Industry Committee on Dec. 12th, 2024

[Patrick Collison]

We think it's a very exciting time. We're seeing the development and adoption of new payment systems around the world in places like Switzerland, Sweden, India, Brazil, Thailand, etc., where central banks are building these real-time, bank-based wallets that are instant and close to free, creating much more competition in the marketplace and creating enormous consumer benefit.

We're generally seeing a lot of adoption. Stripe is very enthusiastic about this. We would love to see more competition in the marketplace thanks to these systems, and we really support any Canadian efforts to bring that about.

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

When your colleague testified here, he talked about various methods that were being developed, including payment by the bank. So you're saying that there are quite a few of them now.

Can you explain what that concept is and what it consists of?

[Patrick Collison]

Yes, absolutely. We really want to be able to offer lower costs to our businesses. We've asked businesses what matters to them. This is obviously high on the list.

Again, the amounts we are discussing in this hearing are very small. As I mentioned, we're talking $10 to $17 per business a year. We wonder about the ways we can reduce costs by thousands of dollars a year to make a meaningful structural change. One way we see we can do that is by offering the ability to get off card rails entirely and to switch to bank-based payment rails.

We have been working on this for the past five or so years, and we rolled out a product called "instant bank payments" in the U.S. last year. I think this is going to be much cheaper over time, structurally. It's an early product. It's U.S.-only at the moment.

We're iterating and learning, but I hope we'll be able to bring this to Canada and to other markets in the years ahead and to offer very meaningful cost savings to businesses.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Thank you, Mr. Savard-Tremblay.

Mr. Masse, you have the floor for six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you, Mr. Collison, for being here.

I just want to clarify something. Where are you broadcasting from right now for your testimony?

[Patrick Collison]

I'm in California.

[Brian Masse, NDP, Windsor West, ON]

Okay. The reason I asked about that is your connections to Ireland, which is a tax haven. It's in the top 10 now. Why does Stripe have a head office and organization in Ireland?

I know you've referred to yourself in the past as "Isaac" as a nickname.

Explain to Canadians why a so-called Canadian business is headquartered in Ireland, which is a tax haven.

[Patrick Collison]

Isaac was an artificial intelligence system I developed when I was a teenager, but Stripe is in Ireland for two reasons.

The first reason is that John and I grew up and went to school there. We feel a lot of affinity for Ireland, and we wanted to build a business with one of its two dual headquarters in the country.

The second reason is that most of our customers are based outside of the U.S. A lot of them are in Europe, the Middle East and Africa, etc., and we need to have people there in order to support those businesses.

When you look at it and take stock of the European Union, where most of those customers are, Ireland is now the only English-speaking country in the EU. Given the fact that Stripe is an English-speaking company, it's the most logical option in Europe.

[Brian Masse, NDP, Windsor West, ON]

What's the tax difference that you have as a so-called Canadian company that's headquartered out of Ireland? What's the tax differentiation for Canadians?

[Patrick Collison]

I'm not a tax expert and I probably shouldn't opine too extemporaneously, but I don't think we derive any Canadian benefits from having our dual headquarters in Ireland.

[Brian Masse, NDP, Windsor West, ON]

Okay. I'll follow up on that myself.

I'm trying to understand the value for Canadians. Explain how Stripe really makes businesses more competitive versus just charging a fee.

What I've been asking for in these hearings and so forth is that we see some of these interchange fees more or less as being a parasite on the economy, because you're talking about technology that you developed with Elon Musk and the investment from PayPal back in 2005 to today. Explain the innovation that's taken place and how you're saving Canadians and Canadian businesses money versus just sponging off them in the transfer of money versus accounts.

I'm really having a hard time understanding how you've invested so much money and the value that we're getting for Canadian businesses.

Thank you.

[Patrick Collison]

Absolutely. Stripe's mission, as we describe it publicly, is to increase the GDP of the Internet. Maybe that's a bit arcane, but that's the core idea we're trying to get across as we want to help businesses increase their revenue.

