Evidence of meeting #151 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 bank.
A recording is available from Parliament.
Liberal
The Chair Liberal Joël Lightbound
I think it's pertinent to remove credit card payments in the examples where you were talking about sending money between Canadians, transferring money.
President and Chief Executive Officer, Interac Corp.
Yes, and I apologize for that. All the numbers that I quote are in the Payments Canada 2023 report. That's the source I'm using.
Liberal
The Chair Liberal Joël Lightbound
We'll have a look at it.
All that I'm hearing makes me all the more hopeful that, at some point, we're going to get new technologies like blockchain that will allow for a peer-to-peer, permissionless way to move value and money around. I think it's coming, because the traditional legacy financial system has failed Canadians in many ways.
Go ahead, Mr. Chambers.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you, Mr. Chair.
I think those are exactly some of the concerns we have. You're putting your finger on it. There isn't really an alternative in the system.
Visa is being brought in front of the Department of Justice. The Department of Justice filed a complaint against Visa. Visa controls 60% of the debit market in the U.S.
Mr. Wilmot, how much of the debit market does Interac control in Canada?
President and Chief Executive Officer, Interac Corp.
Interac's debit at the point of sale—
Conservative
Adam Chambers Conservative Simcoe North, ON
Of all the debit transactions in Canada, what percentage are controlled by Interac?
President and Chief Executive Officer, Interac Corp.
As to Interac's debit at the point of sale, the majority of debit transactions at the point of sale are through Interac.
Conservative
Adam Chambers Conservative Simcoe North, ON
I don't mean the majority but the percentage. It's like 100%. Is that correct?
President and Chief Executive Officer, Interac Corp.
I don't have the percentage.
Conservative
Adam Chambers Conservative Simcoe North, ON
Okay.
Here are the broad strokes. This is what I'm hearing. We have a secret ownership group. We have a secret fee schedule. We have legitimate questions about competition in the sector. Now the same ownership group is responsible.... They had a sole-source contract to deliver real-time rail, which is directly going to attack the profit pool of the ownership group.
You can understand why, with this cloud of secrecy, policy-makers are questioning this. Help me understand why we don't make a very radical recommendation, which would be to say that maybe Interac should be its own company. Maybe the financial institutions should not be able to own the company. Help me understand why we shouldn't make that recommendation.
President and Chief Executive Officer, Interac Corp.
Interac worked hard and long for the new corporate structure we have, which was put in place in 2018. That corporate structure does follow governance best practices and has a number of committees that the board is not involved in, whether they're for compensation, pricing or other matters, including for my own compensation with the HRCC, the HR and compensation committee. We have best practice governance capabilities.
With RTR, the real-time rail that Interac is involved in with Payments Canada, we delivered the first portion of the RTR project—
Conservative
President and Chief Executive Officer, Interac Corp.
I think we're behind the original schedule that Payments Canada worked to.
Conservative
Adam Chambers Conservative Simcoe North, ON
We're behind schedule in delivering a significant economic benefit to users. Is that not right? I understand that in your previous role, you identified that it is of significant economic benefit to get to real-time rail. Is that correct?
President and Chief Executive Officer, Interac Corp.
Absolutely. Real-time settlement systems are an economic flywheel for economies.
Conservative
Adam Chambers Conservative Simcoe North, ON
My understanding is that 2.7% of GDP could be increased if we moved to real-time rail. Am I about correct on that?
President and Chief Executive Officer, Interac Corp.
I don't know where that calculation comes from, but there's economic benefit for real-time settlement systems.
Conservative
Adam Chambers Conservative Simcoe North, ON
We're delayed in delivering real-time rail, which will provide significant benefits to the economy by lowering the transaction profit pool of the economic owners of Interac. However, as I mentioned before, it's a secret fee schedule, and we're behind schedule on delivering something that will make the banks, your owners, less money.
If I could leave you with one recommendation, it would be to help us with transparency so that we don't make unwise or very radical regulatory recommendations, because in the absence of any information, we're left with what looks to be an ownership structure that is working really hard to protect its profit pool. The issue is not with Interac. The issue is with your secret ownership structure and the banks. We have no idea how they influence decision-making at Interac.
I think I'm bumping up against my time, but I appreciate you coming here today. If I could leave one thing with you, it would be to please have more transparency. Otherwise, we're left to wonder how these decisions are being made.
Thank you, Mr. Chair.
Liberal
The Chair Liberal Joël Lightbound
Thank you, MP Chambers. I echo the sentiment of MP Chambers.
Mr. Wilmot, if you have anything you'd like to submit in writing as we go forward, please feel free to do so. We're more than open to receiving your submission. Also, I know you have a flight to catch at 9:00, so I said we would stop at 7:30.
Does anyone have a pressing question they'd like to ask? Otherwise, I will adjourn the meeting.
Go ahead, Mr. Van Bynen.
December 9th, 2024 / 7:25 p.m.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
I have a very quick question, Mr. Chair.
I'm not disputing the organizational structure. I am concerned about market dominance. I think that's the issue of concern within this committee. One quick solution would be to require divestiture by the major players so that it's an independent corporation.
How much would you attribute the asset base of the current organization to its legacy software and hardware? You are the infrastructure and ecosystem for these types of payments. How much in legacy costs have been recovered or are yet to be recovered? Also, how would you address market dominance? Go to the market dominance question first.
President and Chief Executive Officer, Interac Corp.
As we discussed in committee, there are other alternatives to e-transfer. If we exclude credit cards from electronic payments, I believe e-transfer is about 10% when we look at debit, electronic funds transfer and e-transfer. The 230 participants see real value in e-transfer so they use e-transfer.
To your other question on legacy technology, e-transfer was introduced in 2003—21 years ago. With older systems, there is what we call “technical debt”, which is due to older infrastructure. One great opportunity for all of us with real-time rail is to move to new technology infrastructure. That's with e-transfer as well. Then we'll be able to leverage, in consultation with the Bank of Canada, new technologies, like the public cloud and AI, to increase efficiency and make e-transfer an even more valuable platform for Canadians to use for the next 21 years.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
I am a bit concerned that it's easy to say “exclude credit cards”, but credit cards are just as much a payment system as any other system, so that doesn't take away my concern about market dominance.
Liberal
The Chair Liberal Joël Lightbound
Thank you, Mr. Van Bynen.
I have just one quick last question. You said you represent about 10% of all payments, excluding credit card payments. Does that include payments...? I'm with Desjardins and I send money from one account to another account within my larger Desjardins account. Is that included in there or not?
President and Chief Executive Officer, Interac Corp.
Yes, it's included in there. There are fintech companies that can—
Liberal
The Chair Liberal Joël Lightbound
The pie keeps shrinking, because to me, it's not a payment when I'm sending money from my chequing account to my savings account within the same institution. If that's included in the number of payments you're taking into account—you first said 6% and now say 10%—that's misleading by a landslide, Mr. Wilmot, I have to say.