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Results: 1 - 15 of 96
View François Lapointe Profile
NDP (QC)
So you think it would be very important to conduct a study of high streets and provide small businesses with training on new technologies. We hope that will also encourage your people to increase the amount of business they do online in order to stay afloat. That will also necessarily increase the number of credit card transactions.
The Retail Council of Canada is one of the many groups claiming that the fees imposed on merchants are too high.
Could that be an impediment? Could that make us consider implementing regulations to ensure that credit card fees are not too onerous for merchants?
John Kiru
View John Kiru Profile
John Kiru
2013-05-28 17:19
I think that's a discussion, in my opinion, for another topic.
But absolutely. Anywhere where you can reduce costs, whether it's taxes, whether it's fees, including supplier fees, which the banks effectively are...absolutely. Visa, MasterCard, all those fees are significant when your margins continue to diminish. So absolutely, that is a component within the structure.
View François Lapointe Profile
NDP (QC)
I thank my colleague.
Thank you, Mr. Chair.
I would like to talk once again about the appearance of the voluntary code of conduct in budget 2013. It is somewhat surprising because it is a code of conduct, not a program. It is not a department, but it is there. We now know that 64% of economists in Quebec were questioned on the subject. Nearly 80% of the members of the Association des économistes québécois are more or less or completely of the view that the excessive charges that credit-card-issuing companies levy on merchants should be regulated.
Once again, we do not see that. We do not see any will in the budget to introduce regulations on this issue, despite the fact that, once again, there is a virtual consensus within the industry. There is a universal consensus among the merchants' associations. Only the CFIB says that the code may work one day, but the retailers, service stations and others say this must be regulated. What is your thinking on the idea of ultimately adopting regulations?
John Knubley
View John Knubley Profile
John Knubley
2013-05-02 17:54
Taxes and credit cards are often the responsibility of the Department of Finance and Minister Flaherty. I am not aware of the matter, but we can nevertheless request—
Corinne Pohlmann
View Corinne Pohlmann Profile
Corinne Pohlmann
2013-04-30 15:37
Thank you for the opportunity to be here. With me is Monique Moreau, who will assist with the questions at the end.
CFIB is a not-for-profit, non-partisan organization that represents more than 109,000 small and medium-sized businesses across Canada. Our members represent all sectors of the economy and are found in every region of the country.
There's no doubt that digital technology is of growing importance to small businesses across Canada. One of the greatest benefits has been the explosion of the Internet, as it helps to showcase small businesses' products or services as effectively as those of their larger competitors and attract clients from around the world. But there are barriers to their ability to effectively adopt digital technologies that we'd like to raise today.
You should have a slide deck presentation in front of you, which I'd like to walk you through over the next few minutes.
I believe there are two aspects to adopting digital technology. The first is how easily small businesses are able to access the infrastructure needed to effectively use digital technology, and then once they have access, how easily they are able to use that technology in growing their business.
As you can see on slide 2, high-speed Internet is the most widely used form of telecommunication technology by small firms, and will be the focus of our presentation.
As you can see on slide 3, almost two-thirds of small businesses are using the Internet to make purchases online, and almost one-third use online directories or social media to market their business. In fact, all aspects of Internet use, in our 2012 survey, increased substantially since 2009.
But the most impressive growth has been in the number of small firms that have a website. In 2009 about half of small businesses had a website. By 2012 more than 70% did, a 40% increase in just three years. As you would expect, the larger the business, the more likely it is to have a website, as you can see on slide 4. So while virtually all firms with more than 100 employees now have a website, almost 60% of firms with fewer than five employees have one, which is 50% higher than it was in 2009.
As you can see on slide 5, besides using the website to provide information about their business, almost half are actively updating their website on a regular basis, and 21% are actually selling online, which is more than double the 8% that were selling online in 2009. But to many this growth is still not fast enough.
