So what is the solution? The coalition believes that transaction costs charged to retailers, whether on credit or debit, should reflect the true cost of processing, as is the case in Australia. Reasonable costs should be allowed, of course, plus a fair return on investment for card companies. But interchange fees should be capped at that level.
How does it work in Australia? The details are provided in our submission, but the highlights are as follows. The entire fee-setting process of the card organization is transparent to all stakeholders. A common benchmark has been established on allowable costs. The result in Australia is that interchange is capped at 0.5% or 50 basis points, producing a merchant discount rate of less than 1%.
We do refer extensively to the Australian model, but as you can see on slide 18, Australia is not the only country to act. The European Union has also moved to a cost-plus model on cross-border transactions. In fact, multiple jurisdictions are working to address the problem. The world is moving on this.
The coalition understands that Canada is unique and that considerable analysis is needed to produce a regime that is appropriate for Canadian circumstances. However, it is urgent that Canada get on with the task, and we urge the committee to recommend that the government develop a system of oversight to ensure fair pricing and competitive behaviour by the two card companies.
The Minister of Finance has the power to designate, and therefore regulate, payment systems in the country. The options on how to do that are detailed in our submission.