Finance Committee on March 22nd, 2007

[Karen Michell]

Well, of course, the banks and white labels are competing for space in all sorts of different retail outlets in terms of where they are going to put their ABMs to serve customers--

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

How many are the banks negotiating exclusively?

[Karen Michell]

Well, the banks are looking to have service both on their own premises and off premises as well, so in terms of whether we are privy to all of their exclusive contracts, no, not at all.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

You can tell us about your exclusive contracts. You've identified airports and universities. You're trying to say you want that territory; no one else can have it.

How many?

[Raymond Protti]

Well, we wouldn't have that knowledge. That would be knowledge that each individual institution would have. It's really a question we would have to take back to the individual institutions.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Okay, then let me ask about fees.

Mr. Johnson makes a very important point about the cost it actually--

[The Chair, Conservative, Brian Pallister]

Mr. Protti, I'll just intervene. Your time is up, Madam.

In respect to the previous question, if you would commit to undertake to provide the committee with that information, that would be appreciated.

[Raymond Protti]

Well, to the extent I can provide that information, Mr. Chairman, I certainly will. There are a variety of questions we haven't had a chance to respond to, and I'll be responding, Mr. Chairman, to all of those.

[The Chair, Conservative, Brian Pallister]

We appreciate that, sir. Thank you.

[Raymond Protti]

Thank you, Mr. Chairman.

[The Chair, Conservative, Brian Pallister]

We'll continue now with Monsieur Thibault.

[Robert Thibault, Liberal, West Nova, NS]

Merci, monsieur le président, and thank you all for appearing.

I live in rural Canada. I have a lot of choice. I can go to a white label and pay a fee, I can burn $10 worth of gas and get to my own bank and get money from a machine at any hour without a fee, or I can go to that branch when it's open and get it from a teller. I like the choice.

As far as the debit machines and all those are concerned, I haven't seen those stores yet in my area where I couldn't use a credit card or a debit card. The only place I've seen that, actually, is at the cafeteria on the fifth floor of the Centre Block of Parliament Hill. It may be happening; I'm not aware of it. I haven't seen that move. I have seen an increase in choice.

What I am concerned about, and I think it's the fundamental question here, is whether we should be regulating or not. Should we have legislation or should we not? It comes down to a question of pricing, and that comes out to a question, basically, of whether there is collusion in the market. Is there true competition in the market? If not, then there's an argument to be made that perhaps Parliament should look at this, that there should be some regulation.

So I will ask the question first to Mr. Protti. I don't think we'll have time for answers from the others, but I would appreciate it if you would reply in writing to the chair so that we can get it. If there is no collusion, if there is true competition in the market, why are the prices similar?

[Raymond Protti]

There could be no collusion in the marketplace. Collusion in the marketplace would be illegal under the Competition Act.

The issue of the setting of prices for products and services is not an issue that we can discuss collectively around the trade association table. The Competition Act makes it abundantly clear that you cannot sit down with other members and collude or agree on the setting of prices for the products and services you're providing.

So the first answer to your question is no, you can't have collusion. If you had collusion, then you'd be subject to prosecution under the Competition Act. That's the first issue--you can't have it.

What was the second part of your question?

[Robert Thibault, Liberal, West Nova, NS]

The question is if there is no collusion, if there is true competition, if there is no tacit understanding that nobody underprices another, how come the prices are very similar? How come they're exactly the same?

[Raymond Protti]

Why does the price of a standard loaf of bread collect around a very close median figure? Why is the price of a subcompact car provided by any of the three North American manufacturers very similar?

There are at least 15 different elements that go into the cost structure of a sophisticated system like an ABM--

[Robert Thibault, Liberal, West Nova, NS]

With due respect, Mr. Protti, in those cases where there is true market competition, we see offers of rebate. We see price reductions to try to get consumers through the door. We haven't seen any of that in the case of these transactions.

[Raymond Protti]

Yes, you do. The lowest-cost providers in terms of accessing your non-bank ABMs are in fact the banks at $1.50.

