Interac is preparing to start charging all financial institutions a flat fee for Interac e-transfers, amid scrutiny of its pricing model from the Competition Bureau and the House of Commons, The Logic has learned.

The planned move would be a reversal of its current practices. Interac charges banks and credit unions between six and 43 cents for every e-transfer based on the volume they send, one source with direct knowledge of the matter confirmed. That effectively means smaller institutions, which send fewer e-transfers, pay more for the same service than their larger competitors.

In late October, Conservative MPs Michelle Rempel Garner and Adam Chambers brought public attention to the issue by revealing an internal fee schedule, which showed Interac’s volume-based pricing model, in a parliamentary committee hearing.

Two sources with direct knowledge of the matter told The Logic the payments company had been preparing to change its e-transfer pricing model before the MPs revealed the fee schedule.  Interac’s board will consider the proposed change, one source said.

The sources asked not to be identified because they are not authorized to speak about the matter publicly. The proposed change has not been finalized.

Interac CEO Jeremy Wilmot is scheduled to appear before the committee Monday evening. In an email, spokesperson Lauren Mostowyk said Interac is “pleased to fully cooperate with the bureau,” which has opened a preliminary investigation based on testimony at the committee, and sees the probe “as an opportunity to demonstrate our commitment to fairness and competition.”

In an interview, Rempel Garner said the fact bank-owned Interac has been charging small institutions, which send fewer e-transfers, more than large ones is just one symptom of a broader competition problem in the Canadian financial services sector.

“I haven’t heard evidence at the committee that just moving to a flat fee structure is going to solve the competition problem,” she said. “There needs to be change, obviously.”

Interac e-transfer lets Canadians send, receive and request money electronically. The firm processed more than one billion e-transfers totalling $338 billion during a 12-month period ending in 2022, and nine out of every 10 Canadians have used the service. It’s designated as “prominent” by the Bank of Canada, which means it’s subject to strict oversight because of its importance to the economy.

Canada’s large banks founded Interac in 1984 to create a shared network for their ATMs. In 1996, the Competition Bureau required it to open access to its systems and operate as a non-profit after an investigation into its alleged abuse of dominance. In 2013, the competition commissioner accepted changes to the agreement that allowed Interac to become a for-profit entity with an independent board, paving the way for a 2018 merger between Interac Association and Acxsys, the organization then responsible for e-transfers and online payments.

Only banks, credit unions and other qualified financial institutions can access the Interac e-transfer network. Fintech firms that want to offer e-transfers to their customers must work with an Interac partner financial institution.

Daniel Eberhard, CEO of Toronto-based online bank challenger Koho, said Interac’s tiered pricing model makes it hard for fintechs, small banks and credit unions to compete with big banks. “It’s made it very hard for new entrants to come up and scale.”

Under questioning at the House of Commons industry committee in late October, Ramesh Siromani, an RBC executive and Interac board director, said he was unaware of the details of Interac’s e-transfer pricing system, but said it’s common in banking to charge less for large transaction volumes.

Competition commissioner Matthew Boswell later appeared before the same committee in November and confirmed he has opened a preliminary investigation into Interac based on testimony before the committee. The Competition Bureau has the power to investigate past behaviour, as long as it was ongoing when it opened the probe, he said. Competition Bureau spokesperson Emmanuel Morin told The Logic “it would be inappropriate to comment” on whether Interac moving to flat fee pricing for e-transfers would affect the investigation.

Rempel Garner said the Competition Bureau’s investigation will be “a big part of determining the next steps” for how to address the broader problem of what she calls inadequate competition in the financial services sector. She said she hopes to hear other ideas from fintechs as the committee considers recommendations.

“There’s a competition problem and they’re going to be scrutinized for it,” she said. “But I’m not sure if that is the silver bullet to fix the situation.”

Correction: The fees that Interac currently charges financial institutions for facilitating e-transfers has been updated.