B-3 Magnetic secure transmission (MST) – Credit and Debit Card Code

The Supervision and Promotion Branch (SPB) of the Financial Consumer Agency of Canada (FCAC) was asked to clarify the treatment of magnetic secure transmission (MST) technology under the Code of Conduct for the Credit and Debit Card Industry in Canada (the Code). MST technology is used to make mobile payments through the tra​ditional magnetic stripe reader of merchant terminals.

The issue raised is whether MST technology complies with element 11 of the Code, which states that “If a merchant chooses to accept contactless payments at the point-of-sale, the merchant shall be able to cancel the contactless acceptance on their terminal for each paym​ent card network, with thirty days’ notice, while maintaining all other aspects of their existing contract without penalty.” Currently, the acceptance of MST payments cannot be canceled at the terminal level.

It is SPB’s position that the circumstances under which merchants can cancel MST acceptance is contingent on whether merchants are charged higher fees for the acceptance of MST payments. Therefore, MST technology can be implemented as long as the fees to accept MST payments do not increase relative to the fees that are ch​arged to the merchant for accepting card-based payments at the point-of-sale.^{Footnote 1}  Fees to accept MST payments include those that may be set by a payment card network or its participants, including acquirers and other downstream participants (e.g. independent sales organizations). Merchants will be allowed to cancel the acceptance of MST payments if fees for MST acceptance increase relative to fees for card-based payments at point-of-sale.

This interpretation applies only to mobile payments made through MST technology and should not be construed as applying to other technologies or payment methods.

We request that you communicate this in​formation with relevant parties, including both Code and non-Code participants.

Tha​nk you,

Richard Bilodeau, Di​rector
Supervision and Promot​ion Branch
Financial Consumer A​gency of Canada