Industry Committee on Dec. 12th, 2024

[Patrick Collison]

It's fairly complicated, because Stripe has so many different products and services. Directionally, I would say that we have a lot of payment-related functionality that gets included by default in the standard blended pricing. That functionality is increasing over time.

I'll give you one tiny example. We have a feature called adaptive acceptance, where we use machine learning to try to increase the authorization rates of transactions to help businesses grow their revenue. If you're paying the 2.9% plus 30¢, it's included for free. If you use our interchange-based pricing, you pay separately for that and a lot of other functionality. Then, on top of that, we have pure, software-based products. For example, Stripe Radar is a fraud-prevention tool kit. It's not part of the transaction itself. It's a separate tool for managing fraud. Again, that's included for free with the sticker pricing, but you pay for it separately if you're using our interchange-based model.

In each case, there are many different products.

[Vance Badawey, Liberal, Niagara Centre, ON]

As you may know, Interac just announced that it's moving away from volume-based pricing towards a flat fee for its customers. This decision was a year in the making.

Are you currently reviewing your pricing models, as we were just discussing, to ensure the most optimal pricing options for your customers?

[Patrick Collison]

We're always reviewing them to try to make sure we're competitive in the marketplace.

I will say that I think Stripe has differentiated itself and achieved the most success primarily at the lower end of the market, where we've seen the strongest traction because, traditionally, those businesses have been underserved. I mean, the whole motivation for it....

I'm sorry. Is the audio working? Can you hear me okay?

[Vance Badawey, Liberal, Niagara Centre, ON]

Yes. I can hear you okay. Go ahead.

[Patrick Collison]

The whole motivation for starting Stripe in the first place was that we perceived a need to serve small businesses more effectively than they had been. This is a really big focus for us.

[Vance Badawey, Liberal, Niagara Centre, ON]

Great. Thank you.

This is my last question. When your director of public policy appeared at committee, he argued that small businesses would prefer to keep their higher prices because they are “simple and predictable”. Dan Kelly, the president of the Canadian Federation of Independent Business, welcomed the agreement and called it an “important deal for small business”. He also said about your company, “It's extremely disappointing to see a big company take this approach”, and, “This means [SMEs will not] get the full value of the promised savings.”

How can you argue that small businesses would prefer to pay higher prices?

[Patrick Collison]

We think our pricing is very competitive relative to our competitors when you take stock of the full bundle of products and services that Stripe provides. For example, when it comes to many of these global payment methods that Stripe provides, nobody else in the Canadian market provides them. You'll generate less revenue if you use an alternative or a competitor to Stripe.

I think that's why more than 500 Canadian businesses switched to Stripe just over the past week. We think the value equation for Stripe is much stronger, especially for a small business, than for any competitor.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you.

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Mr. Savard-Tremblay, you have the floor for two and a half minutes.

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

Mr. Collison, how dependent are you on networks like Mastercard, Visa and, of course, Interac? We're very interested in that question, because we're wondering if you've had the same problems with the SEPA payment network in Europe.

I'm asking you this so we can compare the networks.

[Patrick Collison]

It's an interesting comparison. I'm not an expert on Interac, so my apologies if anything here is not specific enough.

I would say that SEPA is generally cheaper and has more open access than Interac. I think that enables somewhat more product innovation. We're very excited about bringing our instant bank payments product, the thing we discussed earlier, to SEPA-based payment rails. I think that could really help reduce costs for businesses.

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

Can you tell us a bit more about the SEPA model? You're saying it's easier to use, more open and cheaper.

The comparison we make is between Visa and Mastercard on the one hand, and Interac on the other. Based on what you're telling us, we would do well to learn from what is happening in Europe.

[Patrick Collison]

I think it's true that a lot of interesting and important payment innovations are happening in Europe. As I mentioned in my opening remarks, the open banking policies in some European markets, like the U.K., include a mandate that businesses enable open access for payment facilitation, which really helps.

