Finance Committee on Feb. 25th, 2014

[Todd Roberts]

I think that historically the standards that have been effective have been driven by a combination of our regulators, so OSFI, as well as the role that the Department of Finance has played. I look at organizations such as the CPA, and the newly established group, FinPay.

I think we are getting to highly effective standards, and I think the multistakeholder approach is the one that is the most effective.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay, now following up that question, the other statement you made is that the integrated approach to regulation and supervision...and you talked about American Express and PayPal. Now when you bring these large organizations like that together, you said they operate on the periphery of the current payments and regulations system. How do we make sure that gets all knit together as well, because I can see that, as you correctly pointed out, Ottawa can maybe interject themselves in one place but not every place.

[Todd Roberts]

We believe that any party that actually provides a payment service to Canadians should be held to the same standards. So I think the test should not be what type of institution they are, I think the issue should be whether they are involved in payments or not. So if you are providing a payment service you should have the same rights and obligations as any other party that provides that same service.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay, thank you.

Now my next questions are going to be for Ms. Meredith and then Ms. Anderson.

When you talked about us being behind on the business-to-business and the other, it seems to me that the backbone and maybe the technology backbone within these businesses is going to be a little bit of a constraint. You can do all this stuff on the front end, but unless you have the backbone technologies and your business to accept, as you said, matching invoices and payments, your basic fundamental accounting practices are not being done. So that could be a challenge. I wanted to know your opinion on us catching up on some of that.

To Ms. Anderson, I'd like to ask you this. You talked about one side of the equation, the fees on this. But as I go to the small gasoline retailers where I put my debit card in the actual pump, I'm not even actually going into the store and seeing someone. That transaction is being processed. So I'd like to know from a small business perspective...it seems to me that it can generate enough savings to these small businesses. Can you comment on that as well as on what the savings are as opposed to just the transaction costs?

[Patricia Meredith]

In terms of catching up on the B-to-B payment side, I think that the recommendation the task force made for the federal government to take the lead is still valid.

Essentially it's like adopting the fax machine. A fax machine isn't valuable unless the people you're dealing with also have a fax machine. So you really need a leader to move adoption of the technology forward.

The government, along with the provinces—in fact the provinces have a lot more transactions than the federal government—really needs to get behind the shift to digital payments and automated processing of their own receivables and payables.

[The Chair, Conservative, James Rajotte]

You have about one minute, Mr. Allen.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay.

[Tricia Anderson]

I would certainly acknowledge that the self-serve model in itself, which was introduced some 30 to 40 years ago, has changed the operating model, if you like, of retail sites. That has been driven to a significant extent by the fact that gasoline margins have reduced quite significantly over time. So in fact, while yes, there's a savings in terms of not having staff there, there are technology costs for sure and equipment rental costs, etc. There's also the loss of revenue from people not coming into the store. Frankly, you make more money on a can of Coke than you do on a litre of fuel any day. So there's that offset as well.

Retailers would rather have people come into their store, but frankly consumers are very much focused on speed of transaction. That's why, as I mentioned, we certainly acknowledge that. Meeting customer needs on that front is important. There are investments in technology and equipment rentals, etc., from running what's called a CRM, a cash register, if you like, in the dispenser, and technology costs have been very significant for independent marketers and I'm sure for all gasoline marketers. It's a very complex system out on the pumping island.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Thank you, Mr. Allen.

I'm going to go back to Mr. Thibeault, I believe. Is that correct?

[Glenn Thibeault, NDP, Sudbury, ON]

Thanks, Chair.

Mr. Robinson, I just have to push back a little bit on one of your comments. You were saying that it's great to see the technology moving forward but that if we actually put any regulation in place, you'll see the slowdown of innovation. But what we also have are organizations—like CIPMA, like the Retail Council of Canada, like the Canadian Federation of Independent Business, the Canadian food and restaurant association, the list can go on—saying that we need to do something now because one more fee, one more layer, will be the straw that breaks the camel's back.

