Hon. Pierrette Ringuette moved second reading of Bill S-242, An Act to amend the Canadian Payments Act (debit card payment systems).
She said: Honourable senators, it will certainly come as no sure surprise that my second bill today also relates to the debit card system in Canada. Bill S-242 is a very short bill, but a bill 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.
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 Visa's and MasterCard's entry into the debit market in the United States. While many of us take it as gospel that, under normal circumstances, increased competition leads to better value for consumers, the debit card market may be the exception that proves that rule.
In the U.S. experience, Visa and MasterCard use their deep pockets and their already-considerable network of credit card contacts to push smaller debit players out of the way and take dominant market positions.
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-242 is a small step that amends the Canadian Payments Act to specifically name Interac, MasterCard and Visa Debit system as designated payment systems.
By adopting this legislation, we will simply be ensuring that all debit card systems in Canada, whether Interac, Visa or MasterCard, operate under the exact same legal framework. This is simple common sense. It is a measure that has been called for by small- and medium-sized businesses across the country.
It requires no financial cost to the Canadian taxpayer and does nothing to impede competition in the debit card marketplace. It simply ensures that any competition happens on a level playing field for all participants.
Thank you.