SEPA, while it's open access and very cheap, is also a low-level protocol. In particular—again, maybe this is a little bit arcane—it doesn't mandate an authentication flow. That is to say, it's up to the bank in each case: What do you tap on your phone? How exactly is a payment initiated? That's why we think these central bank-based wallets, like TWINT in Switzerland or Swish in Sweden, are so compelling. They're a full package payment solution.

I think Canada pursuing something like that, a full package, instant, and close to free payment solution, would be really compelling.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Mr. Masse, you have the floor for two and a half minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

Mr. Collison, the Conservatives seem to have a conspiracy here with regard to Mark Carney. It is an odd thing; there's no doubt about it. I've been in Parliament for over 22 years, and I think there's some merit to their questions about the relationship.

When did you actually draft Mark Carney into your operations? I actually believe that it was probably a cocktail conversation thing, that it was a good idea to bring in an elite person like that, versus that of the conspiracy of the Conservatives that's it's part of an operation of the Liberal Party.

[Patrick Collison]

I first got to know Mark in 2015 or 2016, or thereabouts. I believe he joined the board in 2020, if my memory serves me correctly.

The main thing we were interested in having was his perspective and expertise on the evolution of the global financial system generally. When he was in the U.K., he spoke a lot about open access to payment rails, central bank digital currencies, tokenized systems and things like that. He's the only living person, or I guess maybe the only living or dead person, to have been a central bank governor in two different G8 markets. As we thought about what the global financial system might look like in 10 or 20 years, we thought he would provide a valuable perspective.

[Brian Masse, NDP, Windsor West, ON]

This isn't Shaun of the Dead, so I'm glad he's looking at living people. Where I am going with this is that I still don't see the value in the interchange experience.

When was the technology that you currently have in place developed? Did it receive any subsidies or tax reductions, being based or developed in Ireland or Canada?

I'm curious about that aspect, because again, I represent not only workers and their productivity, but also small and medium-sized businesses that are paying for something that I think is quite antiquated.

[Patrick Collison]

It's been extremely expensive to develop Stripe. I don't know what the cumulative Stripe spend is, but it's certainly been more than $10 billion to develop it to the point it's at today. For the vast majority of its history, Stripe was not profitable. Investors were subsidizing Stripe to help cover the costs of building all of the software and the functionality for these businesses, so it has not been a....

For most of its history—

[Brian Masse, NDP, Windsor West, ON]

That is $10 billion just to be able to transfer funds from a consumer to a product in the market.

[Patrick Collison]

Yes, it's.... Yes is the short answer.

Payments are a funny thing. As you say, you look at it and, sure, it's a payment. How hard can it be? When you layer on the compliance considerations, the currency considerations, all of the different payment methods in different countries, the need for fraud prevention and the importance of self-serve access....

Traditionally, you'd have to go to the bank, plead your case, fill out paperwork and so on. Stripe pioneered this instantly enabling, self-serve model whereby a business can just fill out the form on a computer at home and instantly go live. This was a pioneering thing that Stripe developed. All of these together are very expensive to develop.

I agree that it sounds a bit funny when you first hear it. How could it be that hard?

[Brian Masse, NDP, Windsor West, ON]

No, that's fair enough. This is where I want to go for the future. It's not where we were in the past, though.

Looking at all of these layers, it seems almost like a Ponzi scheme. The citizen who wants to buy something, a widget, has to pay upwards of whatever percentage to actually get that product and just give over the money, which you could do at a market or some other place face-to-face.

We have all these systems and different regulations and so forth that are really inefficient in the economy for competing. That's where I want to go with this: reducing costs.

[Patrick Collison]

I agree with your basic intuition. There are some transactions where you can see it's complicated. There are multiple currencies and different countries involved, and it's not trivial. There are some transactions, like buying something at the farmers' market, that make you ask, “Why should this be that complicated?”

I really support the committee spending time just thinking about this and trying to figure out ways to simplify it and make it cheaper for Canadians, because I think there are real opportunities. I agree with the thrust of your question.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chairman. I know I'm out of time.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Masse.

MP Patzer, the floor is yours.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you very much, Chair.

When and how did you become aware that Mark Carney was going to be the special adviser to the Prime Minister on financial matters?