Evidence of meeting #142 for Industry, Science and Technology in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was customers.
A recording is available from Parliament.
October 28th, 2024 / 5:15 p.m.
Executive Vice-President, Cards, Payments & Transformation, Royal Bank of Canada
I'm sure you can ask Interac. I don't have access to that.
Conservative
Adam Chambers Conservative Simcoe North, ON
Maybe it's worth pushing on this a little bit more, because if the large financial institutions charge a receiver and a sender $1.50 each, and there's three dollars of gross revenue going into the system, and the largest institution only pays six cents for that transaction, that sounds like a lot of gross margin to me.
Do you support moving to uniform pricing that does not discriminate based on the size of the institution at Interac?
Executive Vice-President, Cards, Payments & Transformation, Royal Bank of Canada
Today I'm not able to comment on the economics of e-transfer pricing and transactions.
Conservative
Adam Chambers Conservative Simcoe North, ON
Okay, so this is exactly what's wrong with the entire payment space.
By the way, my understanding is that when this volume price scheme was implemented, there were only two financial institutions that met the highest volume threshold, that is, Toronto Dominion, TD, and RBC. Lo and behold, who was the co-chair of Interac's board at the time that these volume-based pricing schemes were implemented? It was TD and RBC. Then you wonder why there's a slowing and a delay in real-time payments. Is it because there is an inherent conflict of interest on the board of Interac that they don't want to move away from volume-based pricing and give smaller financial institutions an opportunity to compete on a fair level?
Do you believe you're in a conflict of interest, sir, in your role at Interac?
Executive Vice-President, Cards, Payments & Transformation, Royal Bank of Canada
Interac is an independent entity with independent board members.
Conservative
Adam Chambers Conservative Simcoe North, ON
It's an independent entity with board members that are made up of its customers. Isn't that correct?
Executive Vice-President, Cards, Payments & Transformation, Royal Bank of Canada
If I may, I think the Interac board members are available on their website.
Conservative
Adam Chambers Conservative Simcoe North, ON
Yes, sir, it's available on their website. I saw your name there.
I guess what I'm pointing out is the inherent conflict of interest that exists by having the customers of Interac sit on the board to set the pricing that disadvantages smaller entities.
This is the final question, sir. I appreciate your being here today in the hot seat.
You're an independent member of the board of Interac. Would you support forcing the banks to divest their ownership of Interac?
Executive Vice-President, Cards, Payments & Transformation, Royal Bank of Canada
First, I want to address your earlier point. The board does not set pricing matters. There's an independent committee of the board with independent members. We don't discuss pricing at the board. I just wanted to make that clear.
Interac is a unique Canadian financial institution. Over the years, it's been innovative and brought various fantastic payment products into the market. We're all proud of what Interac has accomplished, and I think it will continue to do more.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you.
I believe I'm over my time, but I think we'll be sending the competition commissioner the transcript of today's testimony.
Liberal
The Chair Liberal Joël Lightbound
Thank you, Mr. Chambers. Your contribution to the committee has been greatly appreciated today.
Mr. Turnbull, the floor is yours.
Liberal
Ryan Turnbull Liberal Whitby, ON
Thanks again to the witnesses.
Our government recently negotiated an agreement with credit card companies to lower the interchange fees by up to 27%. I want to ask the panellists if they acknowledge that would save merchants money.
Could I ask RBC to start? Will that save merchants money?
Executive Vice-President, Cards, Payments & Transformation, Royal Bank of Canada
I believe the undertaking was to bring down the interchange for merchants of a particular size. Yes, it would save them money.
Senior Vice-President, Credit Cards, Canadian Imperial Bank of Commerce
Yes, I think it would save money for small businesses.
Senior Vice-President, Retail Payments & Unsecured Lending, Scotiabank
I would agree. Small businesses are saving money.
Liberal
Ryan Turnbull Liberal Whitby, ON
Okay, great. I'm going to take it that all of you will agree with that. I think it makes sense.
Do you support the lowering of those interchange fees given the fact that merchants would save money? That's a thing that our government.... You've all said that you do not set the interchange fees, and that credit card companies do that, or the networks do that, as you call them. Would you support the lowering of those interchange fees, then?
I'll go to CIBC first.
Senior Vice-President, Credit Cards, Canadian Imperial Bank of Commerce
We are supportive of the assistance that has been provided to small businesses through the interchange undertaking.
Head, North American Retail & Small Business Payments, Bank of Montreal
Similarly, we're happy that the small businesses are able to have lower interchange rates.
Executive Vice-President, Cards, Payments & Transformation, Royal Bank of Canada
I have a similar response. We are happy to see the small merchants benefit.
Liberal
Ryan Turnbull Liberal Whitby, ON
Does anyone not agree with the fact that was a good thing for small businesses and not support it?
I'll take it that you all agree. That's great. I guess if we were to continue to negotiate further decreases to those interchange fees, you wouldn't have any issue with it, which is great to hear.
I also want to ask you another line of questions.
When inflation was sky-high and the Bank of Canada decided to increase interest rates to get a hold of inflation, your fees and the structure of your fees seemed to respond extremely quickly, I must say. Your fees and interest rates were very responsive to those changes.
We know that inflation has come down now to 1.6%, and the Bank of Canada has cut rates four times, with the latest one being 50 basis points. The rate is now at 3.75%, which is great news for Canadians. How are you responding in kind?
I'm remarking here on the incredible asymmetry I see between the responses as the interest rates went up and as they have come down, when the response rate has seemed to be very slow. In fact, many of my constituents have said to me that if they don't call the bank and fight with the bank, they won't see any of those rate cuts immediately with regard to their products.
What are you doing to help Canadians out now, when, finally, they're getting some relief from the central bank rate cuts?
I keep starting with RBC, and I apologize for that. There's no bias here.
I'll start with Ms. McKee from TD Bank.
Executive Vice-President, Canadian Card Payments, Loyalty and Personal Lending, TD Bank Group
I'm not sure what products you might be referring to where you're seeing rates responding quickly. Our products in the credit card space tend to have a fixed rate, and we would look at those products and the set of benefits, services and features as a whole on a regular basis, according to product line strategy management. We're focused on designing products that resonate with Canadian consumers, so as needs and expectations change and evolve, we modify our products.