Thank you to all the members of the committee for inviting us to appear and contribute to this study.
My name is Alex Vronces, and I am the executive director of Fintechs Canada.
With almost 50 members who collectively serve millions of Canadians on a daily basis, we're an industry association of Canada's most innovative financial technology companies.
There is much to say about credit cards. In these opening remarks, I'm going to focus on two things. One is that credit cards are enablers of commerce. Two is that they are an accessible source of credit for Canadians.
The Bank of Canada's most recent survey on payment methods found that nine in 10 adult Canadians have at least one credit card. In 2023, one in three payments were made with a credit card. Many prefer using their credit cards because of the rewards, because they're widely accepted and because they make buying and selling seamless.
Credit cards have also long had some of the best built-in liability protection for consumers. This was even before the federal government legislated the requirement to better protect consumers in the event of unauthorized credit card payments.
While more than half of Canadians pay off their balance before it starts accruing interest, according to some Bank of Canada data I consulted with before I appeared today, some rely on their credit cards to get by when there is nothing better.
Interest rates in the credit card market vary. While some retail cards are as high as 30%, there are several cards with rates as low as 10% to 12%. The FCAC, the Financial Consumer Agency of Canada, says that credit cards are a cheaper source of credit than the alternatives that many Canadians in precarious situations turn to, such as payday loans.
The way to make the financial sector work better for Canadians is not to make the issuance of credit cards or the processing of credit card payments more complex. There is a level of regulation that's necessary to protect consumers and merchants as well as to ensure the stability of our financial system. Canada is on track to meet that standard. Doing substantially more would just erect unnecessary barriers to entry, making the Canadian market even more uninviting for financial sector innovation.
The way to make the financial sector work better for consumers and merchants is to increase the level of competition. The government can do this by doing three things.
First, it could regulate payment service providers. This is something that's already happening. When this initiative is complete, it will make it easier for the credit card networks, among others, to let new entrants into their systems to compete with the incumbents, whether that's by offering lower interest rates, better protecting cardholders from fraud or offering more attractive rewards.
Second, we are overdue in launching Canada's real-time rail, which was supposed to boost competition between the different payment systems. Real-time rail has long been opposed by those who have the most to lose, the big banks. Big banks control Payments Canada, which is in charge of building the system that will compete with the other payment systems that big banks rely on for so much of their revenue. The government needs to fix the Payments Canada model to make sure that our payment system benefits Canadians, not just Canada's biggest banks.
Third, we're still behind on open banking. Though open banking is coming to Canada, the scope will be limited at launch. On day one, open banking will be about sharing data, not also initiating payments. Payment initiation is what would have allowed a fintech and a merchant to work together to make it more attractive for a customer to pay the merchant by something other than a credit card.
Thank you again for the opportunity to appear today. I look forward to answering any questions you might have for me.