Industry Committee on Oct. 7th, 2024

[Chandra Arya, Liberal, Nepean, ON]

Mr. Ahluwalia, can you answer the question?

[Martin Leman, Vice-President, Strategy, Pricing and Interchange, Mastercard Canada]

Merchants derive great value from accepting credit cards in the form of—

[Chandra Arya, Liberal, Nepean, ON]

That's not my question. Based on the card I use or choose, will the interchange rate vary?

[Martin Leman]

There are varying levels of interchange for different types of transactions, different types of cards and different contextual scenarios.

[Chandra Arya, Liberal, Nepean, ON]

Does that mean that when I use a card at a merchant I know what is that being charged? Will I know that when I get a new card from a bank? At what point will I know that I'm going to get charged the interchange or not?

[Martin Leman]

You, as a consumer, will not be charged interchange.

[Chandra Arya, Liberal, Nepean, ON]

Again, at the end of the day—

[Martin Leman]

Merchants pay interchange to the banks that provide card-processing services, sir.

[Chandra Arya, Liberal, Nepean, ON]

Merchants don't pay from their pockets. They will have to get it from us, one way or another.

Is that correct?

[Martin Leman]

That's not entirely correct.

Again, merchants derive great value from card acceptance, including an operational savings compared with using cash or cheques, which is how things used to be. When I was a little boy and I went to the grocery store with my mother, she'd get to the top of the line, pass off her groceries and then proceed to pull out her chequebook to start writing a cheque.

[Chandra Arya, Liberal, Nepean, ON]

Okay. However—

[Martin Leman]

That is time and money for a merchant. What we've done with electronic payments is remove that cost. It has been replaced.

[Chandra Arya, Liberal, Nepean, ON]

I'm sorry to interrupt you.

Mr. Hannah, I have 30 seconds. My last question is for you.

After listening to you.... You saw the text of our motion. It's almost as though there's no problem.

Is that what I'm hearing from you?

[Darren Hannah]

I think what you heard from me is that consumers are getting good value out of cards. We think merchants derive a lot of value from cards. We think the market works well. It's continuing to evolve.

[Chandra Arya, Liberal, Nepean, ON]

Are you saying, “There's no problem at all. Why are you doing this study?”

[Darren Hannah]

I'm saying that progress is being made. Everything can always be improved. There are new undertakings and agreements coming into place that will add further value.

I'm saying that we've made a lot of progress.

[Chandra Arya, Liberal, Nepean, ON]

As Mr. Littler said, that is a very small portion of the total cost.

[Darren Hannah]

What I would say is that, when you look at the value merchants and consumers are getting, it's a strong product and it continues to be so.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Arya.

Mr. Garon, the floor is yours for six minutes.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Mr. Chair.

Welcome, everyone. I want to thank the witnesses for being with us. I find my colleague Mr. Arya's questions very interesting, and I'm going to continue in the same vein.

Mr. Leman, I'm going to translate your remarks into French. You said that consumers were not being charged interchange fees.

I'm sure you took an economics course at university. I see you studied at the École des hautes études commerciales de Montréal, the HEC.

Is that correct?

[Martin Leman]

That's correct.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Then you're aware of the impact a tariff has. You know that setting a tariff without including it in the final price of a good doesn't mean that consumers don't pay that tariff. When the cost to produce a good or the transaction cost rises, someone has to bear the cost of that increase. I imagine everyone here knows some economics. I simply want to point out that what you said is false.

I'd like to understand the interchange issue.

My colleague Mr. Arya asked if consumers bear the cost of rewards programs. We know there's a cost to that. I'm trying to understand what you said because these issues are complex. You said that various charges were billed to merchants and that they depended on the transaction's risk level. That risk may vary with the method used to make the payment, contactless payment, for example, or with the type of card or type of rewards program and so on. Those rewards have to be paid for.

Am I getting this right?

[Martin Leman]

Would you please clarify your question?

[Jean-Denis Garon, Bloc, Mirabel, QC]

You said that the fees charged to merchants varied with the type of card used, the risk level of the transaction and so on, didn't you?

[Martin Leman]

Yes, I said that.