Finance Committee on June 16th, 2009

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

You clarified that the charges per transaction aren't 1.8¢ per transaction but actually 1.6¢ per transaction. They're individual, but there are two charges of 0.8¢ per transaction. Does every transaction result in two 0.8¢ revenues to Interac? Is that accurate? One is from the buyer and one from the issuer?

[Mark O'Connell]

Right. It's 0.8¢ to the acquirer and 0.8¢ to the issuer.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

How many transactions do you have per year?

[Mark O'Connell]

Last year in Interac direct payment, I believe there were around 3.6 billion transactions.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

That's 3.6 billion, with a “b”?

[Mark O'Connell]

When the consent order was issued, Interac direct payment was a fledgling. It was a business case being launched. The consent order was issued when shared cash dispensing, or our ATM business, was what Interac was. Today, the Interac ATM business is 250 million transactions. It's interesting to juxtapose the two services from a transaction standpoint.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Is there any revenue from those 250 million ATM transactions?

[Mark O'Connell]

Yes, we have a switch fee.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

So that's the same 0.8¢ per transaction.

[Mark O'Connell]

No, there are different fees, again, set on a cost recovery basis under the same model and they're flat switch fees, but they're respective of the ATM business. We don't charge any additional fees in that business, such as the convenience fees and so forth. That has nothing to do with Interac.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Regarding other revenues, on your e-mail money transfer, what kind of charges are involved there?

[Mark O'Connell]

Again, ours is a wholesale charge to the issuers. I'll have to get back to you with respect to making sure I get all the specific charges. But again, it's a flat fee.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I would imagine that on the Interac online it is again separate, a different type of charge?

[Mark O'Connell]

Yes.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

So you could endeavour to get us the charges for the ATM, the e-mail money transfer, the Interac online, what those numbers are?

[Mark O'Connell]

Yes, where I can, I will. All five services in the restructuring would be looked at from a competitive model standpoint.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

In terms of taking a look at what you're asking for, of course, try to take a look at it from our constituent standpoint, because it's our constituents who have a lot to say these days, probably more to say these days about the banking system in general and credit cards and debit cards and everything else.

One thing that has been a strength here in Canada is the strength of our banking system—our financial system ranked number one in the world. I think even President Obama was quoted to say that Canada has shown itself to be a pretty good manager of the financial system and the economy in ways that haven't always been there in the United States. Canadians are very protective of that system. What I'd like to hear is a little bit about how the Canadian consumers' experience will change based on the changes you're looking for right now. What would you say to our constituent who might be concerned about this? How will their experience be better?

[Mark O'Connell]

How would their experience be better if Interac...?

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

If we made the changes you're asking for.

[Mark O'Connell]

So the first change is just the restructuring of Interac in order for it to be able to compete and continue to be there for consumers. I think consumers over the past 20 years have come to rely on it, and in some respects debit in Canada has been a love affair with Interac. So I think it's important that our viability be continued.

Beyond that, if you're talking about a level playing field, I think the experience needs to be different. Cardholders should understand the payment vehicle. So in this new multi-network world we find ourselves in right now—and we're no longer in the dressing room, we're out on the ice, and Visa and MasterCard are operating around us here—I think it's important that consumers continue to understand the payment vehicle they're using and not be confused, thinking they're using their Canadian Interac and they're in fact using another brand. I think it's important at the point of sale that merchants, as well, understand that they aren't having contracts put in front of them where Visa, MasterCard, and Interac rates are blended—they can't tell and can't make an overt choice between them. We shouldn't have honour-all-cards rules, as we saw in the United States.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I just want to clarify this.

[The Co-Chair, Conservative, James Rajotte]

This is the last question.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I'm not talking about all the different cards people may use, but for me as a consumer, if I walk in to use my BMO bank card, as I always do, how will my experience be better? What innovation is going to improve my ability to shop and buy the things I want to buy with my card?

[The Co-Chair, Conservative, James Rajotte]

Very briefly, Mr. O'Connell, please.

[Mark O'Connell]

An immediate innovation we are endeavouring to roll out in this game in the debit wars is, for example, the tap and go, the contactless. As you notice, the U.S. credit card companies have their products in market; Interac does not by virtue largely of our inability within our structure to move at other than the pace of the slowest. So that's an example, and then you move to mobile payments; you move to other information on your chip card. This market is evolving dramatically, and what I'm asking for with respect to a level playing field and Interac's restructuring will just enable Interac to provide those services to Canadians.