Yes.
Evidence of meeting #73 for Finance in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was system.
A recording is available from Parliament.
Evidence of meeting #73 for Finance in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was system.
A recording is available from Parliament.
12:25 p.m.
Bloc
Thierry St-Cyr Bloc Jeanne-Le Ber, QC
I'd like to get back to Mr. McKay's comment. I'm not entirely satisfied with the answer about the feasibility of instantaneous transactions. Perhaps this is because of my former occupation, because before I was elected I was a computer engineer. I know full well that the transaction could be done absolutely instantaneously; this is not a computer problem, it's purely a banking issue. I'd like to fully understand what prevents transactions in real time rather than in batches or—
March 22nd, 2007 / 12:25 p.m.
President and Chief Executive Officer, Canadian Payments Association
In differed fashion.
12:25 p.m.
Vice-President, Policy and Research, Canadian Payments Association
The batch system we utilize within the CPA has been relied upon for many years and has a number of advantages. First and foremost is efficiency. You're allowed to consolidate data from a number of sources and enter it into our system, so it's relatively inexpensive. To develop a one-on-one system just for the message exchange would be rather expensive.
Second is reliability. If you were to open up the system and have additional points of access you would increase your operational risk.
Finally is accessibility. Today financial institutions access our system directly; the billers do not. So the financial institution provides a point of contact so that each biller is not required to connect to our system and increase the cost.
The batch system is extremely efficient and is relied upon by virtually every country in the world, from a clearing and settlement perspective.
12:30 p.m.
Bloc
Thierry St-Cyr Bloc Jeanne-Le Ber, QC
This batch processing is done daily. Are there places where it's done more frequently or could it be done several times a day? Could that be considered? Does everybody do this at the same time?
12:30 p.m.
Vice-President, Policy and Research, Canadian Payments Association
It could possibly be done more than once a day, but what we're talking about is only the exchange of the payments between the financial institutions. As we set out in our submission, and as Mr. Legault pointed out, there are really four systems involved in a bill payment. The first part where the consumer speaks to his or her financial institution is not part of our system. Once they have that data they consolidate it in a batch system. Then they enter it and it goes across to the receiving financial institution.
When we're talking about the legs to the transaction, essentially we clear and settle once a day. If we were to clear and settle twice a day you may be able to shorten the overnight settlement, because settlement occurs overnight, but it doesn't mean that billers will actually receive the funds any quicker. You may shorten it by a few hours at best.
In many cases, once Canadian financial institutions receive the data they give provisional credit for many of the transactions before settlement is provided. So the merchant or the biller generally has the funds before settlement occurs.
12:30 p.m.
Liberal
The Vice-Chair Liberal Massimo Pacetti
Thank you, Mr. St-Cyr.
I'm being a little bit lenient on time so you can explain the process.
Mr. Wallace is next for six minutes, and then Ms. Wasylycia-Leis.
12:30 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
Thank you, Mr. Chairman.
I appreciate you coming today. It's an area I knew nothing about before I got on the committee and we started talking about it.
Just for my own clarification, your organization was created by the Parliament of Canada. Is that accurate?
12:30 p.m.
President and Chief Executive Officer, Canadian Payments Association
That's correct.
12:30 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
What is the role...? You have a board and so on. Are there any consumer groups on your board?
12:30 p.m.
President and Chief Executive Officer, Canadian Payments Association
We have three board members who are appointed by the Minister of Finance--three independent directors. We also have a stakeholder advisory council that can provide advice to our board of directors. We have consumer groups represented on our stakeholder advisory council.
12:30 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
When you told us in your presentation about the stakeholder consultations you are undergoing, what is the role of consumer groups in those consultations?
12:30 p.m.
President and Chief Executive Officer, Canadian Payments Association
We basically would like to have consultations involving any stakeholders that have either expertise or interest in this topic. So the round table will be totally open to any stakeholders, including consumer groups, billers, or third-party service providers that have an interest in the issue.
12:30 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
Based on those consultations, will you be coming back to us with recommendations for changes to the act? What outcome are you hoping to achieve from those consultations?
12:30 p.m.
President and Chief Executive Officer, Canadian Payments Association
We are projecting two potential conclusions or outcomes. First are things we could do totally on our own by looking at our rules. As you may remember from our last presentation, our rules have to be submitted, and the Minister of Finance has 30 days to disapprove any of them. If we find anything else in the marketplace that is beyond our mandate, we would like to make some recommendations to those participants to see what they could do.
12:30 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
Right.
I have read over the submission you made earlier. Do all people who make electronic payments have to use you? Are they all part of your group, or is there a way of getting around using your organization?
12:30 p.m.
President and Chief Executive Officer, Canadian Payments Association
I'll ask Mr. Kreviazuk to answer.
12:30 p.m.
Vice-President, Policy and Research, Canadian Payments Association
In a sense, I spoke a few moments ago about “on us” transactions. If the person or the consumer who is paying the bill banks with the same institution as the biller, it never comes through us.
Secondly, we have learned that there is a voluntary process of VISA-issuing institutions that can settle out their bill payments at the end of the month through VISANet. If they opt for that process, they would not come through us. But we understand that this is relatively small.
12:30 p.m.
Vice-President, Policy and Research, Canadian Payments Association
To be honest, we only learned about it recently.
12:35 p.m.
Vice-President, Policy and Research, Canadian Payments Association
I assume so.
12:35 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
I also would like to follow up on the question of my friend from the Bloc.
How prevalent is fraud? Do you track any complaints? Do you guys get complaints? Do you have any sense of how much fraud is taking place in electronic payments?
12:35 p.m.
Vice-President, Policy and Research, Canadian Payments Association
We don't either collect or monitor from a fraud perspective. That's the domain of the individual financial institution.
I should say, though, since we are sort of the managers of the national clearing and settlement system, that our public policy objectives are safety, soundness, and efficiency. Routinely, we review our rules to ensure that the transactions that flow through us and are going to be cleared and settled through us have proper risk management processes.
We require, for example, certain levels of authentication in the POS environment and the ATM environment. What we generally rely on is that when you as a consumer send funds from your institution, your institution institutes proper authentication technology, because they are essentially on the hook for those transactions.