Finance Committee on April 19th, 2007

[Brian Crozier]

Yes, we are.

[The Chair, Conservative, Brian Pallister]

Okay, thank you very much.

My pleasure, Mr. Pacetti.

We'll continue on with Monsieur Crête.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chairman.

Mr. Woolford, you spoke about the need to do a thorough review of Canada's payments system. Could you give us two or three negative effects stemming from the lag we are currently experiencing? As well, what fundamental principles would you like to see included in such an overhaul?

[Peter Woolford]

There are the costs paid by our members. I mentioned access to financial services, particularly for SMEs, as well as credit service costs for retailers. This is an area where technology is developing on an almost daily basis. Consequently, fees paid by retailers are increasing. These fees are passed on to consumers through hidden charges.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Woolford, would you not agree that that is the counterpart, for retailers, of the client service fees we are examining here?

[Peter Woolford]

Indeed, there is a cost to accepting credit cards and having the institutions process the accounts. This is a market where fees charged by the various institutions—the acquirers—are almost the same. We believe that we should at least consider that.

With regard to the fundamental principles, we of course have to consider service access, the cost of the various services and how they are interrelated, to find out who benefits, who pays the costs and who incurs the risks. In fact, costs, benefits and risks are the three major elements.

Did that answer your question?

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Yes.

You said that some countries are ahead of us. Has the Free Trade Agreement with the United States leveled the playing field between our two countries, or do they have a significant advantage? Are there any examples of countries or groups of countries that you would like to mention?

[Peter Woolford]

We believe that Canada has an excellent system. Many changes are underway, and we have to examine this situation carefully.

In various countries, such as the United States or Australia, certain things have been done, either through the courts or through regulations, and studies are conducted by the European committees. So there are various ways to address this issue. We in Canada want to discuss the issue before taking action. Once again, we recommend there be a discussion on this issue.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

And—

[The Chair, Conservative, Brian Pallister]

Unfortunately, Mr. Crête, we can't discuss things much further with you leading the discussion.

We'll move now and conclude with Mr. Del Mastro for a couple of minutes of brief questions.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

Mr. Woolford, thanks once again for appearing before committee. As I recall, you appeared in the pre-budget consultations and outlined the beneficial impact of the GST reduction on disposable income.

[Rick Dykstra, Conservative, St. Catharines, ON]

I forgot all about that.

[Dean Del Mastro, Conservative, Peterborough, ON]

I appreciate that. I did not, and I've in fact quoted it on several occasions.

[Peter Woolford]

No good deed goes unpunished, Mr. Del Mastro.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you very much.

I've noticed that a number of retail outlets, specifically food retailers like restaurants and so forth, which at one point had ventured into the white label ABM market and would not accept debit payment, have now virtually all gone to debit payment in their restaurants because of market demand's forcing them to do that. People didn't like paying the fees, and they were seen as something that was hurting businesses' ability to market themselves for what their core industry is.

Is this something that you're witnessing on several levels--customer demand for Interac access or debit payment for goods as actually driving out some of the white label ABM craze that kind of took over?

[Peter Woolford]

That's a tough one. What we do know is that retail is a customer-driven business. What the customer wants, the customer gets. Merchants who have tried to charge the customer for taking their money have quickly found that the customer says no. So that really hasn't picked up or gone very far very quickly. There are just so many options out there that it has proven to not be terribly attractive.

On the effect on ABMs, our sense is that the advent of the Interac direct payment service itself greatly reduced the customer's demand for cash. Typically you don't have a full-function ABM inside a non-bank location. Essentially you have a smaller, cheaper cash-dispensing machine--that's all it will do. You can't pay your bills or make deposits at one of these cash-dispensing machines; you can only withdraw cash. So with the advent of Interac direct payment, the customer can pay directly using their card rather than going to the machine and paying a fee to withdraw money.

Second, as I mentioned in my response to one of your colleagues, the opportunity to get cash back on a transaction means that if you need cash, many of the merchants today who have a large cashflow are quite happy to give you cash back when you make a purchase in the store.

Third is that we've seen a variety of other payment options and financial service options provided by the financial service providers, both online and in other formats.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Del Mastro, Mr. Woolford, and all, for your participation. It was a most stimulating panel.

Committee members, remember that finance department estimates will be under the gun on Tuesday morning at 11. Thursday we're not sure about yet. Be here, and we look forward to seeing you.

We are adjourned.