Finance Committee on Feb. 27th, 2014

[Corinne Pohlmann]

We do have a few of those.

[Mark Adler, Conservative, York Centre, ON]

Yes.

Okay, on page 3, I see, under “All sectors”, that 35% prefer cheque, and 22% prefer debit cards, so there's a 13% variance there. Wouldn't you consider debit to be a more secure form of payment than a cheque?

[Corinne Pohlmann]

Remember that particular chart refers to all sectors of the economy, so that includes manufacturing and all those others that do business-to-business transactions. For them, cheques become an important tool for record-keeping purposes. It's also far easier to have a chequebook than it is to set up a whole debit system if you're not really a business that's going to use that.

[Mark Adler, Conservative, York Centre, ON]

Okay, good.

Have you ever surveyed your members with regard to the cost of default for cheques? Is that a big problem with many of your members?

[Corinne Pohlmann]

We did ask that question in a recent survey regarding the various payment systems, credit card, debit card, cheque, as well as cash, though not so much. We asked what percentage of the transactions had been returned to them, and it was lower for cheques than it was for, say, credit cards. I can't remember the exact numbers, but I can get you that information. From our members' perspective, it was less likely that they would have a cheque returned than that a credit card transaction would be returned. There could be a charge-back or a bounce-back or something could happen so that the credit card transaction would not go through. In their experience, it is more likely that would happen than that a cheque would bounce.

[Mark Adler, Conservative, York Centre, ON]

That's interesting.

I just throw this out to all of you, and if any of you have any information on this, it would be very helpful for me. Are you aware of any studies that have ever been done with a control group of people who use just cash, say, versus a group that uses the new technology? If they've been given the same amount of money, who would spend that money more quickly, the people with the cash or the people with the mobile payment?

[Lucie M.A. Tedesco]

Mr. Adler, actually something we have identified, which we intend to do research on, is the behavioural impact that mobile payments will have on consumers.

[Mark Adler, Conservative, York Centre, ON]

Has nothing been done empirically up until now?

[Lucie M.A. Tedesco]

To our knowledge, I don't believe anything has been done.

[Mark Adler, Conservative, York Centre, ON]

No? Okay.

Can any of you speak to the social benefit of mobile banking? I've seen that using an iPhone, you can take a picture of a cheque and you can deposit it into your account. My wife does it.

[Darren Hannah]

Absolutely.

[Mark Adler, Conservative, York Centre, ON]

Would that help seniors and people with disabilities?

[Darren Hannah]

Absolutely. The advantage of mobile banking is the convenience. People like to be able to use their mobile devices and conduct their transactions wherever they want. Increasingly they can.

We've seen remarkable uptick in the usage and the adoption rate of mobile banking. When we first surveyed the public and asked about mobile banking in 2010, only about 5% of people had done it. Within two years that was up to 20%, and that was in 2012. By 2014, now, I suspect it is beyond that.

If you look out into the future at the next generation of customers.... I look at my son who is 11 years old and goes to a local middle school in Mississauga where every child has a smartphone, every child expects to do everything with their smartphone, and that's what they're going to expect in the future. That is the next generation of consumers.

[Mark Adler, Conservative, York Centre, ON]

Also there is the social benefit for seniors and people with disabilities. I see endless possibilities with this.

[Darren Hannah]

Absolutely.

[The Chair, Conservative, James Rajotte]

A very brief question, please.

[Mark Adler, Conservative, York Centre, ON]

Mr. Cumming, you're being ignored quite a bit. Let me just throw a question at you. How competitive is your business?

[Hugh Cumming]

There is really just a tremendous amount of innovation that has occurred in the last three to five years in the payment space, and there are a lot of organizations pushing the edges, including their traditional payment networks. It's a highly competitive environment, but it's also one where people are working together to try to create solutions and get at some of the problems that were raised here.

Ultimately, there is one consumer and the merchant wants something very simple. The feedback we have received as we've pushed some of those edges ourselves is that it needs to fit into how they're doing business today. It needs to be simple and represent a value for them, and the market is still deciding what that ultimately will look like.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Van Kesteren, please.

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

Thank you all for being here and participating in what could be described as a fascinating subject, especially for those of us who are having trouble still figuring out BlackBerrys. We see the new technology that's been displayed here. It's quite remarkable.

Ms. Tedesco, you touched with Mr. Adler on the subject of whether or not people spend more money. I would suspect it is quite a bit more.

Ms. Pohlmann, I think we've had this discussion as well before, and I think we're still members of your organization at home. There's the ability to pay now for what normally in the past.... If you had cash in your pocket you'd look and you'd say, “We can't go out for dinner. I have $20 left and that has to last me for the rest of the week.” Hasn't this changed the whole culture that we live in?

I guess that's two things. I sympathize with your members because I'm one of those members. By the same token, I recognize that so many of those things they rail against, so many of those things we railed against really have made business that much easier.

As the first thing, I'll ask you to comment on that a bit.

Could you suggest whether or not some of the huge debt being incurred by the Canadian family is possibly a result of an immature populace that's moving into this new electronic age?

Ms. Pohlmann first.

[Corinne Pohlmann]

There is no doubt that credit cards, debit cards, electronic payments have improved the lot for many retailers. There is no doubt. That has made it a lot more convenient for them. They are more guaranteed to get paid. There are all kinds of advantages.

You can see even in the data I showed you today that they have no issue paying fees for regular payment credit cards. They see those as fair. They understand there is a cost for that service. Where it becomes an issue is when they start feeling like they're paying for a lot of it, and they're getting nothing extra in value for the extra fees they are paying on top of that. That is the difference. I'm not suggesting that mobile payments or credit cards or other types of payments are not going to be good for business. They are. It's just how much in fees they have to pay. That's the question.

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

Everybody is in the same boat, and ultimately it's the consumer who pays, so it's going to be passed on to the consumer.

[Corinne Pohlmann]

Absolutely, it ultimately is going to be. They just feel they have no power in that relationship as it is. They feel they have to offer it, so they have to pay the fees; they can't negotiate, and it's a kind of situation where they are the takers. They have no other ability to do anything but take it.

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

Ms. Tedesco, do you want to comment?

[Lucie M.A. Tedesco]

I will just add that I wouldn't be able to point to the exact research, but I remember reading some research on that exact topic that says the further a consumer gets away from paying cash, the easier it is for the consumer to spend, or the more likely it will be that the consumer will spend.

What we're going to try to do is conduct the research to test that hypothesis.