," Stanton said.
More competition won't be easy, he acknowledged, as card providers will fight harder for consumer loyalty.
"In a dual environment we have to redouble our efforts to make our customers happy," he said.
Visa and MasterCard only process transactions, they do not lend money, and are benefiting from the growth of payment transactions, particularly outside the United States.
Credit rating agencies DBRS and Moody's have noted that Canadian credit card debt and net loss levels are lower than in the United States and consumers pay off more of their card bills than American users.
($1=$1.22 Canadian)
(Reporting by Lynne Olver; Editing by Frank McGurty)
