Finance Committee on April 19th, 2007

[Peter Woolford]

Sure, a pleasure.

From our perspective, what we're seeing is a system that is evolving very rapidly. We've seen new players come into the marketplace; we have some of them here today. We've seen mono-line banks issuing credit cards into Canada. We've seen a whole variety of new players come into the financial services marketplace, and the prospect is for more.

Technology is touching this area, as members of the committee know very well. It's going to continue to profoundly reshape the way we do our financial affairs. The various services that are offered are being offered by different parties, and they're very different services.

What we thought was the world for ABMs in 1996 is profoundly different today. All those changes going on are the reason we think it's time to take a bit of a step back and just look at the whole range of things. We're not suggesting that anybody is doing the right thing or the wrong thing, just that the entire package needs to be looked at from the perspective of all the various users of the system. That's something that is being done with increasing frequency around the world. We're simply surprised that Canada just sat by and watched this occur.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Has the Retail Council itself done any studies or issued any documents on this issue?

[Peter Woolford]

We have appeared before this committee a couple of times on this matter. We submitted to the finance discussion paper last year and in 2001 as well. I'd be glad to make those available to the committee again, or your researchers could get those for you.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I'm sure we can obtain them.

[Peter Woolford]

We've been at the table on this issue for some time.

One of the key points we've been making is the need to look at the availability of services through individual banks as well and the requirement for our smaller members to often go directly to a bank branch for many of the services the bank rules require them to show up for. So there's a fair body of our position and our argumentation available out there.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Can I just do it by PIN number?

[The Chair, Conservative, Brian Pallister]

Thank you very much to both of you.

Mr. Soikie, you alluded twice to the banks' ownership of payday lending companies. Which specific bank owns what payday lending agency, and to what degree?

[Evan Soikie]

I wouldn't say that they own them, and unfortunately I don't have the paperwork with me. I wasn't expecting to get too involved in that.

But we are aware that TD has a reasonably large investment in the company that owns Money Mart. I don't know if my colleague has it with him, either. I'm sure I could provide it to you. I was given a list of the six major banks, and I would say that I remember that at least five of them had reasonable investment in payday lending.

Unfortunately, as I said, the problem is that people are being denied bank accounts and are being forced to use this.

[The Chair, Conservative, Brian Pallister]

There's a very interesting line that could be followed, certainly, as a consequence of such information, so I'd urge you to provide that to the committee.

[Evan Soikie]

Absolutely. I'll be sure to get that for you.

[The Chair, Conservative, Brian Pallister]

Thank you very much, sir.

We'll now go to three-minute rounds. Go ahead, Mr. Pacetti.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I have three minutes, okay.

Just quickly, Mr. Woolford, we're looking at different things. There are Interac fees, but we're also looking at electronic payments, and it's a little bit of a mixture of the two. The banks say that people are using the cash-back option. Do you know if your merchants are using that quite a bit, and is it something that's encouraged?

[Peter Woolford]

In our submission, you will see that we report on a piece of research done by the Canadian Bankers Association that says that about two-thirds of Canadians who hold debit cards opt for the cash-back service at some point.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I don't need the Canadian Bankers' statistics. In terms of your merchants, your people, is it something they encourage? Is it something that's beneficial for them?

[Peter Woolford]

It varies with the format of store. If you're a clothing store, if you're a footwear store or a confectionery store, it's not something you would normally offer to your customer, because a lot of your business is no longer cash.

If you're a mass merchandise store or a supermarket--a large big-box format--where there's a lot of cash, it's a very attractive option to offer to your customers and for you. So it's really driven by the need to serve the customer and to provide that facility to them. So for certain formats it's very popular, and they're happy to provide it to their customers.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

That's fine.

In terms of electronic payments, most of your merchants, I guess, are retailers. Would that mean that people pay on the spot, or are they receivable-driven?

[Peter Woolford]

Most of our members are paid on the spot. It's about 50% debit, 25% credit, and 25% cash.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Is there any problem in terms of getting the money into their accounts? Is there a one- or two-day turnaround, or is it over five to 10 days?

[Peter Woolford]

One of the great advantages of the debit system is that it's virtually instant. That's one of the great features of debit, that you're guaranteed payment. It's final, it's settled, and you know you have the cash.

On the credit side, our small merchants can sometimes wait two or three days, and in a cash business like retail, that's very serious.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Okay. Just quickly, Mr. Iuso, there's another service that's provided out there. It's e-mail, when you pay through the Internet. Does that coincide with the type of business you do? Do they call it PayNet, or something like that?

[Joseph Iuso]

It's actually called the Interac e-mail money transfer service, and they use a thing called suspense accounting. So when one bank consumer pays at his bank, the other bank floats that suspense account and puts the money into the other person's account when he receives the money.

So it looks instantaneous in real time, but from the way I understand the way it was set up, there's still an overnight batch process that actually does all the reconciliation. They just set up suspense accounts. The other unfortunate part is that they created this new system, but then they put in all these restrictions, and it's not really a viable product.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

In terms of your business, where do you get your clients from? Why would somebody need your service? Couldn't somebody just access the Internet directly or just have a standing order? How does that--

[Joseph Iuso]

May I give my colleague a chance?

[Brian Crozier]

I was just going to say that the statistics Peter gave--25% of payments are credit card, 50% are debit, and 25% are cash--gives you some idea of what online debit power is to an online retailer. So if you had a store that was credit card only, you'd be missing out on 75% of the sales.

When UseMyBank is deployed into the marketplace, we find that when our online merchants access our system, anywhere they are in the world, their sales are 30% to 40% over and above what they're doing with Visa and Mastercard. For example, when someone doing $1 billion a year with credit card sales on the Internet in Canada adds UseMyBank to the system, they would add $300 million to $400 million in sales, because 30% to 40% of the market doesn't even have a credit card.

So this is a very powerful payment option, and everyone in this room who's a Canadian knows just how powerful Interac is in the real world at point of sale.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

So you're an alternative to cheque writing.