Evidence of meeting #17 for Industry, Science and Technology in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was interchange.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Kevin Stanton  President, MasterCard Canada
  • Andrea Cotroneo  Vice-President and Canada Region Counsel, MasterCard Canada
  • Tim Wilson  Head, Visa Canada
  • Bill Sheedy  Regional President, North America and Head of Interchange Strategy, Visa Canada

5:30 p.m.

Regional President, North America and Head of Interchange Strategy, Visa Canada

Bill Sheedy

I was just going to indicate that I appreciate that there's clearly an issue here. We wouldn't be having this hearing, we wouldn't be having these discussions, if there weren't. And in many of the exchanges that my colleague and I have had with merchants, we understand that many of the groups and merchants aren't pleased.

I think that as an industry, and certainly as a company, we can do a better job--and have done a better job--being more transparent with our rates and doing a better job explaining why we do what we do. I think that will help. I do think that over time, merchants have forgotten that the credit card network and the payments industry provide tremendous benefit to them. Increasingly, as the business has evolved and matured, they've focused less on the benefits and more on the dollars of expense.

5:30 p.m.

Conservative

The Co-Chair James Rajotte

Merci, Monsieur Bouchard.

We'll go now to Mr. Dechert, please.

May 14th, 2009 / 5:30 p.m.

Conservative

Bob Dechert Mississauga—Erindale, ON

Thank you, Mr. Chair, and welcome, gentlemen.

Our government understands the importance of small business to our economy. We understand that most merchants are small businesses. For example, that's one of the reasons we decreased the GST by 2%, which had a big benefit to retailers across Canada.

I certainly want to acknowledge the important role that Visa and MasterCard, and other credit card payment mechanisms, provide to enhancing the business and consumer spending, and therefore the success of merchants. We also acknowledge that consumer spending is a big part of the success of our economy. Of course, we want to do everything we can to encourage consumer spending to help bring us out of the current economic situation.

Having said that, I have some questions for you about your request to enter the debit market, and also some questions on the credit card side.

We heard from the Retail Council of Canada and the CFIB that the lowest-cost payment form that their members have access to is the debit payment mechanism. They showed us some statistics to show that. They also gave us some statistics on the percentage of consumers who have availability of using the Interac system and the debit system in Canada. Will the percentage of Canadian consumers who have access to debit increase if your company and, for example, MasterCard are allowed to enter this market? That's one question.

What will the effect of the entry of your company into this market be on the cost of transactions to merchants? We heard from MasterCard just a few minutes ago, and they told us their proposition for debit is a flat fee and lower than Interac rates. Is that your model as well?

The fourth question on this is, why would the retailers not want to have you enter the debit market if by entering the market you gave access to more consumers to the debit system, which is a lower-cost form of payment for them?

5:30 p.m.

Head, Visa Canada

Tim Wilson

We believe that by entering the debit market in Canada we can bring value to both merchants and to consumers. There are a couple of reasons for that. On the consumer side, we bring the opportunity for increased functionality, as I mentioned, the opportunity to use the card online, for mail or telephone order, and in 170 different countries around the world, when people travel internationally, which is becoming more important as our economy becomes more globally integrated. So we bring functionality.

We also bring best-in-class fraud controls, the opportunity for banks to bring new security features to the debit cards they offer in Canada and to more effectively manage fraud.

On the retailer side, we offer, number one, the opportunity for them to provide choice to their consumers, to create satisfied customers, and also the benefits of bringing new technologies. So we have innovations, like what we call Visa payWave, a card that's just waved in front of a reader and requires no signature for transactions under $25 to $50. That can help retailers who operate in a small ticket environment, whose business model relies on quick throughput, to speed up that throughput and generate efficiencies.

5:35 p.m.

Conservative

Bob Dechert Mississauga—Erindale, ON

Those are obviously some benefits to merchants. So why do you think the merchants are telling us that they don't want Visa and MasterCard to enter that space?

5:35 p.m.

Head, Visa Canada

Tim Wilson

I think clearly, with the debit product in markets today, which has zero interchange and low fees, they feel it's—as you mentioned—the lowest-cost form of payment. We like to look at payment more broadly, and competition more broadly, in that we look at the value a product provides, not simply the price. It's like looking at the car market and comparing BMWs to Honda Civics. You pay more for one because you get increased features and functionality. We bring new features; we bring choice; we bring competition. We think that will deliver value.

5:35 p.m.

Conservative

Bob Dechert Mississauga—Erindale, ON

On the fees, are you suggesting the same fee structure as MasterCard, or is your model different?

5:35 p.m.

Head, Visa Canada

Tim Wilson

Ours is a hybrid fixed fee and percentage fee. It's a bit of both. It's a different model.

5:35 p.m.

Conservative

Bob Dechert Mississauga—Erindale, ON

Okay.

5:35 p.m.

Head, Visa Canada

Tim Wilson

We disclose all those rates on our website.

5:35 p.m.

Conservative

Bob Dechert Mississauga—Erindale, ON

With respect to credit cards, you mentioned earlier that you can provide statistics that demonstrate that people purchase more if they have a premium card. Can you provide those statistics to the committee? I'd be very interested to see that. I asked the same question to the Retail Council of Canada, if they believe that consumers would actually spend more because they have a premium card as opposed to a card with fewer attributes, and they said they didn't believe it.

5:35 p.m.

Head, Visa Canada

Tim Wilson

We can provide some statistics to the committee.

5:35 p.m.

Conservative

Bob Dechert Mississauga—Erindale, ON

If that were true, you could presumably show that to the merchants, and they would want people to use those cards because they would spend more and perhaps be willing to pay a higher price.

5:35 p.m.

Head, Visa Canada

Tim Wilson

Yes. We believe these are the highest-valued consumers to merchants. We set very specific spending or income thresholds for the cards to ensure that they are the most valuable customers. They spend the most and deliver the most value for retailers.

5:35 p.m.

Conservative

Bob Dechert Mississauga—Erindale, ON

Would you say that's the justification for charging a higher interchange fee for processing that credit card?