Industry Committee on Dec. 9th, 2024

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

This question is going to be very similar to what Ms. Rempel Garner asked. Do you have any assurances from the businesses you charge for your service that end-users will see a reduction in fees? Have you done any work on that analysis or had any meetings with your participants?

[Jeremy Wilmot]

No. Interac has been focused on the wholesale rate, the B2B rate, and on ensuring that it will support continued growth. We've had 40 times growth over the last 10 years. We would love to see 40 times growth over the next 10 years. We'd have to set a price that participants can work with and that works for them. We all expect digital services to have a better price and be more convenient and faster all the time. Interac is no different from any other fintech in that we are striving to meet that expectation of the market.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

My worry is that it will end up being like credit card rewards, where the wealthy who spend on their credit cards a little more will get more rewards and the people who don't spend as much will have to pay for it. They are usually on a lower socio-economic rung. It's the same thing with Interac in a way, is it not?

[Jeremy Wilmot]

The—

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

I will just finish that thought.

I have friends who work at banks. They're all bank managers. Among the credit cards, checking accounts and savings accounts offered, it's the ones that are more high-end—they have a higher fee or ask you to hold more money in a bank account—where Interac is free.

Some of the lower accounts, the starter accounts—the ones where you don't have to hold a certain amount of money in your account, maybe because you don't have that money—are usually the ones that will charge you for Interac service.

[Jeremy Wilmot]

Interac focuses in on the wholesale B2B rate. We will ensure it is a flat rate in 2025. We will look to continue to support the notion that 95% of Canadians don't pay a fee for e-transfer so that it gets widely used. It's an easy way to accept money as a small or medium-sized business, and it's an easy way to transfer money person to person.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

I agree with all of that. I just don't want the bottom 5% to have to subsidize the top 95%. That's my worry. Interac is adopted by a lot of users in Canada; you have a lot of participants. You have all the big banks. You were founded by the banks. I think there is heft there. If you throw that heft around, there could be an arrangement where the final end-user sees a reduction in fees.

[Jeremy Wilmot]

Interac is going to make all of that possible by having a flat-rate fee for e-transfers. Then the 230 participants can make their own decisions commercially on how to improve customer service and the customer value proposition.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Mr. Chair, how much time do I have left?

[The Chair, Liberal, Joël Lightbound]

You're about done, Mr. Gaheer. Thank you very much.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Okay. Thank you.

[The Chair, Liberal, Joël Lightbound]

Mr. Savard‑Tremblay, you have the floor.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Mr. Chair.

Mr. Wilmot, first of all, I'm curious about some of the things you've said. You said earlier that there were security concerns about fintechs, if I understood correctly.

Is that correct?

[Jeremy Wilmot]

I think what I stated is that connecting to e-transfer is not an easy task. It requires security, as well as regulatory, operational and technological effort. It's an undertaking that needs to be well thought through for the people who want to directly connect to e-transfer.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

If there is such a fear, should we put a stop to the use of these technologies?

[Jeremy Wilmot]

Fintechs have a variety of options they can deploy. Around the world, you see a lot of fintechs using the electronic funds transfer rail. They provide products on it to enable direct connection to bank accounts.

E-transfer is a prominent payment system. We take that responsibility very seriously. We want to mediate the oversight expectations of the Bank of Canada. We want to be careful to ensure the integrity of the system. A payment network is only as good as the trust in it. I think Canadians trust e-transfer. They use it as a verb—“I'll e-transfer you”. The trust really exists, but if payments get lost or scammed or if there is fraud, there will be a rapid deterioration in trust and people will stop using e-transfer.

We really need to ensure that any participant directly connected to e-transfer has all of the necessary skills and capabilities and meets the expectation that a prominent payment system deserves.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

As you know, when you develop new financial technologies and want to offer them to consumers, you have to know whether there will be a gain for them, particularly in terms of price.

To have that information, we need to know the prevailing prices in order to adjust and stimulate competition. That's the idea. However, this modulation is not public.

As for the modulation of Interac fees, you said earlier that you were the decision-making authority on the matter, it seems to me. At the end of the day, your pricing system is pretty opaque.

How do you expect us to stimulate healthy competition when potential new competitors can't know the fees set by the company that has a monopoly or a near monopoly?

[Jeremy Wilmot]

The e-transfer flat-rate fee to be introduced in 2025 will encourage new entrants onto the e-transfer platform due to a lower entry cost for e-transfer.

There are a number of different methods that fintechs can access to enable their service. I think the possibilities and opportunities for fintechs are there for them. They have the ability to really focus on what the value proposition is for consumers and businesses in order to adopt that technology.

The second thing I'd say is that we have 230 participants. There are about 100 million transactions a month being processed on e-transfer. Clearly, the 230 participants see that as a valuable way to move money. We don't want to lose that. We want to ensure that all 230 participants still believe this is a good way to support their value propositions to customers and don't switch it to another rail, which they absolutely can.

We will be competitively priced to ensure that happens. The flat-rate fee will enable the 230 participants, I hope, to stay with the system and will enable us to broaden access to increase the number of direct participants.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Wilmot.

Before I turn to MP Dance, you said they can move to another rail—that they absolutely can do that. What are the other rails in Canada? How many participants do they have?

[Jeremy Wilmot]

If you look at payment methods, there are paper payment methods, card payment methods and electronic payment methods. The card is typically credit and debit.

The electronic side is electronic funds transfer, or EFT, which would happen typically on the ACSS—the automated clearing settlement system or batch system. That EFT platform is used by fintechs to enable money to move from A to B. It's also possible to work with larger technology companies—data providers such as Plaid, Flinks and PayPal—to provide different propositions.

There are a number of different ways that fintechs can move money for their customers.

[The Chair, Liberal, Joël Lightbound]

The other ways imply credit cards, as you've mentioned, or PayPal or other companies. For e-transfers, who would you say is your biggest competitor in Canada?

[Jeremy Wilmot]

For e-transfers, it would be EFT and debit cards. These are ways of accepting or moving money directly between bank accounts.

[The Chair, Liberal, Joël Lightbound]

Basically, the service you're providing is relaying the information between the banks—between the participants. You're saying, “In your ledger change that.” You're making the connection between the two. I'm simplifying it.

[Jeremy Wilmot]

I think so. It's about account-based payments. It's an account to an account. There's a source of good funds on one end and a destination of good funds on another end in order to ensure that it's a direct, account-to-account payment. That's what we're talking about.

Debit rail, EFT rail and e-transfer as a product enable this account-to-account payment. When RTR, or real-time rail, comes, it will be another capability for fintechs to use to move directly from one account to another account.

[The Chair, Liberal, Joël Lightbound]

Go ahead, MP Dance.