Industry Committee on Oct. 24th, 2024

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Mr. Chair.

I think there is a bigger thing involved here. International free trade, as we know, is dead. Globalization is dead. Now it's all about friendshoring, nearshoring and an emphasis on self-reliance. However, when it comes to investments in Canada, we are still following the old logic that we love foreign direct investment, both inward and outward, but we are also ripe fruit for the picking by many international companies with limited operations in Canada.

Stripe has employed a few people. I'm sure some bright engineers are Canada-based, but their decision-making is not Canada-based. I don't know how much tax they are paying on the revenues they are generating in Canada. Obviously Mr. Peters, who has come from Washington, D.C., can legitimately claim that, being a private company, he is not entitled to disclose that information. He is saying that they haven't changed their fees for the last eight years. Anybody who knows even the basics of business knows how misleading that can be.

For example, I could say that my fees have been $1,000 for the last eight years without disclosing that, eight years back, my volume was $100 million. Now it's $1 billion. But we don't have to disclose that. We can just say that it's been 1% for the last eight years.

You can also say that what the government is proposing is so small that you'll not pass on the benefits—without, again, telling us what the percentage is. They said there are two ways they charge the business clients, interchange-plus fees and standard pricing, but they are not willing to disclose how much is under standard pricing and how much is under the interchange-plus fee model: “We are a private company. We are an international company. We don't even know where our board members are from.” I mean, they know, but obviously they can't pinpoint where they are located.

We have a real problem here. How can Canadian policy-makers formulate policies that can help Canadian consumers and Canadian businesses when we cannot actually get any relevant, meaningful information from growing companies like Stripe? It has become a big company. I know that eight or 10 years back, it was probably still in start-up mode, but now it is a giant global company.

Mr. Peters, I appreciate that you came from Washington. I really appreciate it. You could have appeared by video conference. You came here in person.

What is it that you can actually tell us that helps us understand the model better and understand the foreign rate? Generally speaking, I am not in favour of taking the Australian route and saying we should fix the interchange fee at 0.35%, which I believe is the Australian fee, or maybe at the 0.5% the European Union is charging.

What is it you can tell us that can help us understand much better?

[Brian Peters]

We like to compete on the value of our product. I mentioned earlier that there are 50 different processors in the market. There are different business models serving different parts of the economy.

Our model, yes, involves processing a transaction, but there are a lot of other value-added services. When you look at the way we're helping businesses succeed, it has a lot to do with those additional services that go beyond a very plain vanilla execution of a transaction.

[Chandra Arya, Liberal, Nepean, ON]

I'm not being disrespectful, but go back and listen to what you said. Tell me what we can get out of what you have just said that we can use in our policy-making process—nothing. Most policy-making is data driven, and if we don't know what the actual information is how can we change our policies?

[Brian Peters]

We posted on our website very specific detailed information, which, I believe, unlike for any other company, is highly specific. We've tried to be very transparent, and I—

[Chandra Arya, Liberal, Nepean, ON]

Specifically, what are your volumes in Canada and what percentage of your overall revenue comes from your standard pricing? Very specifically, what percentage comes from the interchange fee plus? Can we get those specifics?

[Brian Peters]

Again, I.... My expectation of the hearing was that we would be discussing what these numbers mean for small businesses, our revenue, and the way our business model works as a company to us. I think that doesn't seem to me to matter as much to the small business—

[Chandra Arya, Liberal, Nepean, ON]

One of the reasons we want to discuss it with you is that you refuse to pass on the changes that the government has brought in.

[Brian Peters]

We did pass them through. We did pass them through.

[Chandra Arya, Liberal, Nepean, ON]

Yes.

[Brian Peters]

We did pass through the reduction.

[Chandra Arya, Liberal, Nepean, ON]

So you have implemented everything the Government of Canada is suggesting, and you do not disagree with whatever they're saying?

[Brian Peters]

We did pass through the reduction. For our flat-rate customers, we're shielding them from what would otherwise be an increase. The government's announcement, the expectation, is effectively to say there are some small businesses and other small businesses, and we're going to treat them differently. That is inherently in conflict with a flat-rate pricing model, which treats the whole class of businesses with the same price. We could split it up, and then if there is another expectation in the future, then we're splitting it up again. Then what about other cost increases?

We would be moving from a world where many small businesses, particularly small businesses over larger businesses, which value that simple price, would suddenly lose that, and they would be cast into a fluctuating world of interchange-plus pricing that is very technically difficult to manage, it's—

[Chandra Arya, Liberal, Nepean, ON]

I have a last question, if I may. You guys must be profitable in Australia and the European Union, and I'm sure you are extremely profitable in Canada. What if we bring in the same sort of model that the European Union or Australia has in capping the overall interchange fee?

