A Conservative government is likely to take aim at the banking sector to reduce fees and increase competition, said Michelle Rempel Garner in conversation with John Ivison.
Rempel Garner and her colleague Adam Chambers raised the issue of e-transfer fees at a parliamentary committee this week, which has since passed a motion calling for the Competition Bureau to look into a situation where banks are making large profits from high fees and possibly using their dominant market position to restrict competition.
But the Conservative MP said that e-transfers are only one area where consumers are getting soaked. “The e-transfer system is one drop in the bucket of the broader issue of competition in the banking sector,” she said.
“This doesn’t sound like a sexy topic. It oftentimes doesn’t come to the front burner of political debates. But it really does underscore both the affordability issues that Canadians are having (and) also this emerging concern, that is extremely valid, about Canada’s economic productivity. Is our economy sustainable? Will it be able to protect jobs or create jobs?
“I think it’s really fair to note that something we haven’t talked about yet is the impact of some of these transaction fees… when you add that up over every small business, every consumer in the country. I think it’s a fair question to ask if that is actually a macroeconomic determinant to Canada’s economic growth and productivity right now. The long answer to your short question is, yes, of course Conservatives are going to act on this,” she said.
She said another Conservative MP, the party’s trade and competition critic Ryan Williams, has tabled a private members’ bill, the Consumer-Led Banking Act that is aimed at introducing a more open banking system in Canada and is currently being discussed in committee.
The e-transfer issue emerged this week during a meeting of the industry committee, which was looking at credit card practices in Canada.
One of the witnesses, an RBC executive named Ramesh Siromani, also acts as a director of Interac, the main e-transfer provider. Rempel Garner and Chambers asked him about the pricing structure governing Interac’s business (the e-transfer provider is effectively owned by the big banks).
Siromani claimed he was not aware of the details but the two Conservatives managed to glean that it is volume-based – that is, the big players like RBC and TD pay less to Interac than smaller players. Chambers said anecdotally he has heard that big banks pay 6¢ a transaction, while smaller banks pay as much as 43¢ – figures that were not contradicted by Siromani. Canadians are charged between $1 and $1.50, although for many people this payment is included in other account charges.
Rempel Garner said that the service is used by 88 per cent of Canadians and there were over one billion transactions in 2022.
“But here’s the rub. Big banks, from what we’ve heard, are getting a big price discount for that service versus what smaller financial institutions are getting paid or have to pay. And that’s a problem because … it’s harder for (smaller institutions) to get into the space because they’re paying higher fees. It’s not just a problem for consumers, it’s also a problem for small businesses or financial industry startups that want to get into this space and disrupt it because the banks, from what I can see, don’t really have a motivation to lower prices by allowing more competition in the market,” she said.
Rempel Garner is hoping that the motion passed by the industry committee on Thursday means the Competition Bureau will look at the pricing of e-transfers and the broader payments industry.
Canada has long been revered internationally for having a stable banking sector that weathered the financial crisis of 2008 because of the small number of well-capitalized banks.
But Rempel Garner said that the long-standing assumption that Canada can’t have high quality banking and low fees is wrong.
“Those are two completely different premises. And I think it’s a premise that the banks want to perpetuate. It’s like: ‘we can’t have more competition in this space, because then that would mean poorer banking’. Come on. That’s largely bull,” she said.
She criticized the Liberal government for talking about fees for a number of years but not acting.
“The government should have been moving on this stuff. They’ve had nine years. And when I think about how far back and how behind Canada is to peer nations like the U.K., I just don’t understand why they haven’t moved on this. This is low hanging fruit,” she said.
Ivison pointed to research that suggests the total of all banking fees last year was $17 billion and a study by North Economics that claims Canadians are being overcharged $8.5 billion a year in comparison to consumers in the U.K. when it comes to all kinds of banking fees.
“It’’s average Canadians that are paying that. It’s smaller financial institutions. It’s small businesses. It’s also emerging startups that are looking at modernizing the financial services industry that are just saying, ‘look, we can’t plug into this system in Canada because of rent seeking policies that the government is refusing to move on’. So giddy up, we need some changes.”