When Hiruy “Mez” Girmay decided to start his own business, he knew he’d have to scratch and claw for every dollar.
After his first shop at the now-defunct Pickering Markets closed down, in August the 29-year-old opened the first stand-alone location of 13 Suns Ethiopian Café & Eatery, a passion project near Warden Avenue and Eglinton Avenue East in Scarborough that combines plant-based cuisine and modern Ethiopian dishes.
“It hasn’t been simple, to say the least,” Girmay said. “It’s slowly showing a lot of promise and potential.”
13 Suns is one of thousands of small businesses across Canada that hopes to benefit from last December’s agreement between the federal government and credit card giants Mastercard and Visa to lower interchange fees — a slice of the total fees on each tap or swipe that goes to the bank that issued the card — for small business credit card transactions.
The Canadian Federation of Independent Business hoped the agreement would result in lower total processing fees for all small businesses accepting credit cards. However, at least one payment processor has said that it will not lower its fees for small businesses, raising concerns that some small businesses will benefit, but not others.
The agreement to lower fees applies to businesses with annual Visa sales of less than $300,000 and annual Mastercard sales of less than $175,000. The federal government estimated that the reduction in fees will save Canadian small businesses a combined $1 billion over the next five years. The changes are scheduled to take effect on Oct. 19.
But payment processor Stripe said the fees it charges businesses via its standard plans would not be changing ahead of the Oct. 19 implementation of the interchange reduction.
“In the aggregate, costs for processing payments in Canada have gone up, but we’ve decided to keep our standard pricing the same,” a Stripe spokesperson wrote in an email to the Star.
Other payment processors, however, have said they’ll “pass on” the resulting savings to merchants.
In an email, a spokesperson for Square referred to an Oct. 8 blog post in which the company said it is “pleased to pass on savings by lowering processing fees in order to keep rates low for our sellers.”
Similarly, payment processing company Moneris said in a statement to the Star that they “will pass through the interchange fee reductions” to qualified businesses under the new agreement.
Mastercard and Visa did not respond to a request for comment.
Dan Kelly, the president of the Canadian Federation of Independent Business (CFIB), said Stripe’s decision to not pass along savings to its customers could “negate the savings” of hundreds of thousands of small-business owners across the country.
“While I compliment them for their transparency in letting businesses know through their website they’re not going to do this,” Kelly said, “it is hard to see this as anything other than a giant rip-off.”
Kelly said the CFIB is advising its members that the interchange fee reduction could net qualified businesses between $300 to $400 in savings for every $100,000 in Visa transactions and $200 to $250 in savings for every $100,000 in Mastercard transactions.
“This isn’t going to make it or break it, but that would be a relief to merchants to see that kind of reduction,” Kelly said. “And that is welcome news.”
Girmay, who uses Square to process transactions in his restaurant, isn’t yet sure how potential interchange savings will impact his business’ operations. They could go toward equipment, an expansion of his staff, or even rent, he noted. Still, he said any savings helps, especially for an operation so new and still finding its footing.
“These fee reductions are just a small step toward being able to really sustain my business and making me feel a little more hopeful in this scary world of entrepreneurship,” Girmay said.
