Industry Committee on Oct. 28th, 2024

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

I will just close with this. One stat I got is that Interac reported, in 2022 alone, 1.7 billion e-transfers. When you think about the profit, even on a low volume rate and then combine it with the profit that your banks might be making off of it.... I'm a Conservative, I'm all for profit, but given that Interac is the dominant player in this, do you not think this committee should be recommending that the competition commissioner look at, per your admission, a volume-based pricing schedule for e-transfers that might (a) price competitors out of the market, and (b) have a detrimental impact on smaller financial institutions?

[Ramesh Siromani]

E-transfer is a very innovative payment mechanism and, as Canadians, we're all proud of what Interac has managed to do. This is one of the first payment mechanisms globally to introduce person-to-person transfers. I think Interac will be taking the right commercial decisions and, over time, introducing efficiencies into this market.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

I rest my case.

Thank you, Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Ms. Rempel Garner.

Mr. Arya now has the floor for six minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Chair.

One of the witnesses mentioned that it is a highly regulated industry, but when we look at the current portfolio of all the five major banks that are here today, 30% to 40% of their lending is to the residential real estate market. When we include commercial real estate it's sometimes about 50% or over, but most of it is for refinancing existing stock, not creating new housing units. Maybe we should bring in credit guidance so that we can mandate the banks to give at least 10% to 20% to create new capital stock, either in real estate or in small-scale manufacturing, which I believe is required with onshoring, near-shoring and self-reliance so that it goes up.

Anyway, to come to today's issue, I have two particular questions for all. We are a developed and a technologically advanced country, but why is it that we're backward when it comes to global south countries, developing countries, that have faster real-time payment systems? If I have to transfer from my personal bank, from one bank in Nepean to another bank in Nepean, say, about $10,000, it takes over a week's time, whereas, in some global south countries, it can be done in a matter of seconds. Why is that?

I will start with the Bank of Montreal.

Ms. Douglas, why is it that our technology solutions are so backward that I can't transfer money instantly between my accounts within Canada, in the same area?

Let's start with that, then I can come to the other points.

[Jennifer Douglas]

This area is something that I actually don't work directly on, but I can tell you that—

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Ms. Douglas.

Because I have limited time, I will go to Ms. Ferri from CIBC.

[Diane Ferri]

I'm the credit card executive at CIBC, and I also don't work on the real-time—

[Chandra Arya, Liberal, Nepean, ON]

Mr. Siromani of Royal Bank, at least you are in payments. Maybe you can answer this.

[Ramesh Siromani]

I'll try my best.

I believe you asked why Canada is maybe less innovative in payments. I would actually point to a number of innovations that Canada has made.

[Chandra Arya, Liberal, Nepean, ON]

No, I'm not talking about innovations, Mr. Siromani. I'm specifically asking about a simple thing.

In a developing country or a global south country, one can transfer money from one bank to another in a matter of seconds, whereas here in my riding of Nepean, between two of my accounts in two different banks, it takes a week for me to transfer, say, $10,000. Why is that?

[Ramesh Siromani]

Remember, there are options available to Canadians. If you use e-transfer, for example—

[Chandra Arya, Liberal, Nepean, ON]

E-transfer's limit is $3,000, Mr. Siromani. I'm talking about $10,000 here.

[Ramesh Siromani]

We actually have increased limits for some of our customers to $10,000. Each of these things has a different evolution in different markets.

[Chandra Arya, Liberal, Nepean, ON]

I'm sorry, Mr. Siromani. I know about evolution. We are the most advanced. I think in the building next to where we are sitting, the Bank of Montreal was set up way back in 1851, if I remember rightly.

Maybe Mr. McDonald of Scotiabank can answer this.

[D'Arcy McDonald]

Thank you for the question. I think it represents the complexity and the maturity of the Canadian market and that, to protect the safety and security of the financial system, I think we are—

[Chandra Arya, Liberal, Nepean, ON]

Sir, is the Canadian market much more complex than that of a global south country or a developing country with a much larger population with low literacy? If they can implement and operate it, why can't we?

[D'Arcy McDonald]

I think we are collectively striving for that. I think we are operating in an environment that has legacy infrastructure that we are trying to modernize collectively to make sure that we do it thoughtfully, taking into consideration the many stakeholders who are participating.

[Chandra Arya, Liberal, Nepean, ON]

Sorry, I mean no disrespect to you, but how many years does modernization have to take? Regarding the payments, Canada has been set up and we still don't have the real-time payment system.

Ms. McKee of TD Bank, do you have an answer to my question? I still have not gotten the right answer.

[Meg McKee]

Neither open banking nor the real-time rail are issues that fall under my direct responsibility at TD.

[Chandra Arya, Liberal, Nepean, ON]

Chair, maybe next time we should ask the chief executive officers of all these banks to come in so that at least they will have the answers, because whenever we get the other executives, they always say something is not their direct responsibility and walk away from it.

Again, I think somebody said that the interchange fee is not set up by the banks. It's set up by the credit card companies. As bankers, I want to ask every one of you if you have any.... I guess you wouldn't have any objections if we capped the interchange fee at, say, 0.3% as was done by Australia or 0.5% as was done by the European Union.

Since nobody's answering, maybe I should go back again.

Ms. Douglas, I'm sorry, but you're number one on my list, so you have to answer that.

[Jennifer Douglas]

Sorry about that.

First of all, thank you for the question.

Those other markets are quite different from Canada, so that's number one.

I don't want to speak to hypothetical scenarios where things are capped, but what I can tell you is that the credit card business is a very complex business and a very expensive business to run. We have a long list of—

[Chandra Arya, Liberal, Nepean, ON]

Ms. Douglas, the same complexity is there in the European Union and Australia. Australia in many ways is not much different from Canada in terms of the population, etc., so why is it not complex for you guys there in Europe or in Australia, yet you can still make money? That's a good thing. There's nothing wrong with making money, but why is it that you can earn money there, yet when it comes to Canada...? The Canadian consumers are being fleeced, in my opinion.

[Jennifer Douglas]

As I said, it's an expensive business that we run. We have a lot of costs that we have to cover, whether it's fraud, credit losses, customer service, digital or plastics. It can go on and on, so it's an expensive business for us to run.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, MP Arya.

Mr. Savard‑Tremblay now has the floor for six minutes.