Finance Committee on June 1st, 2021

[Erin O'Brien]

We feel that this act provides appropriate compliance tools to the Bank of Canada. For instance, it can issue fines and it can revoke licences. It's been my experience, in working with the bank over several years, that they're full of moxie.

[The Chair, Liberal, Wayne Easter]

All right, then.

We'll go to Ms. Jansen, followed by Ms. Dzerowicz.

Go ahead, Ms. Jansen.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Yes, I'm just wondering.... I want to clarify. With this new legislation on retail payment systems, the Bank of Canada is going to be watching over regulating Square, Stripe, PayPal, Google Pay and Apple Pay. Is that correct? Is that what you're saying?

[Erin O'Brien]

Those are amongst others, but yes, absolutely, it's those types of firms.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Have you done a study on what the added costs will be for consumers, as well as the added revenue that the Bank of Canada will be getting?

[Erin O'Brien]

In term of costs, there absolutely is a cost associated with the implementation of the framework. What we included in budget 2021 was an estimated cost of $160 million over six years, of which $130 million would be attributed to oversight requirements from the Bank of Canada. Of the $130 million, we are estimating that approximately $71 million in costs would be recovered from the sector, and then the remainder would be covered by the Bank of Canada in terms of its seigniorage revenues.

How that would be applied to specific payment service providers is still to be determined, and that will be outlined within the broader regulatory framework. The Bank of Canada has initiated discussions with payment service providers on this and recognizes that this sector is by no means homogenous. You mentioned a number of the larger payment service providers that are active in the market, but there are also a number of smaller start-ups, so we'll need to determine a cost allocation framework that would be appropriate, given the nature and size of the payment service providers they're regulating. Also, I think the larger companies are going to present more complex situations that require more of the Bank of Canada's time and effort, so the intention is that that would be proportionate.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

You're saying that you're anticipating this is going to cost consumers $70 million. Is that what I understood?

[Erin O'Brien]

It's unclear, I think, to what extent payment service providers would cover these costs as part of their own cost of operating a business, versus how much they would then necessarily pass on to consumers, so—

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Have you looked at other countries where this is done? They would have an idea, wouldn't they?

[Erin O'Brien]

We have looked at the approach undertaken in other jurisdictions, notably Australia, the EU and the U.K. They're a few that come to mind, in general, in terms of how they have set up their frameworks and the nature of the requirements that they impose. I know our approach is very similar to the U.K.'s in terms of costing, but as I say, there are a lot of details that need to be determined and will be outlined in regulations. As we develop regulations, they will be done with significant consultation with the ecosystem, so—

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

It's just so tricky, because of course this is going to impact Canadians' pocketbooks, so when we vote for this, consumers are the ones who are going to take the hit. If you have looked at other jurisdictions and they are somewhat similar, what were the costs you saw that ensued for their constituents?

[Erin O'Brien]

I don't have those details available today. I would call on my colleague Julie, but I don't believe either of us has that information available currently.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Okay. It's an unfortunate bit of missing information, because of course when we have to vote on this, we're impacting our constituents' yearly bills. It would be good to know that.

[The Chair, Liberal, Wayne Easter]

Ms. Dzerowicz.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you, Mr. Chair. I want to put a couple of things on the record.

The general modernization of the payments sector and the legislation around it is, I think, largely supported by the fintech sector. I think it has been designed very deliberately to address the cryptocurrencies in the retail payments space. I want to put that on the record.

I also want to put this on the record. There were some questions around the Bank of Canada and support within the industry. Here is a quote that I have from an article that was written in The Globe and Mail:

The Bank of Canada will build on its previous experience as it takes on new regulatory duties, bank spokesperson Rebecca Spence said. The central bank is already charged with overseeing “systemically important” parts of Canada’s financial infrastructure, including the transfer system that lets commercial banks send large sums of money back and forth, and the clearing and depository system, which settles securities trades. Last year, the bank began overseeing Interac Corp.’s e-transfer system, which it labelled a “prominent payment system.”

The Bank of Canada has already been in this space. I think it's just expanding it in an appropriate way.

Then, I also want to put on the record that Payments Canada is also supportive of these regulatory changes. In that same article, which I'm happy to forward, Mr. Chair, Ann Butler, the chief external relations and legal officer for Payments Canada, said the following:

I would think of it as an expansion of the trust in the system.... Payments is a network business, and as you expand trust in the regulatory oversight of the system, you create the opportunity for it to continue to grow and flourish with innovation.

Thank you so much, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Thank you.

I'm going to Mr. Falk.

[Ted Falk, Conservative, Provencher, MB]

Thank you, Mr. Chair.

I find it a bit curious that Liberals need to continually put things on the record. I thought this was more a time and an opportunity to ask questions.

I have questions. Isn't the Bank of Canada the current regulatory body that oversees the Payment Clearing and Settlement Act?

[Erin O'Brien]

I should know this.

Julie?

[Julie Trepanier]

Yes, it is. It oversees the core payment system, which Erin was referring to earlier, under the Payment Clearing and Settlement Act.

[The Chair, Liberal, Wayne Easter]

It is.

Mr. Falk?

[Ted Falk, Conservative, Provencher, MB]

That was just the first question, to set the groundwork.

[The Chair, Liberal, Wayne Easter]

You're just putting a toe in the water. Okay, go ahead.

[Ted Falk, Conservative, Provencher, MB]

I'm laying the foundation for my question. Thank you, Mr. Chair.

It is, then, going to be the same regulatory body that's currently overseeing the payment services we have in place in Canada now that will also be doing the retail payment activities act?

[Erin O'Brien]

That's right.

[Ted Falk, Conservative, Provencher, MB]

Okay, but there are some exceptions when it comes to things such as gift cards, ATM cash withdrawals and things such as that.