TD is both an issuer of debit cards and credit cards (TD Canada Trust) and a transaction processor or Acquirer (TD Merchant Services)
TD Credit Cards
- Offers a selection of cards ranging from reward cards and competitive low rate cards, to student cards and Small Business Visa Cards.
- Optional card benefits include Card Assist, Balance Protection Insurance, TD Auto Club and Travel Medical Insurance.
TD Merchant Services (TDMS)
- TD Merchant Services is a Canadian owned and operated payment solutions provider offering point-of-sale (POS) technology and product innovation for large and small businesses, including a complete line of credit and debit card payment processing, services and payment transaction solutions for face-to-face, telephone and Internet transactions.
- TDMS enables business customers to have the ability to accept and process Visa, MasterCard, American Express, Interac Direct Payment and other major credit cards as a method of payment from their customers.
Debit Cards/Credit Cards:
- Provided by financial institutions and connected to individual chequing accounts, debit cards offer a secure, simple and convenient way to access funds from more than 55,000 banking and cash machines and for making purchases at more than 410,000 retailers in Canada, seven days a week.
- Credit cards are provided by issuers, usually financial institutions, and allow cardholders access to a set amount of credit via their credit card account.
- Transactions for Debit are handled by acquirers predominantly via the Interac network, and via the Visa and MasterCard networks for Credit.
How transactions work:
- At the point of sale, the customer swipes or inserts the card into the point of sale device (or merchant terminal) and the merchant enters the sale amount. The device then reads the information on the card (either on the magnetic stripe or on the chip, depending on the device) and the debit or credit request is passed through the network where the card, Personal Identification Number (PIN) (if applicable) and required funds for purchase are verified by the appropriate financial institution/issuer.
- Generally, merchants rent or purchase the debit/credit card point of sale device and pay a processing fee for each Debit transaction and a Merchant Discount Rate (MDR) for Credit transactions. The processing fees and MDR are set by the Acquirer and the merchant agrees to these acquirer fees & rates via their processing contracts.
- The network currently used to process most debit transactions in Canada is Interac
- In 1984 the big five banks came together and decided to link their own Automated Teller Machine networks to give their cardholders broader access to cash withdrawals at Automated Teller Machines across Canada.
- Interac is now composed of a diverse group of members, including banks, trust companies, credit unions, caisses populaires, merchants, and technology and payment related companies.
- Currently, as a not-for-profit organization, it does not directly charge fees to customers and merchants and operates on a cost-recovery basis, which means there is a charge “per transaction” to cover operating costs.
- It does have a role in setting an interchange rate for shared cash dispense transactions through Automated Teller Machines (ATM). Interchange is a fee that the cardholder's financial institution pays to the ATM operator and it is designed to compensate the ATM operator for the service of providing cash to the financial institution's customer.
- Typically, the largest cost component of the Merchant Discount Rate charged by acquirers is interchange.
- Interchange is the transfer rate exchanged between the merchant’s and cardholder’s financial institutions each time a credit card is used.
- This fee serves to compensate the issuing bank for a portion of the risks and costs it incurs to maintain cardholder accounts.
- Financial institutions do not set interchange rates; these are set by Credit card networks (e.g. VISA & MasterCard).
Code of Conduct:
- Recently VISA and MasterCard have indicated their intention to compete with Interac in the payments market. Concerns and questions from some stakeholders, including several groups representing consumers and retailers, prompted the government to draft a code of conduct for the payments industry in Canada
- The Minister of Finance released a draft Code of Conduct and requested feedback from issuers, acquirers and other payments stakeholders. TD submitted its feedback on January 15th
- According to the government, the purpose of the Code of Conduct is to demonstrate the industry's commitment to:
- Ensure that merchants are fully aware of the costs associated with accepting credit and debit card payments thereby allowing merchants to reasonably forecast their monthly costs related to accepting such payments
- Provide merchants with increased pricing flexibility to encourage consumers to choose the lowest-cost payment option
- Allow merchants to freely choose which payment options they will accept
Where TD stands on the Code of Conduct:
- As both an Issuer of credit and debit cards and, through TD Merchant Services, an Acquirer (we process transactions for merchants who use our terminals) TD supports the code of conduct and the Minister’s call for increased transparency and disclosure to merchants. The new Code will provide an explicit choice about whether they want to accept any of the new debit options, like Visa Debit and MasterCard Maestro.
- TD Merchant Services will contact customers with a clear pricing structure and applicable terms so they will have the opportunity to accept VISA Debit or MasterCard Maestro. This is an important choice because VISA Debit has an interchange fee associated with it compared to Interac Debit.
- Only when merchants can understand the costs associated with their payment services can they make informed decisions about what forms of payment they want to accept. TD Merchant Services is committed to working with other industry participants to ensure information is easily and readily available.
- There is significant concern regarding ‘co-badged’ debit cards, which are debit cards that can be routed over more than one network (for example, Interac as well as Visa Debit). While the payment would still be paid out of your bank account the transaction could take place on either network. While TD supports merchant choice as suggested in the code, until systems are changed to accommodate these new requirements, TD has asked the Government to place a moratorium on issuing co-badged debit cards.