Please allow me to add a few thoughts to what Professor Geist said.
Imagine for a moment that mobile payments are in greater use in Canada than they currently are, that you were traveling abroad on business week ago and that, therefore, in order to pay your hotel bill and settle insurance premium and at home, you had been relying exclusively on your BlackBerry. You would have been rather embarrassed.
Mr. Chair, ladies and gentlemen, I thank you for inviting me to exchange views with you today. I teach consumer law at Université du Québec à Montréal and I have been especially interested in payment issues for over 20 years. I am currently a member of the Canadian Payments Association's Stakeholder Advisory Council and I've been retained since last April as an advisor on consumer issues by the Task Force for the Payments System Review set up by the Minister of Finance in summer 2010. However, I appear before you today on a strictly personal basis.
The questions you raise are numerous and complex. I will consider them primarily from the user's perspective, and especially that of consumers, but also to some extent to the challenges faced for instance by small businesses.
If I focus today on payment issues, it is because payments are vital to almost all electronic commerce activities and tend to be taken for granted, which is a grievous mistake.
On the web, cash is not king. We must rely on electronic payment mechanisms that are both increasingly diverse and offered by a growing range of providers. This evolution is desirable and may be beneficial, but it also generates new risks, which must be understood and mastered.
There is operational risk: payments can be lost, personal information can be stolen, networks can fail—and I owe an apology to Research in Motion: the last decade's experience with our banks, for instance, has shown that all networks are vulnerable.
There is financial risk: providers may go bankrupt or summarily close their doors while millions, perhaps billions of dollars sent to consumers or businesses might be at stake.
Contemplate for instance a sudden collapse of PayPal, which is unlikely to be sure, but which illustrates the consequences that the failure of smaller and more fragile providers might entail.
These issues also raise legal risk—I also teach law—as well as reputational risk for the whole payments industry. Yet there is practically no effective process or mechanism to manage these risks in Canada.
From a legislative standpoint, the United States have been relying since 1978 on the Electronic Fund Transfer Act, which has been complemented by other legislation. Over the past decade, the European Union has implemented a regulatory framework that is adapted to the new realities. Australia has been fine-tuning its e-payments regulatory framework for 15 years or more. But Canada has lagged behind and has not done enough.
As a result, our regulatory framework has the consistency of lace and it is incoherent, incomprehensible and largely unknown. As a result, providers such as financial institutions, which are best placed to prevent and manage the risks associated with the payment mechanisms they offer, strive mightily to transfer risk and cost to users, be they consumers or merchants, through standard form contracts, which is as unfair as it is economically inefficient.
As a result, in addition, some providers such as financial institutions must at least comply with prudential and solvency regulation, while others do not, which creates discrepancies in the market as well as it generates risk. Something must be done.
Mobile payments are currently on everybody's lips, in Canada and abroad. It may well be that, indeed, they are the future of payments and smartphones will replace our plastic cards. It may also be, however, that other electronic payment mechanisms will win the race, or will at least play significant second parts. The issue is therefore not merely mobile payments: it is rather the whole electronic payments ecosystem which requires an overhaul.
But why should we regulate at all? For the same reason we have implemented traffic lights and lines on the pavement: there must be clear rules of the road which everybody complies with to reduce risk, sustain trust and facilitate involvement and participation.
At lease two broad principles should therefore underlie a new Canadian framework for electronic payments: trust and accessibility. Without mutual trust, of course, no payment is possible.
We need to ensure safety and soundness from a financial standpoint, as well as reliability. Rules that allocate risk, advantages, costs and liabilities must be clear, coherent and fair, which they currently are not. All stakeholders must be able to become involved in the evolution of the regulatory framework and their needs and concerns must be addressed, which is currently not the case.
However trustworthy our payment mechanisms may be, they must also be accessible. Affordability is a crucial issue, especially with regard to mobile payments, if only because our mobile phone services are among the most expensive in the world.
Territorial accessibility is also an issue outside the more populated urban areas. And let us not forget that almost half our adult population is functionally illiterate: complex interfaces can quickly become a challenge. Add to that issues, such as the inclusion of persons with a disability.
These are only some of the issues pertaining to mobile payments, and electronic payments in general, and I have barely touched on them. For example, I have not even mentioned virtual money, such as Facebook credits.
Of course, I will be happy to discuss all of this and more with you.