Finance Committee on Feb. 27th, 2014

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

Okay. I'll carry on to my next question. I want to pick up on the complexity and a little bit on the comments on the business-to-business side. It was brought up in the last meeting as well that we're really behind on the business-to-business side of this as well.

Ms. Pohlmann, you said that the platforms facilitate the electronic payment solutions. I'd like to understand how. I'm assuming you mean that government would do that or that someone would facilitate this. How do you facilitate that? That's a huge market entry issue as well, because you want to have players in that. Your big business-to-business players, like the SAPs and the Oracles, are in that game. How do your small businesses get there and do you facilitate that?

[Corinne Pohlmann]

That's an excellent question. Not only is the business-to-business part slow in developing, but so are the business-to-government and government-to-business parts. Perhaps government can play a role in building a system within payments to government that can help spearhead or drive a bit of this innovation, right?

That doesn't say it doesn't exist right now. It does. It's just that right now it's inaccessible to smaller firms, so how do we make sure that those types of business-to-business transactions can be made more accessible to small firms?

Again, I'm hesitant to suggest that government does anything that is directly intervening, but I do think that part of the solution might be to see if government can look at their own ways they interact with business, because through taxation, businesses have to pay government by cheque all the time. Perhaps there are methods or means there that can be used to drive innovation in the private sector as well.

I don't know, but these are things I'm throwing out there. It's definitely a growing issue. There's a real demand among small businesses and a frustration that when they try to use the systems that are already out there, those systems are really not accessible to them because of cost or infrastructure requirements.

Who are some of the major players in this now who might create opportunities?

[Corinne Pohlmann]

The typical one right now is that you pay your bills online, right? You can pay your electricity bill and all of that online. A lot of small businesses would love to have that as an option so that they can pay each other, but to set up a system like that is very expensive for a small business to do, because you have to do it with each separate bank. You have to pay each bank a separate fee. It's quite complicated and difficult to do.

If there were some way we could have an Interac for business-to-business transactions, that would be great. Somewhere where they can automatically just flow funds from one account to another by electronic and very quick means, and in a low-cost way, would be ideal.

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

As a small-business owner, I have been able to make payments through my bank through the CRA, so I've been able to do some of that, but it can be a little bit clunky.

I hear what you're saying.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Allen.

We'll go to Madame Borg.

[Charmaine Borg, NDP, Terrebonne—Blainville, QC]

Thank you, Mr. Chair.

I would also like to thank the witnesses for being with us today as part of this fascinating study.

My first question is for Ms. Pohlmann and Mr. Wilkes.

Do you think the fees associated with online payments and card-not-present transactions might discourage your members from creating transaction-based Web sites or adopting new technologies, or cause them to refuse such forms of payment altogether? Are they refusing to implement these systems because of the costs associated with them?

[Corinne Pohlmann]

Yes. We recently did some work around the payments system. We have a whole report around Canadian payments and small businesses.

One of the questions we asked was what the biggest obstacles were for merchants in accepting or receiving electronic payments. Number one was cost. It was simply down to the extra cost to set it up and to deal with the security issues around it. Obviously, once you have a card-not-present situation, you're also dealing with higher costs. Then, if you have premium cards on top of that, it is a bit of a barrier.

For very small firms it is one of the reasons.... They may have websites, but they're not necessarily transacting online, as a result.

[David Wilkes]

I would add to that.

My short answer also would be yes. In addition, one of the challenges our members are concerned about and are talking to us about is that right now Interac is not issued by all banks in a mobile form. If you don't have what is in many cases the preferred option of paying, which is Interac in a mobile environment, there are concerns that the costs and the transactions will migrate to higher, more expensive credit card options. This is something that members are concerned about and that will prevent, in my opinion, full adoption.

[Charmaine Borg, NDP, Terrebonne—Blainville, QC]

Thank you.

My second question is for Mr. Cumming, Ms. Tedesco and Mr. Hannah.

Do you think a mandatory system that would alert stakeholders of data breaches could reduce the risk of identify theft or fraud, while strengthening the confidence of consumers wanting to use these new payment methods?

[Lucie M.A. Tedesco]

Sorry, but I didn't quite understand the question.

[Charmaine Borg, NDP, Terrebonne—Blainville, QC]

Do you think a mandatory system that would alert stakeholders of data breaches could reduce the risk of identify theft or fraud, while strengthening the confidence of consumers wanting to make mobile or electronic payments?

[Lucie M.A. Tedesco]

That is another risk we identified in our research. Just-in-time disclosure, as it is called, is one possible approach. It is a system whereby consumers would be alerted immediately prior to private information being collected. Consumers would be asked for their consent if the device was attempting to record their personal information.

[Charmaine Borg, NDP, Terrebonne—Blainville, QC]

When a data breach has occurred and a company's security system has been compromised, should the consumer in question be alerted, given that they could be a victim of identify theft?

[Lucie M.A. Tedesco]

Yes.

[Hugh Cumming]

I have a couple of comments on the question.

One is just around this whole notion of a user-centric model. I think that the mobile device creates an interesting opportunity for capturing that kind of consent at the point of interaction with the merchant. That is an important point. There aren't clear rules around what that would actually mean.

The second is really about how to reduce risk in a connected world. Part of it is not requiring every participant, in order to gain the benefit of these kinds of interactions, to have to maintain and house personal and sensitive data. That is really where risk is created, at the end points when data is not properly secured. By creating an environment wherein that data never leaves the protection of where it was created, you can reduce risk in the overall network.

[Darren Hannah]

I have just one point. Currently it's the case that if you have a card and the issuer identifies or thinks that your card is compromised, they are going to reach out and contact you.

[Charmaine Borg, NDP, Terrebonne—Blainville, QC]

I agree, banks will often do that, but I was wondering more about sectors that don't adopt the latest technology.

This is for the SecureKey Technologies representative, but Ms. Pohlmann or Mr. Wilkes may want to respond as well.

In your view, are companies knowledgeable enough on how to build highly secure payment systems?

[The Chair, Conservative, James Rajotte]

Please give us just a very brief response, Ms. Pohlmann.

[Corinne Pohlmann]

No. That would definitely be one of the bigger barriers, and they fear it very much, because they know there are lots of security rules and privacy rules, and that they are going to be liable if it's not done correctly. I would say it's a big area.

[The Chair, Conservative, James Rajotte]

Okay. Thank you.

[David Wilkes]

The whole complexity issue is one that [Inaudible—Editor].

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Adler, go ahead, please, for your round.

[Mark Adler, Conservative, York Centre, ON]

Thank you to all the witnesses for being here today.

I have a battery of questions that I'm just going to ask all of you in no particular order, but I do want to start with this.

Ms. Pohlmann, I'm looking at the various slides, and I see on page 2, under “Retail Hospitality” that businesses are set up to accept various forms of payment, and 98% accept cash. You have a very big sample size of 8,209. Who are the 2% that don't accept cash?

[Corinne Pohlmann]

That's a good question. I'm sure they exist. If you're an online business only, for example—

[Mark Adler, Conservative, York Centre, ON]

Okay, that's good.