Mr. Speaker, it is a pleasure to be here today again to speak on behalf of the residents of Simcoe North and to represent their views, as well as to discuss a very important issue with respect to what we believe is potentially anti-competitive behaviour in Canada's e-transfer ecosystem.
These revelations became known to us at the industry committee a couple of weeks ago. It is clear that Interac uses what it calls and has confirmed is volume-based pricing. We just heard my very capable colleague from Calgary Nose Hill outline how the system works, but here are the facts as I understand them.
The largest financial institutions in the country pay Interac six cents to send an e-transfer. The smallest financial institutions pay it 43 cents. That is a difference of seven times. In theory, volume-based discounts are not a bad thing. A lot of people, Canadians, shop at Costco. Because they get a volume discount, people walk out of there with five boxes of Cheerios when they really only need one.
There is nothing inherently wrong with volume discounts, but then one learns that Interac is owned by the banks. The financial institutions set the prices that Interac charges other financial institutions and, surprise, they favour themselves. There are governance issues at Interac. By the way, the ownership structure is completely secret, hidden from all in plain sight. We have no idea who owns what or what the compensation structure is for Interac executives or board members.
It gets worse. At the time that Interac developed its fee schedule, two financial institutions were co-chairs of the board. These two financial institutions were the largest in Canada at the time and the only two to meet the required volume threshold to get the lowest price. Is that a conflict of interest? It likely is.
Members of the government have a challenge understanding what a conflict of interest is, so I will explain it briefly. A conflict of interest can exist whether there is an actual or perceived conflict of interest. It does not have to be a bona fide conflict of interest. It can exist when a reasonable person perceives there to be a conflict. It would appear to me very clearly that a reasonable person walking down the street would say that it does not sound right that the big banks get to set the pricing that smaller banks pay to compete with the big banks to send an e-transfer.
It is true that many Canadians do not pay for e-transfers, but Canadians can pay up to $1.50 per transaction. If they bank at a big bank, it pays Interac only six cents. That is a heck of a gross profit margin. How much fraud is in the system when people pay six cents as the variable cost to send an e-transfer and make $1.50 in revenue? By the way, the receiving bank sometimes charges the person receiving the transfer for that transaction in their bank account; that can be up to $1.50. When the small institutions are trying to compete with the big ones, they offer free e-transfers, but they have to pay 43¢. Therefore, they have to make up that 43¢ of revenue somewhere else to offer the free banking service to their clients. In fact, I have a low- or no-cost banking account at one of these upstarts solely because it offers free cheques and free e-transfers. A lot of Canadians do not have the time, effort or means to shop around.
The solution here is a lot more transparency, of course. However, perhaps we could even consider other possibilities. Let us be very clear: I am not talking about Interac itself, but its owners, the dark Sith overlord owners called the banks. They are the ones pulling the strings, such as those of the puppets at Interac. It is not Interac itself that is the problem but the undue influence of the owners. Maybe we should think about freeing Interac from the shackles of the big banks. It would then have to deal with the big banks on an arm's-length basis.
We could also think about supporting a competitor to Interac, which would give people choice. That is a very radical position, but I think it would bring integrity back to the system. I am not saying we should absolutely do it, but the time has come to really consider all the options. We should be unburdened by the past.
We have to turn the page. We cannot go back to where these large oligopoly companies have undue influence and control. I swear, the banks must think some of us just fell out of a coconut tree with the practices they use. The answer to this problem is more competition. It is to give more choice to consumers, as well as choice to financial institutions on how to move money throughout the system.
Canadians, businesses and individuals spend about $3 billion to $5 billion a year in transaction fees to move money across the country. This is a significant profit pool for financial institutions, people and companies in the payment space. Competition will reduce the size of that profit pool so that consumers can benefit; this will leave more money in their pockets.
I recognize that many people in this place have differing views on how we might achieve lower prices for Canadians. My own personal opinion is that lower prices will not be achieved by increasing the size of revenues for government. There is no correlation between increasing taxes on companies and lowering prices for Canadians. The idea is that we must attack these profit pools with competition. In fact, a Deloitte study suggested that up to 0.5% to 0.8% of GDP could be unlocked, of value for Canadians, if we moved forward with payments modernization.
The Bank of Canada has a role to play too. They set up standards that prominent payment systems must comply with. Interac is in non-compliance with two of those standards; specifically, they use volume-based pricing, not risk-based pricing, and they do not make public how one becomes a member of Interac.
Now, the Department of Justice in the United States has gone after its prominent payment system, Visa, for its practices at Interac, which it uses in the United States. That entity controls 60% of the debit market in the U.S. Interac controls about 95% of the debit market and 100% of the e-transfer market in Canada. I would encourage regulators to look at that example. It is clear that the status quo will not work anymore.
A wise man once said, “Do not moon the gorilla.” The gorilla is mooning us and laughing all the way to the bank because it is fleecing Canadians. A great new book came out called Fleeced by Andrew Spence. I would encourage everybody in this chamber to read it.
I have an amendment to move to the motion, so I would like to move that now.
I move:
That the motion be amended by deleting all the words after the word “That” and substituting the following:
“the 20th report of the Standing Committee on Industry and Technology, presented on Friday, November 1, 2024, be not now concurred in, but that it be recommitted to the Committee for further consideration, provided that, for the purposes of this study,
(a) the following be ordered to appear as witnesses, for at least two hours each, at dates and times to be fixed by the Chair of the Committee, but no later than Tuesday, December 17, 2024:
(i) the Deputy Prime Minister and Minister of Finance,
(ii) the Minister of Innovation, Science and Industry,
(iii) Shereen Benzvy Miller, Commissioner of the Financial Consumer Agency of Canada,
(iv) Matthew Boswell, the Commissioner of Competition,
(v) Jeremy Wilmot, the President and Chief Executive Officer of Interac Corp.,
(vi) a panel consisting of Patrick Collision, Co-founder and Chief Executive Officer of Stripe, and John Collision, Co-founder and President of Stripe; and
(b) it be an instruction that the Committee hold at least two other meetings to receive evidence from stakeholders and experts.”
With that, I conclude my remarks.