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The government of Canada has secured voluntary commitments from Visa, Mastercard, and American Express to reduce merchant fees in Canada for small and medium-sized businesses accepting credit cards across the country.

Visa and Mastercard have agreed to lower the domestic consumer interchange fees to an annual average effective rate of 1.40% for five years.

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In addition, the companies have agreed to narrow the range of interchange rates that are charged to merchants and have also mandated annual verification by an independent third party.

American Express, which operates through a different business model with fees other than interchange fees, entered a separate commitment. This focuses on more fairness and transparency in the country’s credit card market regarding merchant fees in Canada.

All the commitments are aimed at making credit card acceptance fairer for small and medium-sized businesses and maintaining important card benefits such as reward programmes.

Canada minister of finance Bill Morneau said: “The voluntary commitments announced today are good news for Canadian businesses that accept credit cards, and good news for Canadian consumers.

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“With lower interchange fees, businesses will be able to save money that they can use to invest, grow, and create more jobs-an important part of strengthening and growing the middle class.”

The decreased interchange fee is expected to save $250m annually for Canadian small and medium-sized businesses. This estimate depends on credit card sales of approximately $250bn per year.

If medium-sized businesses having credit sales of $5m a year get a 10 basis point reduction in interchange fees, they will be able to save around $25,000 over five years.

For smaller businesses, with annual credit sales of $1 million per year, a 15 basis point decrease in interchange fees is expected to offer savings of up to $7,500 over five years.