The Mouvement Desjardins has just increased its rate by thirty-three and a third per cent to $2, and the argument that the Mouvement Desjardins made in doing that was that they have the most extensive network of ABMs in the province of Quebec. They have 2,800. They are the single biggest financial institution. They're saying why should they subsidize anybody else using their ABM system, so they increased their rate from $1.50 to $2.

Then, of course, with white label providers, you can have fees that range up to $3, $4, and I'm told--I have none of this on personal experience--that in gentlemen's clubs, stripper organizations, bars, the fee may be outrageously high. But I assure you I don't have data based on personal knowledge. So there's a tremendous range out there if in fact a consumer is looking at a variety of choices.

If I can, I want to make one more basic point. For me, the issue is not 50¢, $1.50, $2, or $4. The issue for the consumer is that the fee can very easily be made to be zero, because there is an enormous amount of choice out there. So for me the relevant number is zero.

[The Chair, Conservative, Brian Pallister]

The next question will be Mr. Ouellet.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Thank you, Mr. Chairman.

If we acknowledge that the need for cash is a basic need in our society, like the need for water or food, why should we rely solely on market rules to establish the cost?

In general, market rules work very well for people with money. I don't have a lot but I do have some. Therefore I obviously do quite profitable business with the banks. If I only have $100 and I withdraw $20 every day or every three days, I will not be a profitable customer for the bank. The bank won't be interested in my kind of transaction and will therefore make me pay through the nose.

Since this is a basic need, it requires not necessarily regulations, but standards according to which if you have a small savings account, you will withdraw very little money. It should be more expensive if you withdraw more money. I'd like to hear your views on that.

[Michel Arnold]

In fact, we're seeing the reverse. The more money you have, the more transactions you have and the less it will cost you.

I'd like to correct one thing. Based on what Mr. Protti said, the perception of the banking system has changed a great deal in the past few years. That's quite true. However, this change in the banking system is not the choice of the consumer. I want to point that out.

ATMs have become well established, which serves consumers in terms of accessibility; that much is true. In terms of fees, that's a whole other matter. ATMs also serve the banks who rationalized their operations by closing branches just about everywhere.

Your suggestion is probably a good one, but we need to ask our friends the bankers how they plan to do such a thing. Right now, we're really seeing the reverse situation.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

So you're in favour of some oversight for basic needs. The government is responsible for that oversight. Mr. Protti gave the example of the automobile. I live in the country and so does my neighbour. People there buy used cars and pay what they can. They don't buy expensive cars. I have the same problem. People have to leave their homes and travel quite far. They spend money to buy gas or they pay. There's something abnormal here. We regulate water, highways, we regulate everything, but we don't regulate something that's essential to live on, namely cash.

How do you explain this?

[Karen Michell]

Thank you.

If I may, there's been a lot of discussion about whether regulation or competition is the best. In Canada, we have the number one access to ABMs per capita in the world. I would suggest that what that has resulted from is the competition we have in the marketplace. We have banks, we have non-banks, and we have non-financial institutions all participating in this ABM network. That situation arose as a result, as Mr. Protti mentioned, of the Competition Tribunal announcing in 1996 that you would have the ability to surcharge so that there would be a business model that supported putting ABMs in lower traffic volume areas. And this competition of all sorts of different providers has led to, number one, the best system in terms of access per capita in the world in Canada.

In terms of whether the choice is driven by consumers or by banks, our polling tells us repeatedly that three-quarters of our customers are very pleased with the technology solutions we offer them. They find it makes their banking more convenient and it saves them time. In addition to that, we're finding now that about 85% of transactions are actually done electronically, whether over an ABM, online, or telephone banking, so it extends the banking experience to a 24/7 kind of experience. So I would suggest to you, as a result of that, that consumers are telling us, and the marketplace is telling us, that we've got a good--

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

[Editor's note: inaudible] poor people, madam.

[The Chair, Conservative, Brian Pallister]

Merci, monsieur.

What percentage of a bank's revenue--can you give me a general number--is derived from ATM fees?

[Raymond Protti]

From a convenience fee, in particular, Mr. Chairman?