Evidence of meeting #14 for Industry, Science and Technology in the 41st Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was e-commerce.
A recording is available from Parliament.
Executive in Residence, Canadian Advanced Technology Alliance
May I answer in English?
Executive in Residence, Canadian Advanced Technology Alliance
That's easier for me. Thank you.
SR and ED is a very good program and is the largest program supporting innovation in Canadian industry. It is supposed to be an enabling program, and for a number of reasons the Canada Revenue Agency has been placing a lot of stumbling blocks before companies seeking to take full advantage of the program, and there's a lot of wastage in the administration of the program.
As I mentioned earlier, we are issuing a white paper on how to deal with the innovation and commercialization gap in Canada, and a good portion of that white paper is going to deal with the issues of SR and ED.
For instance, there is a lot of waste in terms of back claims that do not really support innovation. There are issues with applicability of SR and ED, for instance, to IP protection. It does not allow for that, which puts Canadian companies at a disadvantage. There's a belief that a measure of direct support, in terms of innovation and commercialization, would be of much greater effect in helping Canadian industry to become more competitive.
NDP
Hélène LeBlanc NDP LaSalle—Émard, QC
Talking about changes, this would involve direct changes in businesses. What improvements are you considering to assist mainly the small and medium-sized businesses in adopting information and communications technologies and adapting to e-commerce? What government programs could help them in that regard?
Executive in Residence, Canadian Advanced Technology Alliance
Absolument. There are a number of aspects described in my presentation and, again, if I have the occasion, I would like to talk at length with you and the other members of the committee about this aspect.
For instance, there is a federal program called IRAP, the industrial research assistance program, which is of great value as a direct investment in the development of technologies and innovations in Canadian companies. Unfortunately, this program is quite low in value, at about $80 million a year, and runs out of funds by September. Small companies are being told: wait until next year, that maybe we are going to have money for you next year. But, again, for a small company waiting six months to maybe get or not get some support is quite critical. They cannot afford to do that. That's very uncompetitive for them, as timing is so critical to success in the global market.
There is another good program that has been positioned as an exploratory program. It belongs to Public Works and Government Services Canada, part of the Office of Small and Medium Enterprises. It's called the Canadian innovation commercialization program, which enables federal agencies and departments to purchase innovations from Canadian companies. It's a very small program, but is very effective in helping companies raise their commercialization capabilities.
One of the proposals that CATA is making is to create a program similar to the industrial research assistance program, a program that would be aimed at commercialization readiness assistance. What technology companies are doing, as I mentioned, is that they put all their efforts into making the product, expecting that the product will sell overnight, which doesn't happen. It takes years for the products to be accepted by the market and companies do not have enough capabilities to handle those difficult years. So a program aimed at commercialization readiness preparedness would help Canadian companies tremendously in becoming more competitive globally.
NDP
Hélène LeBlanc NDP LaSalle—Émard, QC
You mentioned a number of programs. Are small and medium-sized businesses aware of all these programs available to them, and, if so, are they using them to innovate?
Executive in Residence, Canadian Advanced Technology Alliance
A lot of businesses are taking advantage of them, but they aren't all doing it.
There are too many programs. At last count in Canada, there were about 470 programs to help Canadians be more innovative, of which about 50 were federal programs. The poor businessmen or business women are just bewildered by the complexity of all of these programs. It does not make sense. All of that information about companies and their innovations and their need for commercialization should be centralized—like the great job PayPal is doing in coordinating all of the financial information—such that an application to one program may be of value for other programs as well.
Conservative
Conservative
John Carmichael Conservative Don Valley West, ON
Thank you, Mr. Chair, and thank you to our guests today.
Mr. MacMullin, I'd like to ask you a couple of questions about the fee structure again, because I'm just not getting it. I apologize if it's redundant.
Mr. Kelly, I'll hopefully leverage over to you.
As a merchant, I'm trying to clearly understand this. When I as a business person complete a transaction in selling a product out of my business through one of the card carriers, I pre-agreed to a fee structure, and those fees range from some of the higher cost fees down to the lower costs. One thing we were told early on in this study is that the fees are one of the largest hurdles to the whole e-commerce evolution of business, small business in particular.
Am I correct in understanding that your fee structure is a simple, all-inclusive deal? If I do business with your company, regardless of which credit card or plastic is used to pay for the product, it's a single fee, consistently time after time, and it's all inclusive with that credit card fee built into it?
Managing Director, PayPal Canada
There are a couple of points of clarification. The credit card fee is inclusive of the PayPal fee. You're not paying a PayPal fee plus whatever your agreed-upon credit card agreement says.
Conservative
John Carmichael Conservative Don Valley West, ON
It doesn't matter which fee it is? You have one fee for all credit card carriers?
Managing Director, PayPal Canada
Correct. So if you're using a Gold TD card, or a basic Royal card, or an Amex card, the fee is going to be the same.
How PayPal fees are structured, as I mentioned, at 1.9% plus 30¢, up to 2.9% plus 30¢, depending on your monthly sales volume. So whether you're doing $3,000 a month or $100,000 a month, there's a sliding scale. It has four tiers and it's a published rate. Unlike most other acquirers who don't publish any of their fees anywhere, our fees are online —at PayPal.ca/fees. It's very transparent. It's based on your monthly sales volume and it doesn't matter what the funding mix is in any given month or any given time period whatever card payment you're processing, because that is a burden. Sometimes you have no control over what credit card a consumer is going to pay with, and you shouldn't have to worry about that burden either. So on top of other things like the incremental costs you may have downgrade fees, I think the acquirers sometimes call them. That is, when you process a certain percentage of premium cards, there may actually be an additional fee on top of the transaction fee. There are no other hidden fees like that.
Probably the best way to describe it is that the fee PayPal provides you is a net rate. Often fees published elsewhere are gross rates, and they will vary depending on the type of volume and type of card mix you have.
Managing Director, PayPal Canada
Yes, 1.9% to 2.9%, plus 30¢ per transaction.
Conservative
John Carmichael Conservative Don Valley West, ON
Plus 30¢ per transaction. That's on the retail value.
Conservative
John Carmichael Conservative Don Valley West, ON
My understanding is that we have some cards in Canada that charge a good deal more than 1.9% to 2.9%.
Managing Director, PayPal Canada
Absolutely. That's why I was saying, in particular for the small and medium—
Managing Director, PayPal Canada
—for the small and medium-sized businesses. The reason we can afford to do that too is that some of our transactions are cash-based transactions. We are taking on the funding mix risk in that cost structure in order to lower the overall processing fees we pass on to the merchants. We simplify it as part of that process and we manage the risk on the funding mix side.
Conservative
John Carmichael Conservative Don Valley West, ON
Okay, it's clear. I'm not quite sure how it works in terms of the numbers.
So, Mr. Kelly, then....
Sorry, go ahead.
Conservative
Managing Director, PayPal Canada
As the emergence of on-line and off-line get together, I'm concerned about determining what is an on-line transaction and what is an off-line transaction. Today, there are two rulings: card present and card not present. A card present transaction is when you swipe or enter your chip and PIN at a store. If I walk in with a mobile phone and I pay with my mobile phone, that's considered an Internet card not present transaction, based on VISA or MasterCard rulings. Those are typically higher interchange rates that are regulated by the credit card companies, not regulated by us or the government.
Conservative
John Carmichael Conservative Don Valley West, ON
Mr. Kelly, can you be really quick, as I only have a couple of seconds left?
What's happening with the trends now, with PayPal now being in the mix with these credit card companies?
