Finance Committee on April 19th, 2007

[Joseph Iuso]

The way it works, step by step, at a high level, is that we act on behalf of the client or the consumer when they make the payment. So we act as their temporary agent to sign onto their online banking account and actually fill in all the data, those 17 steps that most people can't do anyway. We fill it all in, and then we execute the payment and get a confirmation number right there from the bank. We take that confirmation number and provide it to the biller and say that person has made the payment at their bank account today. It may take three, four, or five days to get settled, but you have real-time confirmation that this money has come out of the consumer's bank account.

[John McKay, Liberal, Scarborough—Guildwood, ON]

You don't actually transfer money.

[Joseph Iuso]

No.

[John McKay, Liberal, Scarborough—Guildwood, ON]

All you're doing is telling the creditor that McKay paid.

[Joseph Iuso]

Yes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

And that's it. How do you get paid for doing that?

[Joseph Iuso]

We charge the merchant or online biller a percentage fee, depending on whether it's a per-transaction fee, a discount rate, or whatever fee. It depends on the category.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Woolford, it seems to me that a retailer would be very interested in knowing more in advance than at present that an account has been paid. Is that fair? Is that an attractive idea to you?

[Peter Woolford]

It is. But, Mr. McKay, as signatories to the debit card code of conduct, we're really concerned that this would involve the customer giving away his or her PIN. That's an open key to someone's bank account.

We think that the protection of the financial affairs and the financial security of Canadians is paramount. So even though our members might like to have that assurance in advance, I think we'd be very concerned that this would compromise the security of the debit card system.

[John McKay, Liberal, Scarborough—Guildwood, ON]

What's your response to that, Mr. Iuso?

[Joseph Iuso]

And this is the typical response from a bank, once a client has talked to the bank.

[John McKay, Liberal, Scarborough—Guildwood, ON]

But he's speaking to the retailer.

[Joseph Iuso]

I understand. If you actually look at what's going on with the Internet, there's a new technology coming on that you might have heard about. It's called Web 2.0. This technology is about giving clients a central access.

For example, Royal Bank has invested in CashEdge to the tune of $5 million. They actually take user IDs and passwords and store them in their system. This way, they can effect going into other banks.

For example, Scotia does not like Royal Bank doing this either. But Royal Bank does it all day long. You can get consolidation of your CIBC account, your TD account, and your Bank of Nova Scotia account all in your Royal Bank account access. And by the way, they're introducing money transfer using that service too.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I'm not sure I understood that.

[Joseph Iuso]

Well, the banks are doing what we've done with their own service, called CashEdge and Yodlee. They're doing the same thing as we're doing, but at a more extreme level by storing it.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Could I just add one thing?

[The Chair, Conservative, Brian Pallister]

Sorry, gentlemen, no. We'll have to move on. But work it into your next response.

We'll continue with Mr. St-Cyr.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Does that mean that certain banks are already trying to find out the user names and passwords of their competitors, so as to integrate all accounts into their website? Did I understand that correctly?

[Joseph Iuso]

Can you repeat the question? So are you saying the banks are out doing this as well and you don't understand?

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

No. I simply want to make sure that I understood the previous statement correctly. I think you were talking about the Royal Bank.

If I deal with that bank but I want access to some of my data from the National Bank, I will have to give my password or something like that to the Royal Bank so that it can have access to that data.

[Joseph Iuso]

Correct. They store that.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

So you're doing the transaction instead of the user, and the only difference is that your clients trust you when you tell them that the transaction was completed. However, if I call Bell Canada or some other company and I tell them that I paid my bill, they won't necessarily trust me. That's the difference.

[Joseph Iuso]

Yes, but it's the same as when a parent gives a child the debit card and says, “Here, I don't have time to go to the bank machine or pay for that. I'll give you the credit card and here's the PIN.” Nobody stops them from doing that. And that's the same thing we are doing here. It's an agency. We're acting on behalf of the consumer.

If the consumer could do this effectively and quickly through the bank, then we wouldn't be here.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

We keep trying to understand the same mechanism, which is rather complex.

Given the new measures, what prevents you from continuing to proceed in this manner? Where's the blockage? In the case of the transaction done through the Internet, how can the banks figure out whether the transaction was done by you rather than by the consumer himself?

[Joseph Iuso]

They target us through the billers who use our service. So if GPAY, Telus, Fido, or any of those companies wanted to come, the discussion goes to the point where they talk to the bank, and then we get the same answer as we had from Peter, from Mr. Woolford. It's that simple. That's what we get all the time, back and forth.

Does that answer your question?