It is not looking like a happy holiday season for Visa and Mastercard, but their woes may be a positive thing for retailers in North America. New proposed rules for interchange fees in the US, and an "anti-competitiveness" investigation in Canada could change the landscape for retail businesses on both sides of the border.

The Federal Reserve Board has put forth two proposals for overhauling debit card interchange fees as part of the Dodd-Frank Act, which should vastly reduce the costs to merchants of processing card transactions for their customers.

This is particularly good news for smaller firms that might have avoided offering debit transactions because of the fees involved, but also should lead to big cost savings for retail outfits of all sizes.

The Fed has proposed two potential standards for fees, and is inviting comment from stakeholders on the proposals. The first would see a fee based on each issuer's costs, with a base starting at seven cents per transaction and a cap of 12 cents; and the other would set a stand-alone cap of 12 cents per transaction.

In either case, it would reduce interchange fees by at least 70 percent-a huge boon to retailers-and would take effect in July next year.

In addition, the new rules would include a provision restricting issuers and networks from limiting the number of networks over which transactions can be processed.

Eliminating "anti-competitive" practices in Canada

North of the border, the Canadian Competition Bureau has filed an application with the Competition Tribunal to eliminate rules imposed by Visa and Mastercard that it says create an anti-competitive environment for credit card payments.

With almost $250 billion in purchases processed by the two last year-accounting for about 90 percent of the credit card market in Canada-Visa and Mastercard dominate the credit card payments space.

The Competition Bureau says that some of the rules that the two place on merchants--such as prohibiting merchants from encouraging consumers to use lower-fee payment options and requiring merchants accepting any Visa or MC card to accept all, regardless of the interchange fees attached-have eliminated competition between the two, creating an effective duopoly.

Canadian retailers face interchange fees that are among the most pricey worldwide-at between 1.5 percent and 3 percent per transaction. This compares to flat-rate debit card transaction fees of around 12 cents. The US is one of few countries in which merchants pay higher interchange fees on credit cards than those seen in its neighbour to the North.

The Competition Bureau wants to see the rules imposed by the two firms struck down and a more competitive landscape enacted in Canada, which should drastically reduce the cost to retailers of accepting card transactions from customers.

Although these developments will not come to fruition until much after the holiday season, it could indeed be a merry New Year for retailers.