Industry Committee on Oct. 5th, 2011

[Helen McDonald]

My understanding is that the Minister of Finance has started a task force on the payment system in Canada. One of the areas they're bearing down on is the idea of mobile payments, and what the opportunities, the risks, and the barriers are. As an observer of this field, I know that many companies see this as a new income opportunity: perhaps by assisting you in making an easy, painless mobile payment with your cellphone, a fraction of a cent goes to the service provider.

I know the interested parties include the banks, the telcos, companies like Google, PayPal, and Amazon. I think there's a lot of interest in what looks like a growth opportunity. I expect sooner or later the consumer will be paying for the efficiency or the ease, or whatever it is that gives them the benefits of that mobility, and will be using a single device like a smartphone to make a variety of transactions or to transfer money. But I'm by no means an expert in mobile payments, and I believe that the task force might be of interest.

[Lee Richardson, Conservative, Calgary Centre, AB]

I wonder about controlling it, or competition, and also how you might regulate it if you need to.

[Lisa Campbell]

As I was saying before about our work on the Internet, online, we have to be where consumers and businesses are, so we've had to develop the capacity. When we, for example, execute a search to seize terabytes of data, we often seize mobile devices and have to examine the data that's on them.

Also, the characteristics of smartphones that make them so appealing as a payment system.... And by the way, that is, as you mentioned, on the rise. Many smartphones are now equipped with something called near-field communications. This simply allows people to either swipe or tap at a payment terminal and they can pay using their phone. There are 25 million mobile phone users in Canada, and the global estimate for mobile advertising revenue is expected to be $14 billion this year. It's on the rise. So it's not only financial companies but marketers who are very interested in mobile phones for one key reason: it also contains a lot of information about the consumer and also often has a geospacial device that tells marketers precisely where consumers are physically.

It's a wonderful marketing tool, if you will. You can be quite precise, if that's what consumers are interested in. There are applications like geo-fencing, where a virtual fence is set up around a certain retailer, for example, and when a consumer walks by it, they can be targeted with ads from the retailer outlets in that area. Or there is augmented reality, which works in a similar way. If you hold up your phone and look at a visual area, it can add ads on top of, for example, Parliament Hill, saying “Starbucks is nearby”.

We are very interested in this space, as are our counterparts around the world, simply because--to the point that another member made earlier--it becomes increasingly challenging for consumers to negotiate and transact on a device that is quite small, where many of the conditions of a contract are hidden in fine print disclaimers that require several screens to navigate through. It isn't impossible to make it a fair playing field, but we need to adapt with it, as do businesses, so that it is a fair playing field.

[The Chair, Conservative, David Sweet]

One more minute, Mr. Richardson.

[Lee Richardson, Conservative, Calgary Centre, AB]

That's all, Mr. Chair.

[The Chair, Conservative, David Sweet]

Okay.

Well, I'm certainly educated: augmented reality and geo-fencing.

Mr. Thibeault, it's a five-minute round, but you have six minutes, as I added a minute to Mr. Hsu's as well to make up for the last round of questioning.

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you, Mr. Chair.

Thank you for being here today.

I will continue to follow up on my colleague Mr. Richardson, in relation to mobile payments. I believe you said the Ministry of Finance is having a task force. That's something I think I'll save some of my questions for, that task force.

I think the important thing to look at is that right now we're talking about credit cards and the credit card interest rates and the payments through a mobile phone. Will there be some cooperation between finance and industry to start working together? I guess on the telecom side, that falls to industry. On the rate side and some of the fears that we have relating to what happens if someone.... Right now, I believe a national bank has a sticker on the back of a phone. What happens when that falls off? Where's the responsibility going?

Is there anything being done right now to look into ensuring that we're protecting consumers in mobile payments? Because it seems every day there's a new application being introduced.

[Helen McDonald]

I'm a spectrum regulator, so once the spectrum has been auctioned or handed out for near-field communications on an unlicensed basis, my job is essentially done. We don't try to control what is done on it. That would be through another set of rules run by the Minister of Finance or the ministry itself.

