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 merchants.

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

4:30 p.m.

Conservative

The Co-Chair James Rajotte

Thank you, Mr. McKay.

We'll go to Mr. Lake.

May 14th, 2009 / 4:30 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

Does a premium card generate more revenue for MasterCard than a regular card?

4:30 p.m.

President, MasterCard Canada

Kevin Stanton

No, but there is increased spending on the card. On average, 40% more is spent at a merchant's on a premium card versus an ordinary card.

4:30 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

What are the fees on top of the interchange fees? Are any of those additional fees tied to the interchange fee, in the sense that they go up when the interchange fee goes up?

4:30 p.m.

President, MasterCard Canada

Kevin Stanton

There are acquirer fees that mark up interchange fees, and MasterCard has small transactional fees that are flat. We have fees that are ad valorem as well, but they're very small compared to interchange fees.

4:30 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

Are they tied to the interchange fee?

4:30 p.m.

President, MasterCard Canada

Kevin Stanton

No, they're tied to the dollar amount.

4:30 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

Is there anything in a merchant contract that explicitly states the maximum interchange fee that can be charged?

4:30 p.m.

President, MasterCard Canada

Kevin Stanton

I don't write merchant contracts. I know of none to that effect, but that question is probably better directed to the acquirers, because we don't manage that contract.

4:30 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

Speaking of transparency, it's interesting because this issue is so confusing, even in the way you portray this in section V in your opening statement. You say, “Our highest interchange rate went from 2% to 2.13%, and our lowest effective interchange rate was reduced from 1.45% to 1.21%.” I think the message you want to portray is that they kind of break even. But I want to talk about an extreme hypothetical.

Let's say that everyone was using the basic card rate of 1.45% originally, and over a period of time all of the consumers shifted to a high premium rate of 2.13%. That hypothetical extreme increase would be 47%. It seems to me we're hearing that that's exactly what's happening. It may not necessarily be happening to everybody who owns a card, but there seems to be a wholesale shift. The consumers don't even really realize what's going on, but the companies are shifting consumers from the 1.45% cards to the 2.13% cards.

Is there some truth to the fact that there's a general shift in that direction?

4:35 p.m.

President, MasterCard Canada

Kevin Stanton

No, because you have to demonstrate certain spend levels. The merchant value proposition doesn't kick in until there's a demonstrated spend of $24,000 a year on our card. That's why it naturally stops at about 5% of our base.

4:35 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

But there is a transaction. You even said in answer to one of the questions from across the way that there are programs to encourage issuers to use premium cards. You're encouraging your issuers to push premium cards on people and they are doing that, so more people are moving from the low interchange cards to the high interchange cards.

4:35 p.m.

President, MasterCard Canada

Kevin Stanton

No, we're not pushing their use. We made a program available because we were at risk of losing cardholders and issuers to American Express.

4:35 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

Did that program encourage more use of premium cards?

4:35 p.m.

President, MasterCard Canada

Kevin Stanton

It did, but at a lower cost than American Express.