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
Now, why would there be a percentage applied to a payment fee? For example, if it's 2.9% on a $100 transaction, it's $2.90. What is it about the cost base that makes you charge $29 for a $1,000 transaction? It's the same system utilization. It's the same transaction cost.
How do you justify that percentage?
Chief Executive Officer and Co-Founder, Stripe, Inc.
That's a really good and, I think, deep question.
The main reason is that when we process a transaction, we are doing two things. One is removing the money and, as you say, the work involved in that is pretty much the same no matter what the amount is. Secondly, we're actually writing an insurance policy. The insurance policy is for if there's something wrong with the transaction or if there's something wrong with the product, the good or the service being provided, Stripe will backstop that transaction.
If you go to your card company and say, “Hey, this was deficient. I'm going to issue a chargeback”, or whatever, by default, that chargeback or that dispute goes to the business in question. If the business in question can't afford it or can't refund it for some reason, then Stripe is on the hook and Stripe is underwriting that. Stripe's liabilities actually scale linearly with the transaction amount. That's the reason for the percentage fee.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
It's the transaction risk in itself.
Okay. Give me a better understanding of the ecosystem. I'm concerned in part about the market dominance of Interac, Moneris and Visa.
What is Stripe's share of that market?
Chief Executive Officer and Co-Founder, Stripe, Inc.
We don't have exact numbers, but a single-digit per cent would be my guess. If I just had to make up a number, I'm going to say 5% of Canadian transactions, but it might be meaningfully lower.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
In making choices between Stripe and the dominant market players, what mechanisms are there for making comparisons, so that the merchants or the users can make a quick and clear decision as to which service provider is more beneficial to them?
How complicated is that process?
Chief Executive Officer and Co-Founder, Stripe, Inc.
There's a code of conduct that Stripe is an adherent to that mandates some elements of standardized pricing display and so on.
Traditionally, it's been a very complicated process. It's been very opaque. I remember when we were trying to set up our first what they call “merchant account”, we found it very difficult to figure out how much this would cost.
That's why we're so sort of emotionally attached to this idea of simple, transparent, blended pricing that's there on the website and doesn't change with time and so forth. It tends to be very complicated and difficult to model these costs.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
What could the government do to expedite or to make it easier for businesses to get to the decision that's best for them?
Chief Executive Officer and Co-Founder, Stripe, Inc.
It's a good question. I think the measures around transparency are broadly good. This is true in lots of sectors, whether it's hospitals and health care, or payments. I think having to put your prices on the website is good for competition and it's good for small businesses.
The biggest thing, though—and I apologize if I seem repetitive here—is introducing competition to the marketplace where there are just natural network effects in card schemes, whether it's Interac, Visa or what have you, that I think make it difficult for the free market to operate the way it might naturally in other spaces.
Therefore, I think introducing competing payment schemes is probably the single biggest thing that can be done to.... It might not make things simpler for small businesses because it adds another option on the market, but I think it would, over time, make things cheaper. I think that ultimately making things cheaper is probably even more important than making them simple. Then it's the job of companies like Stripe to try to package all of this together in a way that's hopefully transparent, simple and clear for the businesses in question.
Liberal
The Chair Liberal Joël Lightbound
Thank you, MP Van Bynen. You're over your time.
Mr. Savard-Tremblay, you have the floor.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Thank you, Mr. Chair.
Mr. Collison, I would like to continue our previous discussion about Europe.
There is a regulatory instrument in Europe called the payment services directive. It requires banks to open their system to authorized third parties through APIs.
You're familiar with the European Union, as your company operates there. Do you think this directive has improved competition?
Chief Executive Officer and Co-Founder, Stripe, Inc.
I think it does. In general, it's interesting; whereas the technology sector in the U.S. is generally much more vibrant than the technology sector in Europe, of course, Canada too has seen some amazing companies like Shopify being built here. Shopify is bigger than any technology company that's been started in Europe over the last 20 or 30 years.
However, in fintech narrowly, Europe is actually somewhat more dynamic than North America, and I think that's in part because Europe has created several of these pro-competition policies.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
The European directive actually contains all kinds of measures. It requires banks to guarantee that fintechs have non-discriminatory access to their system; it prevents anti-competitive practices; it prohibits hidden fees; and it has also removed traditional banks' control over all financial interactions and payments.
I'm going to ask you what we call a rhetorical question, meaning that I'm going to ask you a question even though I already know the answer.
Is there such a measure in Canada? If not, is it a shame that there isn't one?
Chief Executive Officer and Co-Founder, Stripe, Inc.
It does not exist, to my knowledge, but steps in that direction would be really beneficial in the Canadian ecosystem, and Stripe would be excited to support them.
Liberal
The Chair Liberal Joël Lightbound
Thank you very much, Mr. Savard-Tremblay.
Mr. Masse, the floor is yours.
NDP
Chief Executive Officer and Co-Founder, Stripe, Inc.
I don't know those numbers off the top of my head.
NDP
Brian Masse NDP Windsor West, ON
Okay, so you actively recruit board members, but you don't know what their benefits are.
Are there financial as well as other incentives for board members, or is it a non-charity “giving up your time” status?
Chief Executive Officer and Co-Founder, Stripe, Inc.
We pay our board members, and our general counsel benchmarks against other companies and tries to figure out what sensible amounts are.
Chief Executive Officer and Co-Founder, Stripe, Inc.
I really don't want to quote numbers off the top of my head out of fear of being wrong, but we can try to furnish some averages or something in our follow-up materials.
NDP
Brian Masse NDP Windsor West, ON
Mr. Chair, I'd like to have those materials presented to our committee later.
Does Stripe take advantage of the corporate tax deductions for alcohol, entertainment and tickets for the 50% to 100% that's available in Canada? Does Stripe take advantage of those tax measures?
Chief Executive Officer and Co-Founder, Stripe, Inc.
I can't state that definitively. Not to my knowledge, but I could be incorrect in that.
NDP
Brian Masse NDP Windsor West, ON
Does Stripe actually have tickets for any sports venue or boxes or corporate venues?
Chief Executive Officer and Co-Founder, Stripe, Inc.
Not to my knowledge, and I'll be very upset if so.