[Brian Peters]

We are successful around the world. We're helping businesses grow around the world, despite different regulatory environments. I would be happy to engage with you on what the right way to do it is, but I can tell you this announcement, this expectation, it's not workable. I'm very open to that conversation because we do operate around the world and we do figure out how to make it work.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Peters.

Mr. Garon, the floor is yours.

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

Thank you, Mr. Chair.

Mr. Lampron, every time someone pays by credit card, the merchant pays fees, which vary depending on the type of card used—Visa, Mastercard or American Express—and the rewards program associated with the card, which may be generous or less so. Typically, transactions carried out with a card that has a generous rewards program cost retailers more, and yet they charge all their customers the same price for the same product. That means that lower-income people, poorer people, or people with cards that have less generous programs, end up financing the free travel, flights and hotel rooms paid for with points that belong to people with more money. We do not oppose rewards programs, but it looks like a regressive practice to us.

When the Mastercard people came here, we suggested that they display the credit card fee structure on the bill, just as the GST, the QST and the other taxes are displayed. It would show people what they are paying for air miles or other similar programs, on top of taxes. It would also enable merchants to adjust the fees and charge consumers directly for the fees associated with their generous programs that pay for their travel. That was one proposal.

The Mastercard people told us that this arrangement, which would essentially be a transparency arrangement, is already allowed. Merchants can already do it. If a merchant wants to add an amount to the bill for someone who has the most generous rewards program in the world, they can already do it.

How was the answer given by the Mastercard people received by you and your members? Are there people who are doing it? Does it work? Do the contracts allow your members to do it? If not, are they simply trying to blow smoke up our skirts again by saying that if the system works to the detriment of the people who have less money, it is ultimately the fault of the retailers, not the credit card issuers?

[Alexandre Lampron]

Thank you for your question, Mr. Garon. You have essentially summarized, in a few words, the second proposal I made earlier, during my opening remarks, and I will reiterate it, for everyone's benefit, if I may.

This is precisely what we are asking the federal government to do: apply the user-pay and transparency principle when it comes to the credit cards' and banks' rewards programs. That is exactly it. We want greater transparency about everything, on the part of everyone. That is entirely true, but we want it to be standard practice. I think you, I, and anyone else, as consumers, want to see the fees we are being charged when we look at our bills.

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

What I understand is this: Even if a merchant wants to do it, they are going to alienate customers if they are the only one doing it, they are going to have customers telling them they don't like it, and so the merchant will stop doing it. For this to become standard practice, it must be required by regulation, one way or another. Transparency does not always emerge naturally from the market, and it is often necessary to coordinate everyone by adopting regulations.

Would you be in favour of taking the discussion in that direction? I do not have a specific proposal at the moment but could we move the discussion in that direction? I ask these questions because the natural equilibrium seems to be taking us somewhere where virtually no retailers are including this information on the bill, even if they are entitled to do so.

[Alexandre Lampron]

You are absolutely correct. That is why we make a point of saying that there is tremendous unfairness in the system at present. If everything can be standardized, I think everyone will ultimately win, both consumers and retailers.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Lampron.

I will now give Mr. Masse the floor for two and a half minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Mr. Peters, does Stripe use any offshore financial centres for employees, mailboxes or accounts?

[Brian Peters]

I'm not sure what you mean by offshore centres. We're a global company. We have employees all over the world. We have a significant number of partnerships with a variety of financial institutions, both large and small.

Could you direct me more specifically to some aspect of that?

[Brian Masse, NDP, Windsor West, ON]

This is about the value of what we get for small and medium-sized businesses. The Canary Islands, Switzerland, Luxembourg, the British Virgin Islands, Bermuda, Panama, Malta and Ireland are offshore financial centres. They provide tax benefits that are preferable versus a nation like Canada.

Can you tell me what employees or what systems are in place in those countries for Stripe?

[Brian Peters]

To be specific, I'd be happy to follow up with you.

In some of those locations, I've never heard of anyone being there or of us having any operations. We are actually double-headquartered in Dublin and south San Francisco. Our founders are Irish. A significant number of our employees are based in Ireland. We have offices in London, like I said, in Toronto, a few spots in the United States, Latin America, South Asia and eastern Asia. It's usually tied to the businesses that we're trying to serve in those regions.

[Brian Masse, NDP, Windsor West, ON]

I appreciate that. Dublin, of course, is in Ireland, and Ireland has favourable tax preferences for corporations to move money. Part of what we're doing here at our committee is to evaluate the value and the cost to the Canadian economy for the use of services.

Thank you, Mr. Chair.