We believe that small businesses do want to embrace digital technology, but there are some significant barriers mostly related to cost.
First, smaller firms want to be able to access high-quality, high-speed Internet services, but just as important is that these services must be made available at a reasonable cost. The best way for these types of costs to remain reasonable is for there to be proper competition in the marketplace.
When they were asked from whom they purchase their Internet services, there seem to be a fairly healthy number of Internet service providers to small businesses across Canada, as you can see on slide 6.
However, when you look at the use of ISPs by region, you quickly realize that access to high-speed Internet for smaller firms is dominated by one or two players in each region, usually the incumbent telephone or cable supplier from that region. With the exception of Quebec and Ontario, other suppliers are not as prevalent, as you can see on slide 7.
In addition, many of these firms charge small business owners more than they charge residents for essentially the same high-speed Internet services, despite evidence that residents tend to be bigger consumers of high-speed Internet than small businesses are. In fact, almost half of those surveyed in 2012 were dissatisfied with the competitive options available in their area, as you can see on slide 8. Of even greater concern is that 55% of rural-based small businesses were dissatisfied with their competitive options in their area.
When we look at data based on whether small businesses are located in an urban or rural environment, 42% of those in the rural areas stated they had only one choice in their area, as you can see on slide 9. Clearly the competitive options for Internet service provider services in many rural parts of Canada remain extremely limited.
Another barrier relates to how they use digital technology to grow their business. Many have said that small businesses are slower in selling their products online. Part of this stems from the fact that to sell online, you may have to think differently about how you run your business, for example, how you manage your inventory, how you accept payments, and how you interact with your customers. However, we also believe that much of this has to do with the cost of accepting electronic payments.
In a study we did for the 2011 payments review, we found the most important obstacle to accepting electronic payments was that the cost of implementing the system did not justify the investment, as you can see on slide 10. In particular, it's the cost associated with processing electronic payments that discourages many from moving in this direction. With the recent introduction of mobile payments in Canada, which will add new players to the payments industry, there's even greater fear that these costs will go up even further.
Another factor for many is concerns with online security, as they feel there's a potential risk of losing customer or business data or having sensitive personal or financial information stolen, for which they become liable. This is especially worrisome for smaller firms that cannot always afford to protect their systems with more sophisticated software.
Finally, another cost factor that discourages many smaller firms from adopting digital technology is the cost of the hardware and software needed to properly take advantage of the latest advances. In 2009 and 2010, the federal government introduced a temporary accelerated capital cost allowance that allowed businesses to deduct 100% of the cost of computers and software in the year purchased. As you can see on slide 11, this was the most used form of government support aimed at encouraging innovation. We found in another survey that more than 60% felt that this measure was beneficial to their business. We believe that such a measure should be looked at again to encourage adoption of new technologies especially among smaller firms.
In conclusion, small businesses want to embrace digital technology to a greater degree but face certain cost barriers that combine to discourage them from adopting technology as quickly as we might like in Canada.
Some ideas to help overcome some of the cost barriers are on slide 12. It includes encouraging more competitive options for high-speed Internet services, updating the code of conduct for the credit card industry, encouraging the creation of more affordable and secure electronic payment methods, and reintroducing the 100% CCA for computers and software to encourage investment among smaller firms.
Thank you very much.
View Geoff Regan Profile
Lib. (NS)
We've heard a lot from retailers about the cost of credit card charges. They are being charged for using credit cards—and, of course, you are very familiar with this issue. You talk about the issue of electronic payments, mobile payments, as part of that. Would you comment on that and what impact that has and what it does in making SMEs reticent to get involved?
Corinne Pohlmann
View Corinne Pohlmann Profile
Corinne Pohlmann
2013-04-30 16:25
The cost of accepting credit cards has been going up, and just went up again on April 1. These are definitely barriers for small firms to adopt.
