Canada's latest changes to card network fees raise an interesting question about interchange regulation and whether the savings being negotiated are making their way through to merchants.
On 19 October 2026, Mastercard replaced its Acquirer Clearing Fee in Canada with a new Acquirer Network Access and Brand Usage (NABU) fee.
The change is worth examining, especially given the attention that interchange reductions have received in Canada over recent years.
Under the previous arrangement, Mastercard charged acquirers when transactions were submitted for clearing. The new fee is based on authorisations, which introduces a different charging basis and potentially extends to transactions that never result in a completed payment.
There is also a significant change for smaller transactions. The previous lower fee for payments of US$25 or less has disappeared.
Small transactions, considerably higher fees
Consider a convenience store processing mostly low-value transactions.
Previously, a transaction of US$25 or less attracted a clearing fee of US$0.005. Under the new structure, the domestic authorisation fee is US$0.0195.
That's an increase of 290%.
For a merchant processing 5,000 such transactions a month, the annual cost rises from US$300 to US$1,170, assuming all transactions are approved and cleared.
An additional US$870 a year may not seem especially significant, but for larger merchants operating across hundreds or thousands of locations, the numbers quickly add up.
The timing also deserves attention. Canada has spent considerable effort negotiating lower interchange rates for smaller merchants, with further Visa interchange reductions taking effect in October.
Merchants could therefore find themselves benefiting from lower interchange while facing higher network fees at much the same time.
It would be useful to understand how much of the intended interchange savings will actually be reflected in their total acquiring costs.
The cost of unsuccessful transactions
The shift to authorisation-based charging has implications beyond small-ticket payments.
Previously, a declined transaction would not normally attract the clearing fee. Under the new arrangement, unsuccessful authorisations may also be chargeable.
Take a merchant generating 10,000 domestic authorisation requests each month, all above the previous US$25 threshold.
At a 15% decline rate, the old clearing fee would have amounted to US$165.75. Under NABU, the cost would be US$195 if all authorisation attempts are charged, an increase of 17.6%.
At a 30% decline rate, the increase approaches 43%.
The Canadian notices don't explicitly confirm whether declined authorisations are billable, although Mastercard's equivalent US fee does apply to them. This remains an important point for acquirers to clarify.
The impact becomes more relevant for businesses processing substantial transaction volumes, particularly those using automated payment retries or operating in sectors where declined authorisations are relatively common.
Hotels and car rental companies also need to consider the charges associated with authorisation reversals, given their reliance on temporary card holds.
These fees have a legitimate commercial basis. Card networks incur costs in processing authorisation requests regardless of whether a payment completes. The point is that a change in how those costs are recovered can have quite different consequences across merchant segments.
Looking beyond interchange
Interchange is generally the largest component of the merchant service charge, which explains why it has attracted so much regulatory attention.
However, network fees, acquiring charges and other processing costs also contribute to the final price merchants pay.
The Canadian changes provide a useful example.
A merchant processing mainly higher-value transactions with strong approval rates may see little change in its network costs. Another merchant, processing large volumes of small payments, could see the relevant fee increase nearly fourfold.
Both operate under the same network pricing structure, yet their outcomes are quite different.
There is a further complication in how these charges reach merchants. Network fees may be denominated in US dollars, converted into local currency and subject to applicable taxes. Acquiring agreements can also incorporate them differently, particularly where merchants are charged blended rates.
Acquirers themselves have legitimate costs associated with processing infrastructure, fraud and risk management, settlement and the services they provide. Those costs, together with the commercial return required to operate an acquiring business, are part of the overall economics.
Understanding the effect of a pricing change therefore requires looking at the full merchant service charge rather than interchange in isolation.
What does this mean for interchange reform?
Canada's interchange reductions have been welcomed by merchants, and understandably so. Lower interchange should contribute to lower acceptance costs, assuming the savings are passed through.
But changes to network fees can offset some of those benefits, depending on the merchant's transaction profile and acquiring arrangements.
Canadian merchants would be well advised to review their statements following the October changes, particularly where average transaction values are low or authorisation volumes are high.
There's also a wider industry consideration. Will similar charging approaches become more common in other markets, and how should regulators account for them when evaluating the effectiveness of interchange reforms?
The discussion around merchant acceptance costs has been dominated by interchange for many years. That focus has produced meaningful changes in several markets, but it only addresses part of the underlying economics.
If the intention is to make card acceptance more affordable, the measure that matters is the total amount merchants pay. That requires a proper understanding of network charges, acquiring costs and how the different components interact.
Lower interchange is certainly welcome. Whether it translates into lower merchant acceptance costs is a different question, and one that deserves considerably more attention.
Sources and references
- Card Brand Network Fee Updates - Mastercard NABU rates and implementation.
- Payment Card Network Fee Updates - Canadian network fee schedules.
- Fall 2026 Card Network Updates - Visa and Mastercard network changes.
- October 2026 Interchange and Network Fee Changes - Analysis of authorisation-based charging and decline-rate implications.
Research note: Based on published fee notices available as of 20 October 2026. The treatment of declined Canadian Mastercard authorisations remains subject to confirmation. Calculations are illustrative and exclude tax and currency conversion.