(Bloomberg) -- Canadian lawmakers took aim at the country’s widely used money-transfer service, run by Interac Corp., and hinted that its owners should be forced to sell it.
Interac’s Chief Executive Officer Jeremy Wilmot was grilled by Parliament’s Industry and Technology Committee in Ottawa Monday, two weeks after Canada’s competition commissioner confirmed he had launched a preliminary investigation into the company’s conduct over electronic transfers.
Its e-Transfer service moves money electronically between accounts, is distinct to Canada and is used in about 100 million transactions per month.
Conservative lawmaker Michelle Rempel Garner cited an Interac fee schedule at an Oct. 28 committee hearing alleging that large banks — which are part owners of Interac — are charged six Canadian cents (four cents) per e-Transfer, and smaller institutions are charged as much as 43 Canadian cents. She then suggested the competition commissioner examine whether the volume-pricing model was adversely affecting smaller players.
Wilmot said on Monday that, after more than a year of development work, Interac was moving to a flat-fee system as opposed to a volume-based pricing model, arguing the new system would make the service more accessible to new and smaller entrants. While he did not provide a fee schedule, he offered to follow up in writing.
Interac was founded in 1984 as a nonprofit, cooperative venture between Royal Bank of Canada, Canadian Imperial Bank of Commerce, Bank of Nova Scotia, Toronto-Dominion Bank and Desjardins, adding more banks in the following years. Those institutions were investigated in 1996 for alleged abuse of dominance, which resulted in Interac expanding beyond its charter members. In 2013, Interac was allowed to incorporate and operate on a for-profit basis.
The corporation’s directors now consist of representatives from each of Canada’s six biggest banks, Desjardins and a credit union, as well as four independent directors.
Lawmakers expressed frustration at Monday’s hearing after Wilmot declined to share details of Interac’s equity ownership, saying the information is private. “Interac’s shareholders are a diverse body of financial services entities, including banks, credit unions, caisses populaires, and payment acquirers,” the company’s website states.
Toward the end of a 90-minute interrogation, Conservative lawmaker Adam Chambers urged Wilmot to be more forthcoming.
“Help us with transparency, so that we don’t make unwise or very radical regulatory recommendations — because in the absence of any information we’re left with what looks to be an ownership structure that is working really hard to protect its profit pool,” Chambers said, also referring to delayed upgrades that would speed up payments in the country.
Chambers alluded to the US Department of Justice complaint alleging Visa Inc. abused dominance in payments, and asked Wilmot for Interac’s share of debit transactions at the point of sale in Canada. Wilmot replied it was the “majority.”
Chambers and another lawmaker floated the idea of recommending that Parliament force banks to divest their ownership of Interac.
“The legacy financial system has failed Canadians in many ways,” said committee chairman Joel Lightbound.
“Interac maintains a best-in-class governance structure appropriate for a private entity,” Lauren Mostowyk, head of integrated marketing and communications for the company, said in an emailed statement. “As a private company we do not disclose our shareholder structure.”
The Bank of Canada designated Interac’s e-Transfer system as a “prominent payment system” in 2020, requiring it to adhere to the central bank’s risk management standard and recognizing that the system’s disruption or failure could cause “a significant adverse effect on economic activity in Canada.”
(Updates with more information about Interac’s board in the seventh paragraph.)
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