The advent of mobile payments in the Canadian marketplaces worries a lot of small business owners because the last time we saw a new product enter the Canadian marketplace was when premium cards were introduced. We saw rates skyrocket at that point.
Right now it's fairly stable, but we worry about when this becomes a much bigger part of our day-to-day life. Mobile payments usually mean that you have another player now involved in the payments network, in this case telecommunications companies, in addition to the banks and the processors and the credit card companies.
We find it really difficult to believe that this new player is not going to want a piece of the pie as well. The only way to get that is to expand the pie. Right now they're sharing it, but we believe that down the road that may extend further. We do worry about that and making sure that the credit card code of conduct is expanded to include some of the rules that these mobile payment companies have to abide by is really important.
View Dan Harris Profile
NDP (ON)
Thank you, Mr. Chair.
Just to go back to the last point about online security, that alone is the biggest hurdle most businesses face. It's a very scary thing, when you're not very Internet or digitally literate, to start even considering all the implications. Of course, the privacy requirements and then the requirements by credit cards and the banks for the type of security—the security certificates and going through all those hurdles—are actually far more cumbersome than even filling out government grant applications, which also can be cumbersome from time to time.
Earlier, Mr. Smith, you were talking about key milestones and the ability to measure success. If my colleague, Mr. Kennedy Stewart, were here today, he would be very happy to hear you say that because he really feels it is important for us to actually measure success and measure the efficiency and efficacy of programs that we put in place.
Going back perhaps to the credit card rates that CFIB brought up, there is of course that requirement to honour all cards and the increasing fees that come into play, and when you add an online payment component to that.... Have you done any research on how much more cost that brings to small businesses?
Corinne Pohlmann
View Corinne Pohlmann Profile
Corinne Pohlmann
2013-04-30 16:44
It really depends, obviously, on the rates they are able to negotiate, but in addition to that, of course, is the cost of setting up the systems. No, I don't have any exact numbers of what that could look like, but certainly we know when premium cards were introduced into the marketplace in 2008, most of the calls—and we had hundreds of them coming in—were telling us that their costs had increased by 25% to 30% overnight, within one month. So this is a substantial issue for smaller firms, whose profit margins tend to be fairly thin to start with. That's why there is the concern now that a new form of payment coming into the marketplace may again cause these increases, which they've hopefully been able to stabilize over the last few years.
However, part of the issue has become that these fees are often not that transparent, so it's not always clear from month to month how much you're going to be paying, given all the different types of fees, which I won't get into here today. That can add up for a small business. But, relatively speaking, small businesses pay more for these types of transactions than larger businesses do simply because of sheer volume. So, again, it's a higher cost on smaller firms than on larger firms.
View Dan Harris Profile
NDP (ON)
There's a bit of a double-edged sword that exists for small businesses that are looking to access the global marketplace because, yes, certainly that gives them potential access to far more customers, but it also forces them to compete with those much larger retailers that are able to negotiate better rates; that are able to negotiate better shipping rates; that are able to get, compared to small business, a more preferential rate all across the board just because of the volume they are dealing with.
For a small business also, with the “honour-all-cards” rule, you don't necessarily know when someone swipes that card what kind of fee you're going to be paying at the end of the day, and there are many different fees that you wouldn't think would be charged. If you go to a restaurant and you pay by credit card, then the tip gets a fee attached to it, and the HST gets a fee attached to it. So for things that have to be remitted to the government or by law have to be remitted to employees, such as their tips, the merchant is also going to be paying 2%, 3%, or 4% on that fee, which is absolutely incredible.
You talked about the code of conduct earlier. Do you find that it's effective right now the way it is, or do you think it needs improvements?
Corinne Pohlmann
View Corinne Pohlmann Profile
Corinne Pohlmann
2013-04-30 16:46
We always knew when the code of conduct was introduced in 2010 that it would be a document that needed to be updated constantly. We do think it's in need of updating today, including adding some provisions around mobile payments, on which there have been some good consultations done and some good ideas, but we have yet to hear when that's going to be added to the code of conduct. We also believe we should have the “honour-all-cards” rule eliminated, as you mentioned. We also believe businesses should have the ability to surcharge up to the amount of the actual fee that they're paying.
