Evidence of meeting #30 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was merchants.
A recording is available from Parliament.
President and Chief Executive Officer, Moneris Solutions
The interchange is definitely much higher.
Conservative
President and Chief Executive Officer, Moneris Solutions
Yes, there was. There's a substantial system investment, from our perspective, to be able to process the more complex cards, so definitely.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
What you're talking about are the chip cards, is that right?
President and Chief Executive Officer, Moneris Solutions
The chip as well as the more complex interchange structure, the premium cards.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
I'm still not understanding that. What is it about the Infinite credit card that costs you more to process the transaction?
President and Chief Executive Officer, Moneris Solutions
The change in interchange from what was a very simple structure in 2001 to now, as Jeff mentioned, 21 or so Visa rates and probably an equal number of MasterCard rates, which required us to have a major system build to be able to handle those transactions.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
It has to identify what kind of card it is.
Is there any way that you could build into your system a point-of-purchase display that would then alert the merchant to the fact that it's a premium card on which a higher rate is being charged?
President and Chief Executive Officer, Moneris Solutions
It's certainly technically possible. I think some of our merchants may have an issue with that, particularly those who deal with speed at the point of sale. Any quick-service restaurant, for example, would want to keep the customers moving and not slow them down to examine each of the types of cards. But it is technically possible, yes.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
I wonder if each of you could let us know your views on the new credit card disclosure rules that were announced by the Minister of Finance last week.
President, TD Merchant Services
I think they were really aimed at consumers or cardholders, so it doesn't impact our business at all because there is really no impact to merchants.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
Do you think these would be helpful to consumers and merchants generally, the disclosure rules that were announced?
President, TD Merchant Services
Again, I don't think there would be an impact directly to a merchant customer. As I said in my opening statement, we believe in transparency, so for consumers, more transparency is always a good thing.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
So from that perspective it would be an improvement.
Do you agree, Mr. Baumgartner?
President and Chief Executive Officer, Moneris Solutions
Yes, I think from a consumer perspective, as a cardholder, I think they were well thought through. They were good from a cardholder perspective. And as Jeff said, disclosure is something we can all do better at.
So from that perspective, I would say yes. From a merchant's perspective, I would say there is less impact, but to the consumer, definitely.
Conservative
NDP
Glenn Thibeault NDP Sudbury, ON
Thank you, Mr. Chair.
Thank you to the witnesses for coming again today.
I want to jump right to a few questions that my Liberal colleague was asking a few minutes ago, related to priority routing. I would like to get some clarification on that.
Is that a system that is implemented now, or is that a system that is planned for the future?
President, TD Merchant Services
In terms of what TD does today, we do not do any priority routing, because we don't support MasterCard Maestro and Visa debit is not yet in the market. So as of today we don't do anything. As I did say earlier, we will support Visa debit, and the choice that Visa has made is to make that a consumer choice at the point of sale.
So if a merchant has elected to accept Visa debit...and this is important to mention. The merchant has to elect to accept Visa debit. So they choose to accept both Interac and Visa debit. If that is the case, and if a card is presented that has both the Interac and the Visa debit application on it, then and only in that exact circumstance will the point-of-sale terminal provide a choice to the consumer. The consumer can then elect to process that transaction as a Visa debit transaction or as an Interac transaction.
NDP
Glenn Thibeault NDP Sudbury, ON
I'd like to come back to Moneris to answer that question, but in relation to that, we had Visa Canada here last week, and I believe they stated that if you have a Visa credit card you're going to have to take all Visa credit cards or debit cards. Is this going to be true for a merchant if they choose not to take the debit card?
President, TD Merchant Services
Visa has elected to enable merchants to elect to accept Visa debit separate from credit. It's commonly referred to as the honour-all-cards rule that Visa has, and they do have that rule. So if you accept a Visa credit card, you have to accept all Visa credit cards. But they've made the choice to say that if you don't want to accept Visa debit and you just want to stay with Interac, that's okay. That's allowed.
President and Chief Executive Officer, Moneris Solutions
On the Visa side, it's exactly the same answer. We believe that method makes the most sense. We think the consumer should have a choice on how their transaction is treated. Our devices will prompt for it, for the merchants that elect to accept it. We're very pleased that Visa has not elected to enforce the honour-all-cards rule. We think that can be problematic, particularly with respect to debit versus credit.
Does that answer the Visa question?
President and Chief Executive Officer, Moneris Solutions
On the MasterCard side, MasterCard has chosen a slightly different path. They've brought the cost down of processing the transaction. Their assessment fees are now actually lower than Interac's, which is positive for the merchants, but their method is a bit different in that the banks are instructing us where to send the cards, as opposed to the individual cardholder, so the banks are making the decision.
From a merchant perspective, at this point it actually matters less. In fact, in some cases, if they hold true to keeping the assessment fee at a competitive advantage versus Interac, it'll actually be a good thing for the merchants to the extent that they're billed on an assessment fee basis.
