We'd like to thank the committee for the opportunity to present our view, as a Canadian online payment service provider, of the online electronic transactions business in Canada.
My name is Brian Crozier. I'm in global business development for UseMyBank Services in Toronto. I've been in the online payment processing business for over 12 years. My business partner and CEO of UseMyBank, Joseph Iuso, has worked for major Canadian banks for over 20 years. Joseph has extensive knowledge of the technical capabilities of the Canadian banking system, as well as all aspects of security, transaction processing, the self-service arena of ATM POS terminals, as well as telephone and Internet banking.
UseMyBank is a Canadian online bank service provider for online merchants and billers. Our core technology provides an easy way for online merchants to transact in real time with their customers using online banking.
Consumers who use a merchant's online checkout may choose their online bank and make a purchase or pay a bill in real time. We launched our service in 2002 and have processed millions of transactions for Canadians, with a good funds rate of 99.99999%.
UseMyBank pioneered online payments several years ahead of the Canadian banking institutions. We were able to accomplish this by leveraging the existing online banking systems to perform real-time payments. We have since expanded our service to hundreds of banks across 10 countries. This real-world experience gives us at UseMyBank a global view of the best online payment practices, which we can share with committee members.
The business of making payments in Canada is largely controlled by a handful of financial institutions. Many believe this constitutes a monopoly that stifles competition, which is the very lifeblood of Canadian business. E-commerce is an important and growing part of the payment industry in Canada. Payments to online merchants and billers are now in the tens of billions of dollars, and many merchants and consumers would like to see more available choices when making these online payments.
There is very little competition in the Canadian payments market. There is a tradition of in-house sales of merchant services, with the largest payment processor, Moneris Solutions, being owned by two of the largest banks. Paymentech and Global Payment Systems have taken over the rest of the market where mergers were not allowed. So it's not difficult to understand why new independent businesses face an uphill battle to offer service.
Interac, Canada's near-monopoly debit network, as well as Visa and MasterCard, are in the business of processing online payments. We believe it's in our country's best interest to offer consumers a choice by having as many suppliers of online payment services in Canada as possible, thus ensuring the quality of service as well as fair market prices.
Since 1989, retailers in Canada have been accepting debit payments at point of sale terminals for pennies per transaction using Interac. In 2006, Interac launched Interac Online, charging merchants upwards of 2% or more per transaction.
Canadian online retailers and billers require a greater variety of options when accepting payments from their customers--more than the current four banks that Interac supplies. For example, the Canadian travel and airline business processes billions of dollars in transactions each year online. This industry currently finds itself between high credit card rates and Interac Online's position of placing them on a restricted list. These retailers are unable to accept direct payments from their customers using online banking.
Canada's clearing and settlement system is among the most efficient in the world. The Canadian Payments Association operates national clearing and settlement systems for all cheques, wire transfers, direct deposits, pre-authorized debits, bill payments, point-of-sale debits, and online payments. Transactions that are charged to credit cards are not cleared through CPA systems, thus the CPA rules don't apply to them.
UseMyBank has met with the CPA to bring them a better understanding of the need for alternative forms of online payments and the benefit that such technology offers Canadian e-commerce. The rules ultimately drafted on this measure excluded not only UseMyBank but many other innovative companies from participating in the Canadian payment sector.
From its initial launch, UseMyBank has made every effort to be an active participant in the payment processing industry. Both in Canada and abroad, we have ensured that our goals and objectives are heard and understood at the regulatory and legislative levels of the financial banking industry.
This same scenario has been replayed time and time again with every group that has been charged with the responsibility of governing the Canadian payment industry. Sadly, innovations that could offer Canadian merchants safe and cost-effective ways to build their online business are being stifled, while other countries begin to surge ahead of us in this sector. We believe that the banking system in Canada should have regulations that foster competition and innovation, similar to the telecommunications industry today, which is enjoying more services and lower prices as a result of allowing more competition to enter a market that was once a monopoly.
In 2006, the Bank of Nova Scotia became a defendant in a case brought before the Competition Tribunal. It was alleged to have illegally reduced competition in the online debit payments market. The bank won the case, but the plaintiff, GPay, without the cooperation of the defendant and other Canadian banks, was unable to remain doing business. GPay was our payment processor for Canada at that time.
At one time, Canada was number one for consumer adoption and usage of ATMs, POS terminals, debit transactions, and online banking. We are no longer number one, as many of these other countries have surpassed us. Since 2000, the banking industry has not been as responsive to changing market conditions and expectations. Their policies and tactics have attempted to restrict the market by manipulating the rules and regulations through lobbying the CPA, the CBA, and other government agencies.
It is possible for Canada to regain its lead in the payments industry. However, it requires an environment that rewards entrepreneurs for creating the next big ideas and companies. We hope that the committee can help make this a more friendly and competitive market for online payment service providers and their millions of Canadian and global customers.