Evidence of meeting #152 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 stripe.
A recording is available from Parliament.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
You've passed your savings on to some of your customers, but not to all. I still don't have a good understanding of what that mixed base is. Are the majority of your customers getting the benefit of those savings that are being passed on?
Chief Executive Officer and Co-Founder, Stripe, Inc.
In terms of the mix of our different pricing models, I actually don't have the figure at hand on a per-business basis. The majority of our transaction volume is covered by businesses that pay for the payments portion separately and then pay for our software products on a different basis.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
Moneris and Square have passed all their savings to all of their customers. Why hasn't that happened with Stripe?
Chief Executive Officer and Co-Founder, Stripe, Inc.
As I was trying to describe, Moneris, for example.... However, I don't mean to single them out, so let's just talk about the traditional payment incumbents. They don't build these software products, so they don't have the same challenge of trying to figure out how to build their software products and the payment functionality together. They have a different business model, which I'm sure works for them. We're trying to provide simplicity and predictability, where businesses can together purchase as a bundle....
Again, I want to emphasize this point. With regard to the absolute dollars involved, we're talking about.... I don't know if you're familiar with the term “basis point”; a basis point is a hundredth of a per cent. The amounts in question are about two basis points or thereabouts.
Whatever we do would be a minuscule change.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
If we go back to the point from my colleague, it may seem minuscule to you, but my understanding is that this agreement will reduce interchange fees by up to 27% and is expected to save small businesses around $1 billion over five years. It's not chump change, sir.
Chief Executive Officer and Co-Founder, Stripe, Inc.
Unfortunately, because of the carve-outs, the limitations and all of the restrictions on it, I'm here to say that, at least for the Stripe portfolio of businesses, it is quite small. On average, for one of these businesses, they've seen a $17 increase from the tax change. Again, $10 per year is what we're talking about here.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
If it's so minuscule, why aren't you passing those savings on to small businesses?
Chief Executive Officer and Co-Founder, Stripe, Inc.
As we have covered, for businesses that pay for the payments directly, it all gets passed through, vanilla. Then we really want to maintain the simplicity and the predictability of our blended-pricing model. We think it's much better for the market for this model to exist. Stripe is one of the pioneers in developing it.
For eight years—I'm very proud of this—we've managed to avoid increasing the cost. This might sound like an arcane point, but it's actually getting slightly cheaper over time because we charge 2.9% plus 30¢ for it. Because of inflation, 30¢ is becoming less valuable over time. It's getting slowly cheaper as inflation erodes it away. Even as we spend these billions of dollars developing new software products, we don't want to increase the cost.
Liberal
Liberal
The Chair Liberal Joël Lightbound
Thank you, MP Van Bynen.
Mr. Savard-Tremblay, you have the floor for six minutes.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Thank you, Mr. Chair.
Good afternoon, Mr. Collison. Thank you for your testimony.
I'll be asking questions along the same lines as in the previous exchange.
For starters, how many small businesses have benefited from the redistribution of the lower interchange fees—those that are eligible, that is?
Chief Executive Officer and Co-Founder, Stripe, Inc.
I don't have the business counts at hand.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Do you have an approximate number for us, though?
Do you have a sense of the volume we're talking about?
We're assuming it's not going to be a specific number. We won't hold that against you.
Chief Executive Officer and Co-Founder, Stripe, Inc.
As I said, the majority of our transaction volume in Canada is from businesses that pay for payments separately on this. It's what we call an “interchange-based model”.
I'd be worried about getting it too wrong if I tried to estimate what fraction of businesses that is.
Chief Executive Officer and Co-Founder, Stripe, Inc.
I can say that we support 900,000 businesses in Canada. That's the total.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
So your clientele is made up of 900,000 businesses. That's great.
What kind of companies are they? I'd like to get a rough idea of what kind of businesses they are. Of course, I'm still talking about businesses that are eligible.
Chief Executive Officer and Co-Founder, Stripe, Inc.
They cover every sector of the economy. Stripe is a very flexible platform. Since we launched in Canada just over 10 years ago, businesses have migrated because they get more functionality from Stripe than they did from the traditional providers.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Can you tell me more specifically about the small grocery and convenience store sector? I imagine you have quite a few of them as clients.
Chief Executive Officer and Co-Founder, Stripe, Inc.
Groceries aren't traditionally where we've seen the most adoption.
Stripe was first designed for online businesses, and that's maybe where we're strongest. However, you're right that we make Stripe available to businesses in every sector. I don't know how many, for example, grocery businesses we have, but I'm sure there are some.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Given the rules on volume and eligibility, I imagine that some small businesses and convenience stores are among those that could benefit from a lower interchange rate. Is that correct?
Chief Executive Officer and Co-Founder, Stripe, Inc.
Yes, as I mentioned, on average—across our small-business portfolio—the tax increase is about $17 per business, and the interchange agreement you're describing results in a saving of about $10 per business per year.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Would you say that so few small grocery or convenience stores have benefited from a lower interchange rate, not because you haven't passed it on to them, but because very few of your clients satisfy the conditions agreed to by the government?
Chief Executive Officer and Co-Founder, Stripe, Inc.
If I'm following the question, yes, I think it is potentially true that, because of the design of the agreement, Stripe's customers are less impacted by it than some other providers are.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Okay.
How are you involved in developing new payment and e-transfer options?