Evidence of meeting #18 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

  • Brian Crozier  Co-founder, Global Business Development, UseMyBank Services
  • Jim Baumgartner  President and Chief Executive Officer, Moneris Solutions
  • Jeff van Duynhoven  President, TD Merchant Services
  • Fern Glowinsky  Senior Vice-President, General Counsel and Corporate Secretary, Moneris Solutions

4:45 p.m.

President and Chief Executive Officer, Moneris Solutions

Jim Baumgartner

I'd love to, and thank you for raising the question.

I'm going to distinguish between an airline and a travel agent. There are government agencies involved in the tour operator business. In the case of the tour operators, TICO, if you're familiar with it--and there's a fund in Quebec as well--protects the travellers. They will require the tour operators to place on deposit funds for future trips. If you buy a trip to Cancun in June, for example, and it's a thousand dollars, and let's say you buy it from a major tour operator, that tour operator will have to place the money in a trust fund. However, if that tour operator were to fail, and let's say you were the merchant processor, you would dispute the transaction with your card issuer. We, as the merchant processor, would end up absorbing that charge if the tour operator was out of business. So we require, in the case of the more challenged tour operators, deposits as well.

So the tour operators are being doubly penalized, because the funds are holding money and ultimately, if it's charged on a credit card, the merchant processors get charged. That's a real problem for the industry. If there's anything anyone can do to help that particular industry out, they really need the help. I think Conquest was, in part, a victim of that particular situation.

In the case of the airlines, there is no such regime. We process for both. In the case of the airlines, we have a great big credit department that would look at the risk. If you own an airline and your airline is profitable and has plenty of cash and so on, we may not require a deposit. If you are more challenged or are going through some tougher times, we may require a deposit to protect against the risks I alluded to earlier.

4:50 p.m.

Co-founder, Global Business Development, UseMyBank Services

Brian Crozier

Can I add something about Conquest?

Have you ever noticed that you can't buy an airline ticket in this country unless you have a credit card? If you don't have a credit card, you can't buy an airline ticket. It's the only country in the world like this.

If you really want to help that industry, what you need to do is help people use their money to make that payment online. Air Canada needs the help of UseMyBank so they can accept payments from their customers in real time at a rate that is going to be competitive with Visa and MasterCard. Instead of so many regulations, we could have competition help drive those prices down.

The technology has been here for 10 years, and we're the only country that is not using it. We have Visa and MasterCard that want to have the entire market to themselves. We have online banking, and we have customers who want to receive those payments. There's really nothing in the way of making it happen.

If you buy a $5,000 trip, you don't have to pay 3% to Visa to get that job done. It can be done for a lot less than $150 on that transaction. That's what we're talking about.

At UseMyBank, we're only in the online world. When you talk about point of sale, it's a place we're not at. But in the online world, I think Canada needs to have some more ability for customers, if they want to make cash payments, to make them. If they decide they want to use Visa, they can use Visa. But we need to have more choices, I would say. Conquest Vacations, I think, could still be in business if they'd had that edge, that competitive edge, to offer their customers the ability to pick a debit payment.

Thirty to forty per cent of people don't have Visa or MasterCard. If you don't have a credit card, you can't shop online. It doesn't seem fair. It seems that you need to have two systems to reflect the same values as you have in the physical world, where you can shop with your cash, your debit, and your credit. When you go on the Internet, you're stuck with credit cards only.

I think Canada needs to have some kind of regulation or something in place to allow merchants to accept cash payments from customers who decide that they want to use their online banks. It makes sense.

4:50 p.m.

Conservative

The Co-Chair Michael Chong

Thank you very much, Mr. Crozier, that was helpful.

Thank you very much, Mr. Thibeault.

Mr. Lake.

May 26th, 2009 / 4:50 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

I want to direct my questions to Mr. van Duynhoven.

I'll go back to the letter, and to the statement that you provided us as well. I'm not sure that I'm any clearer, having been provided a sample statement, in terms of the flow of information. Maybe you can help me with this.

First of all to the letter, though, you mentioned that the letter is designed to kind of clarify situations for customers, but I notice that you use an example in your chart. You talk about the Visa corporate, commercial, and business card transaction fee and you use an example. With this fee change, a $75 transaction processed by your business will cost about 9¢ more than the current calculation. I think you're probably using that example to show that it's not much of an increase. Then with the Visa Infinite card transaction fee, which is a new charge--50 basis points--there is no such example. I would note that on the same $75 charge, it was easy to calculate using your number, and it looks like it would be about 37.5¢ more that they would pay.

Why would you not have an example there?

4:55 p.m.

President, TD Merchant Services

Jeff van Duynhoven

That's a great point, and several of our customers pointed that out to us as well. Essentially, that was a miss on our part.

4:55 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

Only it seems that oftentimes the miss happens to be when the change is to the detriment of the customer.

4:55 p.m.

President, TD Merchant Services

Jeff van Duynhoven

As I said, we pride ourselves on transparency. When we look at what some of our competitors have done, we think we still are very transparent with that. We've clearly articulated...in this example it was 50 basis points extra, you're right. We've learned, as we've gone through some of this, that some customers don't understand what basis points mean. We didn't put a tangible example in that particular case.

4:55 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

I think it illustrates the importance of the communication and some of the challenges here.

On the extra charge, I'm curious about the Visa Infinite transaction fee. Some people talked about 20 basis points or something, but in the letter it says 50 basis points. Is there an extra charge? Do TD Merchant Services make any extra money or charge extra for any of your clients when they use the Infinite card?

4:55 p.m.

President, TD Merchant Services

Jeff van Duynhoven

Yes, and in this particular example it was a 50 basis point charge. To answer your question directly, yes, some merchants pay more than the 20 basis point cost.

4:55 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

TD Merchant Services is actually making more money now. It's not any more complicated for you to do that transaction, but you're charging a surcharge on top.

4:55 p.m.

President, TD Merchant Services

Jeff van Duynhoven

We're charging a surcharge on top because, as I said in my opening remarks, those changes cost millions of dollars for us to change our systems to be able to process these incremental cost transactions. We need to be able to recoup our cost. As any good business person would, we look at the cost and ask how we can do that and do it in a fair and transparent manner. That's what we've done here.

4:55 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

It's largely an equipment cost.

4:55 p.m.

President, TD Merchant Services

Jeff van Duynhoven

Equipment and technology costs. It's less on the equipment side because it's not a point-of-sale device; it's more our own internal processing systems.

4:55 p.m.

Conservative

Mike Lake Edmonton—Mill Woods—Beaumont, AB

Okay. Where I was actually going was to the point-of-sale devices.

I'll move to the other statement you have here. Perhaps we could walk quickly through who sets what and who gets what.

First of all, simply to clarify on the point-of-sale devices, I notice there's a rental charge of $35. Is that per hand-held set-up?

4:55 p.m.

President, TD Merchant Services

Jeff van Duynhoven

This is again an illustrative statement. Customer fees will range depending upon the individual negotiation with that merchant and the type of equipment they have. Do they have a stand-alone point-of-sale device? Do they also want a PIN pad attached? In that case, I have to buy two component pieces. It really does depend on the individual client preferences of what they need and require to run their business.