Why is that not correct?
Evidence of meeting #31 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.
Evidence of meeting #31 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.
3:50 p.m.
Senior Vice-President, Card Products, Retail Markets, Canadian Imperial Bank of Commerce
That is not the only cost factor. You're looking at just the interchange factor.
3:50 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I'm only on the revenue side. I'm not on the expenditure side.
3:50 p.m.
Senior Vice-President, Card Products, Retail Markets, Canadian Imperial Bank of Commerce
I agree with you. I'm still on the revenue side as well. We increased our features and our cost and our benefits to our cardholder. Our success depends on attracting and retaining our cardholders by giving them the most competitive offers, and we increased features and benefits on those cards at no extra cost to the consumer.
3:50 p.m.
Liberal
3:50 p.m.
Senior Vice-President, Card Products, Retail Markets, Canadian Imperial Bank of Commerce
Those cost us.
3:50 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
The simple math of this is that by issuing these new cards, you've increased your gross revenues by something in the order of 10%, possibly as much 15%.
3:50 p.m.
Senior Vice-President, Card Products, Retail Markets, Canadian Imperial Bank of Commerce
I agree with that.
May 28th, 2009 / 3:50 p.m.
Terry Campbell Vice-President, Policy, Canadian Bankers Association
If I can clarify, Mr. McKay, the true premium cards are a relatively small part of the marketplace. I think they're under 10%, probably only about 9%. So while there is that 20 basis point increase, it's a small part of the whole portfolio, so that takes that down.
3:50 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
What percentage of the credit market did the premium cards have this time last year?
3:50 p.m.
Vice-President, Policy, Canadian Bankers Association
I don't have that information, but perhaps my colleagues do. It's still a relatively small part of the market.
3:50 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Could I suggest to you that you've been working that part of the market to try to increase the uptake on the premium cards? Would that be correct?
3:50 p.m.
Head, Cards and Payments Solutions, RBC Royal Bank
Maybe I could just respond. I think before, generally, the percentage of premium cards would have been around Amex's market share. So all of Amex's cards are premium cards. In terms of customers, we are competing with Amex for those cards in their wallet. For merchants, by taking our cards at 20 basis points higher, we are significantly reducing their cost if they had an equivalent Amex card in their wallet.
3:50 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
You're all competing for this mythical customer—or maybe not so mythical—who has money in his or her pocket. So you're issuing these premium cards with some more toys attached to them. You've increased the cost, and I'm not disputing that you've increased the benefits as well.
How do you get to be a premium customer?
3:55 p.m.
Senior Vice-President, Card Products, Retail Markets, Canadian Imperial Bank of Commerce
There were rigorous criteria. The network set the criteria for the niche amount of customers who could qualify. As Terry said, in general, it's less than 10% of customers. These represent the merchant's highest customers. They spend with a higher velocity. They spend at a higher average transaction size, and they tend to be the same customers that were on the Amex brand. We attract and displace that Amex spending onto our cards.
3:55 p.m.
Head, Cards and Payments Solutions, RBC Royal Bank
Some of the qualifications would be minimum household income of $100,000 and that we can't set a pre-set limit. It sounds like a lot, maybe, 20 basis points, but it's proportionate to the risk. Those consumers travel a lot, and they want to be able to go into that store and put any amount onto their card.
3:55 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Looking at it from your market model, you want to drive these premium cards, because it only makes sense from your standpoint.
On the other hand, a merchant is locked into accepting that card I present, regardless of the cost to him or her. So aren't you driving your growth in premium cards on the backs of the merchants?
3:55 p.m.
Head, Cards and Payments Solutions, RBC Royal Bank
I can respond. I can tell you our own statistics in terms of the consumers who went to a premium card. In this very bad market, where generally we have negative growth on spend, those cards increase spends. So the merchants are benefiting from the fact that this customer can now walk in and spend any ticket size they want, where before they were limited.
3:55 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Going forward, what do you see as the percentage of the market that these premium cards will occupy?
3:55 p.m.
Head, Cards and Payments Solutions, RBC Royal Bank
I don't see it changing much from where it is now.
3:55 p.m.
Conservative
The Co-Chair Conservative James Rajotte
Thank you, Mr. McKay.
We'll go to Monsieur Laforest, s'il vous plaît.
3:55 p.m.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
Thank you, Mr. Chair.
I would like to say good afternoon to all of our witnesses.
In your opening remarks, Ms. Hughes, you seemed to caution us that the banking industry was not clearly in control of the whole issue of contracts between acquirers and merchants.
3:55 p.m.
Conservative
The Co-Chair Conservative James Rajotte
I'm sorry, Mr. Laforest. Excuse me. I'm told we don't have translation.
We're okay now.
Monsieur Laforest.