By Cara Henis

Thousands of small business owners balked after receiving notification that they will be automatically enrolled in Visa's new debit program unless they opt out of the service. This is one of the latest moves by Visa and MasterCard as they attempt to launch their branded debit cards in Canada.

Business owners, many of whom are fearful of Visa and MasterCard's looming presence in Canada's debit card market, learned that the new microchip-enabled payment terminals they installed to keep up with the nationwide shift to the chip-and-PIN system also came preprogrammed with the ability to accept Visa debit cards -- cards that cost retailers a lot of money to accept.

"Some merchants felt what they were doing was simply upgrading their systems to accept (micro) chip (debit and credit cards) and they found out after the fact that they also enabled Visa debit," said Catherine Swift, the small business president and chief executive officer of the Canadian Federation of Independent Business, to the Toronto Star. "And they weren't happy about that because Visa debit costs more to the merchant."

Right now, the non-profit member-owned association Interac is the main system that handles the majority of debit cards in Canada. Interac charges merchants a flat fee of six cents per transaction to process debit card payments. Visa Canada plans to charge 0.25 per cent of value of the transaction, plus 15 cents, a rate significantly higher than Interac. MasterCard Canada says it will charge a flat fee that will be cheaper than Interac's, according to the Star.

Yet the fees are not guaranteed and merchants fear costs will rise if Visa and MasterCard take over the debit card market. This could result in retailers passing the costs on to consumers in the form of higher prices for goods and services.

Business leaders found some solace in the recommendations made by a Standing Senate Committee on Banking, Trade and Commerce report released in June, according to CBC news. Suggestions (but not mandates) included:

• The creation of a board to decide what, if any, legislative regulation needs to be enacted regarding debit and credit card payment systems
• The freedom for retailers to decline cards
• The requirement that debit card fees remain flat instead of based on the cost of the good or service

Yet the board will not decide whether any government regulation should take place until the end of December.

If the government decides to regulate the fees, this would mean that Visa and MasterCard would only be able to charge a flat fee per transaction. However, if they are allowed to continue with a fee percentage per transaction, they cannot stop Interac from changing their own fees to a percentage per transaction as well.

MasterCard and Visa are poised to compete for market control with the current debit card-payment system giant Interac. There are about 2.5 million MasterCard debit cards in Canada, but they are currently operating on the Interac payment network. Yet the cards are equipped to work on MasterCard's own debit network, according to the Star. As MasterCard unveils its payment processing services in Canada, the cards will switch over the MasterCard network and prices.

If merchants do not opt-out of Visa's debit program, then retailers must abide by Visa's pricing preferences whenever a Visa debit card is used. Some merchants have complained that they are being charged even though they have declined Visa's services though this may or may not be true, according to the Star.

Less than 1 per cent of merchants who received notification from Visa about their enrollment in the program have chosen to opt out, said Fern Glowinsky, Moneris' general counsel, a payment processing company, told the Star.