So what we've heard from Visa and MasterCard at this last session is that there will be no more fees, there will not be anything else on top of the current interchange fee. But from, I guess, the perspective of the telecom side of it, will there be a fee associated with this mobile technology, not necessarily on the interchange side but on the app side, so to speak?

[David A. Robinson]

It's certainly not the intention. We have no intention of doing that at all. This application is provided. The Suretap application is provided to all of our customers who we can provide it to. It allows them to carry credit cards, debit cards, prepaid cards, which you heard are a growing category as demonstrated by the discussions around Starbucks, and gift cards. Gift cards are wonderful things for merchants and carry virtually no interchange at all. Yet there is an ability now, through mobile devices, to massively accelerate distribution of those cards directly to the mobile device, which I will demonstrate later.

[Glenn Thibeault, NDP, Sudbury, ON]

Great. I guess to Ms. Anderson that's probably good news because as you said earlier about 30% of all your members' overall gross margin.... The costs are 30%, right? That was stuff that you previously testified to at the industry committee.

We've been pushing hard for the government to act on interchange or merchant fees. We've seen something in the budget. We're not sure what it's going to be, if there's going to be anything. It might not be for another year. How much of an effect does this current lack of action coming from all involved have on, for example, your members?

[Tricia Anderson]

My members tell me it is one of the two top issues that they're dealing with. As I mentioned earlier, gas prices rose about 30% over the last three or four years. So that took the percentage of margin that was going to credit cards from about 20% to about 32% right now. Especially in small rural sites where there's not a lot of opportunity for ancillary business, it has a huge effect. One of my members said to me that credit card companies are making more from his operation than his family is. That really stuck with me because that's a sign, really, of the significance of this burden on his business.

[Glenn Thibeault, NDP, Sudbury, ON]

Excellent.

How much time do I have?

[The Chair, Conservative, James Rajotte]

Two minutes.

[Glenn Thibeault, NDP, Sudbury, ON]

Fantastic.

So, Mr. St-Amant, again you know we were talking about a voluntary code. We're hearing more and more organizations saying we need something here in Canada in terms of a mandatory code because a voluntary code is toothless, which I'm assuming you would agree with. Should we be looking at making sure there is regulation in place so that we cannot continue to see these fees continue to rack up? Because in places like Australia, New Zealand—the European Union has certain countries like the United Kingdom—all have recognized that unregulated access by the credit card companies to the small business has a direct effect on our overall economy, because more money doesn't stay in the pockets of our small and medium-sized enterprises. Correct?

[Jacques St-Amant]

Correct.

Now, that's a short answer.

[Some hon. members]

Oh, oh!

[Glenn Thibeault, NDP, Sudbury, ON]

That's fantastic.

[The Chair, Conservative, James Rajotte]

You have one minute.

[Jacques St-Amant]

Thanks. There are two things.

I do believe that unless the industry sees the light, we will need to put a cap on interchange fees in this country. I simply cannot see a reason for our fees being three, four, or five times higher than in Australia, for instance. More broadly, in that area or other areas, if we want rules, we want those rules to be known by all the players. We want them to be enforceable. We want everybody concerned to have to abide by those rules. I don't see how a voluntary code, by its own status, can do that. You need something that in some way, shape, or form is legally enforceable. Otherwise, it's basically window dressing.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Thibeault.

We'll go to Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair, and thank you all for being here today.

Perhaps you could give just a quick answer, Ms. Anderson. I don't want to seem unsympathetic, because I'm a small retailer...well, I'm in the retail business myself, but I'm always puzzled about why, in the particular case of credit cards, that isn't passed on to the consumer. It's a cost of doing business. Like any chain of events, if people had their goods delivered by trucks and suddenly somebody wanted to use the pony, if it was more expensive it would be passed on to the consumer.

Why isn't this passed on to the consumer?

[Tricia Anderson]

There certainly has been discussion on the topic of surcharging. That is something that I have discussed with my members, and they really believe.... To start with, the retail gasoline market is extremely competitive, and frankly, the industry probably has done a disservice to—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

But excuse me, everybody's in the same boat. It doesn't matter whether you are Petro-Canada or Shell, everybody is in the same boat.