Because Stripe was first designed for online businesses, we think a lot about that particular context, and the simplest and most powerful thing we do to help online businesses increase their revenue is help them accept more payment methods from around the world.

Most people who pay online in Sweden, for example, use a payment method called Swish. It's not an easy thing for a Canadian small business to go and call up the Swish people and figure out how to integrate it, and so on. Presumably, if you're running an online business selling to customers around the world, you want to support customers in as many markets as possible, so Stripe makes it really easy with just a couple of lines of code, a bit of work in an afternoon, to accept customers and accept payments from a global customer base in all of the different currencies and payment methods.

Obviously, we—

[Brian Masse, NDP, Windsor West, ON]

Thank you. I'm sorry. I'm just running out of time.

That's a very good explanation. However, what is the real cost of that transaction? It sounds like old technology to me. How is that actually, in today's terms, paying dividends?

[Patrick Collison]

Look, customers vote with their feet, and we don't get to force anyone to adopt the Stripe platform. They take stock of the 50-plus providers in the market and decide whether Stripe makes sense for their business or not.

I will say this: The vast majority of Stripe's revenue goes straight back out the door. We are paying, on behalf of the businesses, all of these other payment systems for the cost of those transactions.

[Brian Masse, NDP, Windsor West, ON]

Okay. You're paying other payment systems, in terms of processing.

[Patrick Collison]

That's correct. The idea is that you pay Stripe a simple flat fee if you're a small business. Then we go and pay all of the other payment schemes on your behalf.

[Brian Masse, NDP, Windsor West, ON]

That's very helpful.

Can you table with us the cost of those fees?

Here's what I'm trying to get at in terms of the economy and productivity, at least for me: What's the value of transitioning money from the person who is actually purchasing something with the payment to somebody else? It seems to me that we have, in-between, a lot of different factors that are skimming profits and, quite frankly, being parasites on the economy and productivity.

I represent workers who have to get up every single day and are often charged with not being productive enough in what they have to do. At the same time, we have financial transaction processes that don't really seem to be offering a lot of value, but are costing a lot percentage-wise, and they don't have the same accountability.

[Patrick Collison]

Look, I totally understand your curiosity and maybe even skepticism here, because it's a weird and messy ecosystem.

I'll make two very brief points, since I know we're limited.

One, I think it is interesting to look at mechanisms to reduce interchange costs and the things different countries have done. What I think has to be factored in as one analyzes this is the main thing those costs do. Those funds don't go to payment processors like Stripe. They mainly go to subsidize consumer credit issuance. To your point about the people you represent, a lot of this makes it easy for them to borrow on simple terms. They don't have to go and get a dedicated loan from the bank or something. I mean, they get credit cards. In Europe, where I'm from, interchange is regulated. However, generally speaking, consumer credit tends to be less abundantly provided. I think there's a kind of balance to be struck there.

The second thing is this: I don't want to harp on this too much, but I really think there's an opportunity here to do something around a real-time payment scheme that's instant and close to free. Then we can let the market adjudicate. If payments are too expensive in the card-based world, well, let's introduce a competitor and see what happens. I think introducing competition there would be very helpful.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Masse.

Thanks, Mr. Collison. I realize you're joining us from California. Thanks for making the time so early in the morning. We appreciate that.

Mr. Perkins, the floor is yours for five minutes.

[Patrick Collison]

The questions are very helpful to wake one up.

[Some hon. members]

Oh, oh!

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Coffee is, too.

Thank you, Mr. Chair.

Thank you, Mr. Collison. It is an impressive business you've built in 14 years.

I'm curious: As the co-founder and CEO of Stripe, you must have been involved in the recruitment of Mark Carney to your board.

[Patrick Collison]

I was.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

You were aware, obviously, of his close connections to the current Prime Minister and government when you recruited him.

[Patrick Collison]

I was not. I actually wasn't sure who the Canadian prime minister was at the time. I first got to know Mark when he was the governor of the Bank of England and living in the U.K. At the time, I thought of him as a British official. Our first discussions were in that context.