Good afternoon. Thank you very much for having me here today.
My name is Tricia Anderson, and I'm president and CEO of the Canadian Independent Petroleum Marketers Association, also known as CIPMA.
CIPMA is a national not-for-profit association representing the unique interests of independent, non-refiner marketers of petroleum products. Our members are key distributors and marketers of petroleum and renewable fuels to the commercial, agricultural, industrial, wholesale, and retail markets in every part of Canada. Approximately 80% of CIPMA members have retail operations and therefore will very much be touched by the growing changes in the mobile marketplace. They are the small and medium-sized fuel companies that are the backbone of Canada’s fuel distribution and marketing industry.
As it currently stands, a key issue for our members is that of credit card fees, which is quickly transcending into new territory with the rapid introduction of mobile payments.
Currently credit card fees in Canada are among the highest in the world, with Canadian retailers paying approximately $5 billion per year in hidden credit card fees as the price of accepting credit cards. These credit card fees are eroding retail margins for Canadian business owners and pose a real and tangible threat to the sustainability of independent businesses in Canada.
CIPMA members know that in order to remain appealing to consumers, they must embrace new technology and keep up with the rapidly changing payment sector. We understand that for our customers, speed of payment is of key importance, and we recognize that mobile payment apps facilitate a faster transaction. However, as mobile payments continue to gain prominence, merchants fear this will pave the way for new costs on top of the already crippling credit card fees.
CIPMA members report that close to 50% of customers use credit cards for purchases. It's estimated that members are paying up to a third of their operating margins on these sales just to cover the costs of processing the credit cards. All our other operating functions must be covered from the remaining margins, leaving little or sometimes no profitability for the businesses when all of these expenses are paid—no funds for new staff, important training, or business expansion.
Beyond this, independent petroleum marketers suffer even more severely when fuel prices increase. With relatively fixed operating margins our members do not benefit from higher gas prices, but we do pay more in credit card processing fees as prices rise.
New fees for processing and new equipment that could be introduced with mobile payments would further erode retailer profit margins and could result in reduced competition as businesses on the edge of survival ultimately close their doors.
As you all know, the code of conduct for the debit and credit card industry in Canada was introduced in 2010 to promote transparency and choice for merchants in regard to payment schemes. In September 2012 the federal government announced its plans to extend the voluntary code to include mobile payments.
In theory, CIPMA continues to support various elements of the addendum to the voluntary code of conduct and its provisions relating to mobile payments. We support that merchants should have sole authority to determine what forms of payment they choose to accept, that competing domestic apps be stored on the same device provided they are distinct apps, and that consumers should have the ultimate choice in the default settings and applications they wish to use.
We also recommend that express written consent for each mobile product offering be added to the proposed addendum, including express consent for each individual payment option within a mobile wallet. However, while we certainly commend the government for recognizing new payment-sector technologies, we feel that a voluntary code of conduct is simply not enough. Many of our retailers have expressed that the current code is not working for them. They are not being protected from the burden of high credit card fees that threaten their very existence.
A code that is currently not working for retailers in regard to credit card fees is even less likely to work for retailers with the introduction of mobile payments. Mobile payments involve an intricate system of stakeholders. What used to be a payment system that primarily involved credit and debit networks, issuing banks, and acquirers now also includes mobile telecom companies and several other players.
CIPMA recommends that government review the best practices and lessons learned in other jurisdictions more advanced in this sphere. Equipped with this knowledge, we can develop policy or potential regulation rooted in education and experience to protect the interests of consumers and businesses nationwide.
Thank you for the opportunity to present our perspective. Our industry very much appreciates the opportunity to be consulted, to communicate our challenges and concerns, and to propose recommendations.