Statement made on 10 March 2010 by Senator Pierrette Ringuette
Hon. Pierrette Ringuette:
Honourable senators, it will come as no surprise that my second bill today also relates to the debit card market in Canada. Bill S-202 is a short bill, but one that is extremely urgent for us to consider.
Numerous studies have proven that Canadians, per capita, are among the most active users of debit card payment in the world. However, the debit card industry is about to undergo a very serious transformation, one that could negatively impact all consumers as well as small- and medium-sized businesses across our country.
Interac, the not-for-profit debit system that most Canadians are familiar with, will soon be facing competition in the Canadian marketplace from both Visa and MasterCard. Unfortunately, this competition might not be on a level playing field.
Although the Competition Bureau has recently ruled that Interac must remain not-for-profit for the time being, thus limiting its financial resources, the Competition Bureau has not yet reported on its investigation of the market dominance by Visa and MasterCard in the credit card market. This lack of ruling leaves the two giants — Visa and MasterCard — all the manoeuvring space they want to dominate the debit market in Canada.
During the recent study completed by the Standing Senate Committee on Banking, Trade and Commerce, witnesses from merchant associations and industry stakeholders painted a dismal picture of the after-effects of the entry of Visa and MasterCard into the debit market in the United States.
Many of us take as gospel that increased competition leads to better value for consumers under normal circumstances. The debit card market may be the exception that proves the rule. In the U.S. experience, Visa and MasterCard use their deep pockets and their already considerable net worth of credit card contacts to push smaller debit players out of the way and take a dominant market position.
While prices were lower at first, Visa and MasterCard increased their market share quickly and, soon enough, their rates and fees were higher than merchants had been paying in the past.
The real concern is that debit fees, which began as a flat fee per transaction, quickly became a combination of flat fee plus an additional percentage of the purchase cost in question.
It is beyond me why debit transactions should be subject to a percentage fee when they involve a direct transfer of funds from one account to another, with zero risk involved. None of us wish to see a repeat of the U.S. situation here in Canada, especially not at the expense of Interac, a genuine Canadian success story.
Bill S-202 is a small step that amends the Canadian Payments Act specifically to name Interac, MasterCard and Visa debit systems as designated payment systems.
Minister Flaherty has announced his intention to create a task force to review the Canadian Payments Act. The task force is to submit its recommendation at the end of 2011 — not 2010 even but at the end of 2011. That is at least 21 months of unfairness for our Canadian entity, Interac.
In adopting this legislation, we would simply be ensuring that all debit card systems in Canada, whether Interac, Visa or MasterCard, operate under the same legal framework. This is simple common sense, and is a measure which has been called for by small- and medium-sized businesses across Canada. It requires no financial costs to the Canadian taxpayer and does nothing to impede competition in the debit card marketplace. It simply ensures that any competition occurs on a level playing field for all participants.
As I mentioned earlier, I am unaware of any pressing business before the Standing Senate Committee on Banking, Trade and Commerce. This is a very important matter. Bill S-202 should not wait, and it should be sent to the Banking Committee for immediate review.