Industry Committee on Oct. 24th, 2024

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

What do you think, Mr. Lampron?

[Alexandre Lampron]

My opinion is a bit like Mr. Brownlee's. We have not done studies that show it. Yes, however, lowering the rate is a good thing. I reiterate, these rates were lowered almost ten years ago in other places, so we believe it is logical for consumers and small retailers to benefit from this. It is also logical that in a country like Canada, all retailers should also be able to benefit from it, regardless of their sales volume.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Brownlee, earlier, some witnesses talked about differences between the big players like Costco and Walmart, for example, and small businesses in general. Is there a substantial difference when it comes to all of the costs associated with credit card use?

[Jeff Brownlee]

Yes, there is.

To go back to your other question when you were talking about studies, part of the challenge that we found, or our retailers found, in terms of lowering the rates is that hidden costs creep in. The credit card companies are very good at that. You can have the rate as low as you want, but there are a lot of hidden costs that creep in overall in terms of processing.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Lampron, do you have something to add?

[Alexandre Lampron]

In one sense, there has to be some degree of difference. That is why we are asking for a uniform percentage of 0.5% to be established for all retailers. That would that be better not only for the consumer, but also for small retailers. So yes, there needs to be a fairly sharp difference in that regard.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Brownlee and Mr. Lampron, do you think the agreement between the Government of Canada and Mastercard and Visa is a broken promise? Looking at all small and medium-sized businesses in Canada, do you think the actual reduction does not meet your expectations?

[Jeff Brownlee]

I don't know about a broken promise, but, again, our convenience stores or the depanneurs in Canada don't qualify for this, because the threshold is too low. If you take a look at a convenience store that pumps gasoline, our margins or the overall sales are inflated, but the margins are still extremely low.

Unfortunately, we worked with the government trying to explain the uniqueness of our industry and the fact that we do collect a number of taxes, and when we found out about this new agreement that came into place, it was when it was leaked to the media.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Essentially, it does not meet your expectations and the expectations of all of your members in any way.

[Jeff Brownlee]

It doesn't meet the needs of our members in any way, shape or form.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Lampron, what is your answer?

[Alexandre Lampron]

Essentially, we believe that keeping interchange fees high in a way impoverishes consumers and our economy. We want to make sure that these fees are as low as possible, particularly when prices are rising, as we have all observed, as consumers. One way to make sure that prices are acceptable is to make sure that interchange fees are as low as possible.

I would point out again that the agreement with Visa and Mastercard has been in effect for barely a few days. However, I think the rate reduction to 0.5% would benefit everyone, particularly our members and small retailers.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Chair, if I may, I would like to apologize to Mr. Peters. However, I am still extremely disappointed in his answers. I think the committee should make sure that the witnesses who appear answer the questions they are asked.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Généreux. I appreciate your apologizing to the witness.

MP Van Bynen, the floor is yours.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

I have a little bit of history of being a banker for about 30 years. Some of that was relative to the convenience stores or any stores that dealt with cash at that time that ended up having to pay fees for the processing of cash so, to some extent, I think you would see that electronic payment systems would benefit you in terms of not having to pay the cash processing costs that had been in existence in the past. To some extent, maybe I'm exposing my age and how long ago I was involved in the banking industry.

In a brief submitted to the pre-budget consultations for the 2022 federal budget, the Retail Council of Quebec recommended eliminating processing fees on the goods and services tax and on the harmonized tax on credit card transactions. The Canadian Federation of Independent Business estimates that doing so would reduce the processing fees charged to merchants by about $500 million annually.

How could this recommendation be implemented? I'm thinking about interchange rates being generally based on a transaction amount inclusive of taxes. Could credit card transactions be disaggregated to exclude tax from the amount in the calculation of the interchange?

Mr. Brownlee.

[Jeff Brownlee]

That's a great question.

What I can tell you is that we have to segment and keep track of that to pay taxes, so I think it can definitely be re-engineered in reverse so that we could get a credit for that. Absolutely.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Would the cost of doing so offset the benefits of doing so?

[Jeff Brownlee]

Absolutely.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Mr. Lampron.

[Alexandre Lampron]

I agree entirely. Yes, that makes sense.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Okay.

I'll go over to Interac.

Mr. Bossin, what would the implications for the issuers, the acquirers and the payment processors be with that type of change in policy?

[Bryan Bossin]

With that type of change....

From the Interac perspective, our network and our customers are the financial institutions in this case. They offer Interac products to the market. I can't speak specifically to the economic model you're raising, but I can say that Interac, the businesses we work with and the financial institutions we serve are very much focused on increasing the availability of debit and of low-cost debit to help benefit businesses.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

When I take a look at electronic transactions—I can't recall the last time I issued a cheque—the systems and processes you're providing are integral and will probably be the backbone of the financial institutions going forward.

In budget 2024, we announced that our government would be introducing legislation to implement Canada's framework for consumer-driven banking, which will allow consumers and small businesses to better manage their finances and access broader financial services. Can this help people build their credit and reduce administrative burdens for small businesses, and could you speak to the benefits of open banking and what it would do for Canada?

I'll start with Mr. Bossin from Interact.

[Bryan Bossin]

I'll be happy to start.

The commitment you mentioned to consumer-driven banking is one that Interac has been supportive of. We've noted that in our pre-budget submissions.

Interac was also part of the Department of Finance working groups that were studying the implementation of consumer-driven banking. We see a number of benefits for Canadians with such a system. It's been implemented in other countries around the world and we've supported it.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you.

Mr. Peters.