A Look At Interac Online - "Credit Push" In Canada
Glenbrook's Carol Coye Benson files this report: I spoke on Friday with Barry Campbell, Director of Business Development for Acxsys Corporation and Interac Online, Canada's "credit push" online payment system.
As background, Canada's major banks run Interac Association on behalf of the membership, which manages both shared ATM access and the Interac POS PIN Debit system (which, incidentally, has very high usage in Canada - with over 3 billion POS transactions done in 2005 - compared to about 2 billion done on Visa, MasterCard and AmEx cards combined).
Separately, eight of the major banks formed Acxsys in order to commercially develop online debit capabilities. There are two major applications: Interac Email Money Transfer, for person to person payments, and Interac Online, for online merchant payments. Both applications rely on the bank's existing online banking authentication infrastructure.
The Email Money Transfer service has been in the market for about three years. According to Barry, growth has been steady and total volume is now in the range of 400,000 transactions per month, representing an annualized volume of about C$1B.
Most consumers use this for personal payments and small local bills. There is some use of it for same-person account-to-account transfers. Although the service can be used to pay someone with a Canadian account at a non-participating bank, (in that case, it is simply put into the Canadian ACH system), this represents less than 1% of transactions.
In the United States, we're seeing the ACH used increasingly as a vehicle to move savings balances from consumer checking accounts into other institutions with higher yield savings accounts.
I asked Barry if the Email Money Transfer service was being used to effect these kinds of balance transfers, and he said, it appears to be happening but that they represent a small portion of overall transfer volume.
I also wondered about fraud, as familiar fraud in particular must be a concern with a service like this: you might let your daughter have your ID and password to look at your accounts, but transferring money may be more of a problem! Barry said that fraud detection capabilities both at Acxsys and at the banks have kept fraud to reasonable levels.
The Interac Online service is newer and usage is still low - but more and more merchants are signing up, with ViaRail and Cineplex joining existing merchants such as Virgin Mobile and Canadian Red Cross. Supporters of the system think both sides of the equation will like it - consumers, as it will play on the very popular Interac POS system, and merchants, as the payments are guaranteed and the fees may be competitive with credit card fees. (The fee structure charges the acquirer a variable amount which is paid to Acxsys, not passed through directly to the Issuer, as in credit card interchange.)
Interac online is an interesting test bed - people watching the NACHA "credit push" pilot will note that the structure is essentially the same, and also closely similar to the Verified by Visa/MasterCard SecureCode protocols.
Anyone want to place bets on transaction volume for Interac Online in 2007? Email me at carol@glenbrook.com.
RE: "The fee structure charges the acquirer a variable amount which is paid to Acxsys, not passed through directly to the Issuer"
Clarification:
With Interac Online there are three parties:
- merchant
- customer
- customers bank (issuer)
1) To complete a purchase, the merchant sends the customer to their own bank (issuer and aquirer is not really relevant).
2) Customer logs in as they would to online banking, and complete the payment.
3) Customer is returned to the merchant fully paid to complete the transaction.
4) Revenue: While Acxsys receives a fee, the banks who own Acxsys share in the revenue.
Posted by: Colin | October 23, 2006 at 07:20 PM