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.
Chief Executive Officer and Co-Founder, Stripe, Inc.
I think that maybe the difference in perspective and the disconnect here might come from the fact that the amounts of money that we're discussing are extremely small. We're talking—
Conservative
Michelle Rempel Conservative Calgary Nose Hill, AB
What is “small” to you, Mr. Collison? Because I don't think it's going to be small to a Canadian small business.... What would be “small”?
Chief Executive Officer and Co-Founder, Stripe, Inc.
We're talking....
I think this might be helpful context for all the questions.
Chief Executive Officer and Co-Founder, Stripe, Inc.
Two things have changed in Canada over the past year. One, because of the tax increase, costs for businesses have gone up by about $17—
Conservative
Michelle Rempel Conservative Calgary Nose Hill, AB
You're allowing small businesses to offset your tax burden. I understand that. That was savings defined for them. We understand that. But you're saying it's small. What is “small”, for you, to a small business?
Liberal
The Chair Liberal Joël Lightbound
MP Rempel Garner, I'm sorry. The time is up. I'll let the witness answer, and then we'll turn it over to MP Van Bynen.
Mr. Collison, the floor is yours.
Chief Executive Officer and Co-Founder, Stripe, Inc.
Very briefly, the respective amounts in question are these. There's been a tax increase, because of the new tax on payment processing costs, of about $17 on average for a small business per year. That's $17 a year. Then the interchange agreement with the card networks results in a saving of about $10 per business per year.
The net increase is about $7, but the amounts in question are $17 and $10 per business annually.
Liberal
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
Thank you, Mr. Chair.
I appreciate the opportunity to clarify the conversation and to maybe ensure that the record is correct.
I'm confused, because you said earlier that Stripe has not been in discussions with the Department of Finance. Is that correct? Did I understand that correctly?
Chief Executive Officer and Co-Founder, Stripe, Inc.
No. All I said was that I'm not aware of any orders from the finance department.
December 12th, 2024 / 8:35 a.m.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
It was my understanding, based on testimony at this committee earlier, that there was a direction for you to pass those savings on.
Chief Executive Officer and Co-Founder, Stripe, Inc.
I guess maybe it's a question of levels of mandate. Obviously, we would comply with all legal orders. We have not, to my knowledge, received any such order.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
To clarify, then, it is possible that a conversation took place but that you weren't engaged in them directly.
Chief Executive Officer and Co-Founder, Stripe, Inc.
I can't speak to all of the conversations that have happened between our policy team and the government. Like I said, we have not received any such order.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
There is a concern about the savings being directed by the department not being passed on. Businesses and non-profits would benefit from this agreement to have the annual credit card with.... Institutions who have credit card sales below $300,000 would substantially benefit, as mentioned earlier.
Do you have any rationale as to why these savings should not be passed on to small businesses?
Chief Executive Officer and Co-Founder, Stripe, Inc.
Well, for businesses that pay us for payments, all the savings have been passed on. That's actually the significant majority of our transaction volume.
The issue we're discussing here is whether, if you elect to pay Stripe in a blended fashion for our software products together, we should change our standard pricing that has been unchanged in the face of inflation and all the rest for eight years. This is kind of our Costco hot dog. We really try to keep the price the same, even as the functionality and the products and services we offer improve. We haven't changed that blended pricing for eight years. I hope we can keep increasing the value while still charging the same amount for many years to come.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
Do you know that under the revised credit card code of conduct, small business owners also have more rights? They must be notified in advance if a processor is not passing on the savings from the fees reduction, and they can now switch to a different processor without penalty. Given the number of competitors in the payment processing space, do you not think this recent decision by Stripe leaves an opening for your SME customers to look elsewhere—to your competitors?
Chief Executive Officer and Co-Founder, Stripe, Inc.
You're right; it's a really complicated and competitive space. Only by offering the best products and services will we succeed in Canada. I'm very proud—I actually checked these numbers yesterday—that more than 500 businesses in Canada elected to switch their business to Stripe just last week.
But you're right; it's a precarious position. It's only by innovating as effectively as we can that Stripe will succeed in the market.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
Several of your competitors, such as Moneris and Square, have committed to passing on the savings to small businesses. Can you explain why they're able to pass those savings on and why Stripe is not?
Chief Executive Officer and Co-Founder, Stripe, Inc.
Again, Stripe has passed the savings on for the businesses that pay us for payments directly. This actually gets to, I think, your question. The traditional payments companies have sort of a different model than Stripe. They don't build all the software services that we do. We spend billions of dollars a year building all these additional software products that are not just for payments. They help you with additional things, such as identity verification, fraud prevention and a very long list of other services.
Because they do only the payments part, they, like us, for businesses that are just paying for payments, pass everything straight through, so Stripe has innovated by building these additional products and services that traditional players haven't.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
You use a tiered system, right? Those who pay premium pricing get to realize the savings. It would be helpful to know what percentage of the clientele pays the premium and what percentage does not. What is your pricing mix?
Chief Executive Officer and Co-Founder, Stripe, Inc.
I want to talk about the question. When you say “pays the premium”....
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
You're saying that you're passing the savings on to one group of clients, who are paying in a certain price range, and not on to the others. I'd like to have an understanding of the mix of your client base to understand the percentage of benefit that each client group gets.
Chief Executive Officer and Co-Founder, Stripe, Inc.
The significant majority of our transaction volume in Canada is covered by businesses that elect to pay for the payments portion as a consequence of seeing the tax increase on payment processing costs. However, they've also seen this benefit that we're discussing here from the SMB agreement. If I'm understanding your question correctly, I'll answer that most of our transaction volume is covered by those businesses that have received that benefit.