Those are some of the additions we'd like to see made. We'd also like see a little more clarity around some of the activities of some of the players in the industry and the way they harass some of the small business owners in getting them to sign onto what we sometimes see as being fairly unethical types of contracts. And we believe there needs to be a dispute resolution process in place.
These are some of the areas in which we'd like to see some improvements in the code of conduct.
View Glenn Thibeault Profile
Ind. (ON)
View Glenn Thibeault Profile
2013-04-30 16:59
I'll be very brief. You mentioned an interesting point. I'm sure you're well aware, as many people are, the New Democrats are going across the country, talking to small business owners about the merchant fees they're paying, and talking about some of the changes we would like to see, what we're proposing, and what stakeholders and small businesses would like to see.
You mentioned surcharging, which is something we're putting out there. I'm hearing from small businesses that they don't want a surcharge. If they surcharge, that cost is going from Visa and MasterCard right to the consumer, and it's not addressing the problem.
They want to see government action, which they're not getting, to address this problem. If we keep this open, how is that going to continue to affect small businesses? When we know mobile payments are coming, when we see language trying to skirt co-badging, this inaction will be detrimental to small business, won't it?
Corinne Pohlmann
View Corinne Pohlmann Profile
Corinne Pohlmann
2013-04-30 17:00
We believe that we need to look at things like surcharging. I agree, most of our members are not going to want to surcharge, and I understand that. The point behind the idea of allowing the surcharging is that it gives power back into their hands. We know in other international examples around the world that, where they have allowed surcharging, small businesses rarely use it, but it gives the power back to the merchant to at least push back a little on the credit card companies, in terms of what they're doing.
I think the “honour-all-cards” rule is another one that needs to be eliminated, because then they can say no to certain cards.
I think consumers are more and more aware of that, especially independent businesses. We do see a lot of empathy for those independent small businesses among consumers now too. They don't take out their premium cards.
View Mike Lake Profile
CPC (AB)
I don't blame him for leaving. It can get uncomfortable with these mean NDP guys asking their mean questions. I'm just kidding. They're friends of mine.
Now I'm getting heckled by my own guys.
I liked Mr. Thibeault's line of questioning on the payment thing, and I want to follow up a little. I imagine this could be an interesting discussion among your members, both with the chamber and with the CFIB. On one hand, typically your members would be advising us on a fairly regular basis to get out of their business, in a sense, and get out of the way and let them do their thing. In this area the messaging is a little different.
How do you find the balance there? What is the balance? I think Mr. Thibeault's line of questioning...he and I would probably have some agreement in this area. We might disagree on some things; in other areas we would have some agreement or at least be sympathetic to a similar position on behalf of consumers especially, and small business people.
Maybe you could articulate that balance.
Corinne Pohlmann
View Corinne Pohlmann Profile
Corinne Pohlmann
2013-04-30 17:04
It's not an easy balance. The credit card industry in Canada is dominated by two or three, and maybe now four, players, given the entry of Discover into Canada.
Given that they have such a dominance in that particular market, we believe there needs to be a little bit of oversight in terms of how they operate in conjunction with the merchant side of the community. Hence, we felt the code of conduct was a great step forward in trying to create some of that oversight.
We knew, as I mentioned earlier, that it had to be a document that would evolve as this industry evolves because it's a rapidly changing industry. We can learn from what's going on in other countries and perhaps try to adapt in Canada before it hits our merchants and consumers too quickly.
So it is a balance. We're not big fans of going too far in regulating the industry, but at the same time we need to balance that with what's happening in the marketplace when it comes to merchant fees and how they're being imposed on small business owners and, of course, ultimately on consumers.
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