Janet is sitting on top of the Protection of Personal Information and Electronic Documents Act, which promotes good privacy practices in commercial transactions. That's where I think she has been monitoring and trying to assist the task force to make sure the privacy aspects are looked at in their deliberations.

We wouldn't regulate, in a sense, other than through what happens through the anti-spam law, or what happens through the protection of personal Information law, what goes on in those transactions. That's where we would end. I'm not talking about the Competition Bureau, but--

[Glenn Thibeault, NDP, Sudbury, ON]

I'll get to competition in a second.

Is there, through the Office of Consumer Affairs—and I guess it's difficult for you to answer that question—anyone right now on the industry side looking at mobile payments and how that's coming mostly through telecoms?

[Helen McDonald]

This is Michael Jenkin, from Industry Canada as well, from the Office of Consumer Affairs. He can answer that question.

[Michael Jenkin, Director General, Office of Consumer Affairs, Department of Industry]

Thank you, Mr. Thibeault.

We are doing work internationally on this. As you know, mobile payments are a very new development. There are lots of different platforms out there, so lots of different ways in which companies are presenting the transactions.

The OECD consumer policy committee, which I chair, is working right now on revising its guidelines for consumer protection, which form the basis for what governments take as the standard for their consumer protection legislation. They're dealing with mobile commerce right now as one of the items they're looking to update. The guidelines were initiated in 1999. They're ten years old now and in need of revision.

There are concerns about issues such as disclosure, screen size, security, and other similar issues. I hope that work is going to come to an initial conclusion, at least on that part of it, the mobile commerce side, within about a year. Eventually that may result in some OECD guidelines in this area, which national governments will look at in terms of how they may approach the issue.

[Glenn Thibeault, NDP, Sudbury, ON]

Is your department then looking into creating a report of some sort into this? If so, would it be something that we would be able to get our hands on to review?

[Michael Jenkin]

No, we're not working on a report right now. We're working more on the international approach to standardize and harmonize, so we've got something to refer to.

As the other speakers have said, a lot of this stuff is inherently borderless, and one of the things you want to do is make sure your approaches reflect the best practice everywhere. I think we need to get some fundamental consensus about these issues internationally first and then look at how we proceed domestically.

The task force for the payments system review I think will also be looking at this issue as part of their ambit.

[The Chair, Conservative, David Sweet]

One minute.

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you.

Then maybe specifically to the Competition Bureau, I believe Rogers recently announced it intends to enter the banking industry, chiefly in the realm of credit cards. Would you foresee any conflicts that could arise from a mobile carrier also operating on a credit card system, particularly with the emergence of a mobile payment system or applications in e-wallets.

[Lisa Campbell]

I'm going to turn to my colleague, Matt Kellison, to talk about a case we have ongoing that illustrates some of the dynamics in this area.

[Matthew Kellison, Acting Assistant Deputy Commissioner, Civil Matters Branch, Competition Bureau]

Thanks, Lisa.

As you may be aware, we have a matter before the Competition Tribunal right now. We've made an application against Visa and MasterCard under our price maintenance provision, where we're challenging certain rules they've imposed on merchants that we feel are anti-competitive and that are raising merchant fees and by extension raising consumer prices.

As that matter is before the tribunal right now, I'm a bit limited in what I can say. What I can tell you with respect to, for example, mobile payments--and you mentioned Rogers specifically--is that would be something we would have to look at. Certainly communications carriers are becoming more and more complex, both in terms of carriage over telecom networks and in terms of the content they may own and provide on those networks. Certainly if they were to branch into something like mobile payments, that would be an area we'd have to examine to determine if there was any conflict.

As my colleague Ms. Campbell described, that's a developing market. It's a market we're seeking to stay on top of. Things obviously change very quickly. I can't say off the top of my head that this would be something that would immediately raise issues. It's something we'd certainly be mindful of.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Kellison. That was a great effort in trying to make a very sophisticated answer very brief.

Now on to Madam Gallant for five minutes.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you, Mr. Chairman, and to each of our witnesses.

