Finance Committee on March 4th, 2014

[Caroline Hubberstey]

What I would say is that when we look at solutions, we certainly look at solutions with privacy-minded security, and I'll give a couple of examples. Interac Online, which is our online e-commerce solution, is actually done through web banking. The merchant actually doesn't get any personal financial information.

Protecting the money in the bank account is different than having a credit card where you can dispute a transaction for a period of time. It's the same for the card today that you have in your wallet. That number on the front of your card is an identifier. It's not an account number. You cannot do any transactions called “card not present” transactions with that information. It's just an identifier, and we use that for Interac Flash as well.

[Scott Andrews, Liberal, Avalon, NL]

I'm also on the privacy and ethics committee. We did a study on big data, trying to digest here in Canada the accumulation of data on customers and how do consumers actually have a knowledge of what is being consumed. We talked about loyalty programs and that kind of stuff.

Is how much information is being collected on customers a concern when it comes to mobile payments?

[Kurt Eby]

I don't believe so. In most cases, the wireless companies—certainly with the agreements that are made now—aren't collecting anything. They don't know that you're making payments from your phone. It's standard information on transactions that the financial institutions or the credit companies would have right now, just for making card transactions. It's no different.

[Frank Maduri]

We wouldn't know if you paid with your card or your phone. We don't see that data. It doesn't exist.

[Scott Andrews, Liberal, Avalon, NL]

Caroline, what about when it comes to south of the border and what the privacy laws and that are down there? How does Interac go, internationally and between our two countries?

[Caroline Hubberstey]

It depends on the product. Our international product would be our cross border debit, where you could use your card in the States. A number of financial institutions offer that feature. You would be using your card, today, as a “mag stripe” transaction, at a point of sale terminal. But again, that information is just an identifier, just a number; it's not identified to you as a person. It's a series of numbers to be able to facilitate the transaction.

[Scott Andrews, Liberal, Avalon, NL]

Mr. Maduri, Caroline talked about small businesses doing more business-to-business mobile payments. Do you agree with that, and do you see where business-to-business payments are going? Are more businesses going to avail themselves of that, or is it mainly in the small to medium-sized businesses?

[Frank Maduri]

I see a big opportunity in small business, again, using this as a terminal to accept a debit card, a credit card, or a BBM payment. That's a massive opportunity, right? And you're seeing it. There's a company in the U.S. called Square. I think there's a company in Vancouver called Payfirma. We believe there's going to be a lot of that.

A lot of the discussion here is about wallets and the consumer side. But on the merchant side too, they're going to be leveraging this to accept payments, so we're big believers in that.

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

[Scott Andrews, Liberal, Avalon, NL]

I have one last question.

Mr. Gaetz, the committee heard last week that the Canadian payment system must be upgraded to carry more information.

What would that entail?

[Gerry Gaetz]

Thank you for that question. I was looking for an opportunity to say something about this.

One of the initiatives that we have launched and are working hard on is to adopt a global payment standard for Canada. We're starting with our core systems. That will then roll out to our members, and we really would expect that to roll out over time to the rest of the Canadian economy.

The idea is to have some standard information flow with the payment. We're working on a scheme to have a small set of mandatory information. When I say “mandatory”, I mean we'd be saying that all our members should adopt that standard set of information. The expectation is then that could start to be used by large and small business, but small and medium-sized business could start to use it to link into their invoicing systems and their accounts payable and accounts receivable systems in a way that they can't today.

So we think this is very important.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Andrews.

I'm going first to Mr. Saxton.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thanks, Chair.

I'll share my time with Mr. Keddy.

My first question is for Mr. Eby.

Are you aware of any recorded instances of fraud using mobile payment services to date?

[Kurt Eby]

I'm not, no.

[Andrew Saxton, Conservative, North Vancouver, BC]

So it's unlikely that it's happened to date.

[Kurt Eby]

I couldn't say that. I'm just not aware of any, at least not for the types of payments that I'm talking about, which are through actual financial institutions. I believe I've seen stories about the Starbucks' bar code scanning thing. I think there have been fraud issues with things like that, but not ones that are done through actual banks and in partnership with wireless carriers or device-makers.

[Andrew Saxton, Conservative, North Vancouver, BC]

The Starbucks method is a stored-value card.

[Kurt Eby]

Yes, and it's an app. There's no relationship between Starbucks and the device-maker or the wireless provider at all.

[Andrew Saxton, Conservative, North Vancouver, BC]

They don't have the full protection of a chip or....

[Kurt Eby]

I would assume not.

[Andrew Saxton, Conservative, North Vancouver, BC]

Okay, thanks.

Mr. Maduri, your company is international. You operate in different countries. Can you tell me what other countries are doing with regard to mobile payments? Where do we stand as far as the technology and the usage are concerned?

[Frank Maduri]

That's a perfect question.

The first comment, and maybe it will answer the rest of it—and I'll keep it to 30 seconds—is that we're far more advanced than anyone. If you go to MasterCard's website, they rank us number two in the world for mobile payments. Singapore is number one. Last year, actually, I was a keynote, and I went to Singapore, met with all the banks and the carriers, and they're nowhere near us. In terms of commercial deployments, acceptance, no one's using it. Australia is another country that's nowhere near it. I've done a lot of work in the U.K., and Turkey, and in the U.S., a tremendous amount of work. In terms of contactless payments we're by far the furthest.

At the same time, I'll tell you something else that I think you need to know. I think we're in the early stages. In terms of being aware of an instance of fraud or whatever, there are not many transactions.

We're the furthest ahead when it comes to contactless payments. In other areas we're probably behind. If you go to Africa, people are using text messaging—for example, in Kenya—to pay and transfer money. In Indonesia, we're doing that.

But in terms of contactless payments, by far this is it. Ask MasterCard, Visa, the banks. They all know this is the market where we'll make it or break it in terms of this new area.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

[The Chair, Conservative, James Rajotte]

You have two and a half minutes.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

I don't think I'll take quite that long.

I'm still struggling a bit with the regulatory regime. I just went in and read the code of conduct that we brought in through the Department of Finance. Again, it's a balancing act between stifling innovation and having a regulatory regime that allows everything to work properly. The comment was made—and I forget who made it, it may have been Flow—not to restrict merchants' or consumers' choices. However, it would seem to me that in order to have a regulatory regime, by the very fact that you have one, there is some restriction of choice.

My question to the panel is whether the code of conduct is sufficient. Is it a living thing that needs to be constantly updated, or is it too restrictive?