Evidence of meeting #18 for Industry, Science and Technology in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was merchants.
A recording is available from Parliament.
5:05 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
Thank you, Mr. Chairman.
Thank you for coming this afternoon. It's a very interesting discussion.
I'm going to stick to the TD approach, so if you want to get it out, I'm going to go over it.
The issue we've been hearing from merchants thus far is about how complicated this is, and you didn't make it any easier today. If I'm looking at the statement under summary of fees, is the interchange rate in any of these fees I'm seeing on the bottom here?
5:05 p.m.
President, TD Merchant Services
The interchange rate is not listed on there, but as we said earlier, it is the largest component of the fees that make up the Visa delivery rate.
5:05 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
So it's not listed in there. I took the $824 and I have no idea what you do with the direct payment sales or the chargebacks--I know what they are, but I don't know what you do with them--or the returns. When I did the math, it came to 2.7%, but that does not include the interchange fee, is that correct?
5:05 p.m.
President, TD Merchant Services
There is no other fee. If you've taken the $824, that is the total amount we have charged that particular merchant.
5:05 p.m.
President, TD Merchant Services
It includes all the fees we would charge to the merchant.
5:05 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
So how do you treat, to the merchant, the direct payment sales of $9,600? Do they get charged down here for the transaction of that for each one of those 224 transactions? Is it part of that down here?
5:05 p.m.
President, TD Merchant Services
Yes, so in the example we have summary of fees. You see an IDP, or Interac direct payment transaction fee. The example, at 8¢ a transaction times 224, is roughly $18.
5:05 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
So for me to do the math, if I add up all the transaction numbers at the top, divide them by the $824, it's approximately my cost per transaction, depending on what the transaction might be.
5:05 p.m.
President, TD Merchant Services
If you were trying to work it out to an average discount rate, then yes.
5:05 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
If I'm planning my business, I need to know approximately. I don't eat it; I have to pass it on to my customers, so I have to have an idea of what I'm paying so I can pass that on. The first fee, the Visa discount, goes to you, right?
5:05 p.m.
President, TD Merchant Services
All these fees come to us. We collect all these fees.
5:05 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
Yes, but this one goes to you. The transaction fee is for the 224, so that's the fee I'm paying, and it's $0.08, right? I got that. That's your total. Your POS machine, is that $35 a month?
5:05 p.m.
President, TD Merchant Services
Yes, so again, it's an example. It might range anywhere from $20 to $35 a month for the rental of the device. Again, as I said, it depends--
5:05 p.m.
President, TD Merchant Services
Most customers like the opportunity to rent from us because we have what we call a four-hour service promise, so we promise, at least 90% of the time, that if you call us and your terminal breaks down, we'll be on-site with a service technician. We have 250 service technicians across the country.
5:05 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
Okay.
I understand the taxes. The Visa assessment fee...and that's a percentage negotiated between you and the retailer?
5:05 p.m.
President, TD Merchant Services
In our case, it is the straight pass-through of the Visa assessment fee. Visa charges us six basis points plus GST, and that's what the 6.3 basis points reflect.
5:05 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
The next one is the discount rate adjustment fee. It's $68.15 in your example. And you explain what that is three pages later.
Can you tell me the difference between Canadian Infinite standard--Infinite electronic, I guess that is--commercial standard, and commercial...? What's the difference between standard and electronic?
5:05 p.m.
President, TD Merchant Services
There are different types of transactions. I mentioned the way the merchant processes those transactions.
An electronic transaction is either one that is swiped--so the card is there--or one that is a chip transaction, where the chip is inserted into the terminal. For those, we know the card is there, so they're less likely to be turned down.
Standard transactions are those for which the card is not present. I mentioned that e-commerce transactions are standard, because you're purchasing at a website and the card is not physically at the merchant's location. So Visa actually has differential interchange rates for those transactions. And we break out all of those card types, where we've charged a premium for those card types--
5:10 p.m.
Conservative
The Co-Chair Conservative Michael Chong
Thank you very much, Mr. Wallace, and thank you very much, Mr. van Duynhoven.
Mr. Carrier.
5:10 p.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Good afternoon.
I want to come back to the issue of premium cards. I have mentioned the Australian model that has been recommended by the coalition of retailers. You said that you do not approve of that model because you are more in favor of free competition.
Since you only process payments... Credit cards meet a definite need and I believe we will continue to use them because they are very useful. So, I think you would not lose anything if the interchange fees were fixed.
Why are you not in favor of a maximum rate set by regulation?
5:10 p.m.
President and Chief Executive Officer, Moneris Solutions
Sure, yes. The different products that are out there, including commercial card products, etc., have different behavioural characteristics. This is my view. I think there is a place for different interchange levels in the system to incent different types of behaviour. I also believe that absent, including in the case of American Express, in any of those discussions is the fact that we would have an unintended consequence if we imposed the Australian example. And that could be that the issuing community decides it's in their shareholders' best interests to issue American Express cards as opposed to Visa or MasterCard cards. The fees that are charged on those cards and the fees that the issuers would receive from those cards would be dramatically higher even than what they're currently receiving today.
And so I think a combination of those two things, as well as--and I don't know for sure--the potential for decreased innovation with things like contactless, for example, and things like the chip, which again, I believe, is a very good thing for the Canadian consumer just from a data integrity perspective.... Examples like these, I think, are driven in a free market, and I don't know if, in a more constrained market, we'd have that type of innovation here.