Certainly from your introduction there is a great deal of expansion available in terms of e-commerce on the part of both the consumer and the commercial organizations. We're seeing that people are reluctant, first of all, to make any payments on the Internet because they're concerned about security. They're starting off purchasing more through organizations that have bricks and mortar.

When we want to expand industry and jobs in Canada, the availability of cash to put those bricks and mortar on the ground and start a business is becoming increasingly difficult.

We have the hurdle where the consumer is reluctant to purchase from a business that they don't know really exists and the businesses that want to do commerce on the Internet don't know how to get started. Is there a designation for businesses that have demonstrated they are a legitimate e-commerce? For example, in the travel industry there is a TICO, Travel Industry Council of Ontario, designation. People know if they see the little TICO bar on there that they have some backup. Is there any designation even for Canadian companies where it's verifiable that if you do business with this company they're on the up and up?

[Helen McDonald]

Other than a better business bureau, which would just be generally “up and up”, I don't know of any brand or mark that's used to show that a Canadian firm is trustworthy in its Internet commerce. Within a particular industry sector they may have such designations, but I don't know of....

Lisa.

[Lisa Campbell]

You pinpoint what is a growing international problem. We are seeing more and more Internet sites that either use a country name, a domain name, or a country flag. In fact the fraud that we see online will be targeted to a geographic population. We have a case going on right now with a copycat of the well-recognized Yellow Pages “fingers”. It's an international fraud, in our view. It's before the courts, so I can't speak about it in detail. Suffice to say, though, that it was targeted even down to the province, so it would say “Yellow Pages Ontario”, imitating what we thought was the real Yellow Pages.

In fact, I mentioned the International Consumer Protection and Enforcement Network. They do an annual sweep, and the sweep this year is just that, to target websites that say they're endorsed by a celebrity, endorsed by a third-party trust organization, or endorsed by a country. Around the world regulators like us, enforcement agencies, are targeted at finding those sites and shutting them down if they're false.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

So there's no place a consumer can go to on the Internet--a government website--to check to see that a company has been demonstrated to be trustworthy in its conduct of e-commerce?

[Lisa Campbell]

No, there is not an accreditation per se. What we do have, though, is tremendous guidance on how to spot fraud and report it, what to do and how to check against it. But there isn't something to accredit a website, because, quite frankly, it is very easy to set up a website.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Are regulations being considered to increase to a higher level of security for e-commerce? When you do e-banking there seems to be a much higher level of security in doing transactions than if you're just buying something over the Internet. Is there a push to have other companies be required to have a greater degree?

Many of us have experienced hacking into accounts, and everybody has access.... There have been some big ones. I think of Winners, a while back, and so on. So that's another hurdle that consumers have to overcome to be willing to do business on the Internet.

[Helen McDonald]

If I could respond briefly to that, the task force looking at the payment system, including mobile payments, is also looking at the question of whether greater regulation is needed in this area. But there's a technology slice to it as well. Do you need ways in which you could assure yourself that a website is valid and that your transactions are secure? If you've done any electronic banking, you'll note the “http” shifts, the S comes in to designate it's secure. In some instances, you find little keys on your screen that show you've now established a secure transaction.

I don't think there's any single solution to this. It does require regulation. It does require technology solutions.

The data breach notification in the amendments that were tabled recently to PIPEDA will also help, in that it will force businesses to let the data subject know if there has been a substantial breach that will put at risk your information or identity or finances because of the nature of the breach. And because that now becomes incumbent on all companies--not just those that are good at this and care about it--it should help improve the level of security in firms as well.

The point was made earlier that if you don't have digitally skilled citizens engaging in these transactions, those who do know how to protect themselves, that is also not helpful. In my opinion, we have to make sure that the kids graduating from schools are able to look after themselves online. And we have to make sure that the information we're putting out on our anti-spam websites, on the Competition Bureau website, as many websites as we can, is simple information on how to protect yourself and how to stay on top of what the new scams might look like, and what to avoid.