Electronic Cash Payments: Canada Loves its Debit Cards, but Will the Cashless Revolution Happen in the U.S.?
Everywhere you go in Canada, from major retail outlets to restaurants to gas stations to little kiosks, the ubiquitous INTERAC logo and the familiar electronic keypad or "pinpad" are present. Canadians have come to expect that they can make electronic cash payments just about anywhere for anything, from coast to coast.
Even pizza delivery drivers bring wireless versions of the pinpads when they come to your door. Just swipe your bank-issued debit card, verify the amount on the screen, select whether you want to pay from your checking or savings account, enter your PIN (personal identification number), and press Enter. A receipt prints, and the money is automatically withdrawn from your account and issued to the retailer—who also pays an acquirer fee for each debit card transaction.
In a country where even a trip to a nearby Automated Bank Machine (ABM) can be bone-chilling during the winter, Canadians don't like having to withdraw hard cash to pay for everyday purchases, and they don't like writing checks, either. Most Canadians select bank service packages in which a specific number of transactions are included along with account service fees. There are some individuals who do not select service packages, however, and a small transaction fee can be applied when a transaction occurs.
The INTERAC Generation Doesn't Rely On Cash
Even technology-challenged little old ladies have become comfortable with completing their INTERAC transactions at their local stores, where some clerks quaintly mispronounce it as "interact." Canadians have become the world's most avid users of debit cards and ABMs. Point-of-sale debit card transactions have been offered across the country only since 1994, but in just over 10 years, INTERAC Direct Payments (IDPs) have become Canada's national debit card service. Debit cards have now surpassed cash as Canadians' preferred method of payment, especially for payments between $25.00 and $100.00. In 2004, a record 2.7 billion point-of-sale transactions were made using IDPs at almost 400,000 merchants.
A whole generation of children is growing up without ever knowing what it was like before you could pay for a movie or a car rental with your debit card.
"INTERAC Shared Services have been successful because they are convenient, fast, secure, and ubiquitous," says Sara Feldman, Vice President of Communications and Marketing for the INTERAC Association, which is located in Toronto, Ontario. INTERAC Association is an unincorporated, not-for-profit association; was founded in 1984 by five Canadian banks; and now boasts a diverse membership of banks, other financial institutions, and non-financial enterprises. Any company incorporated in Canada is eligible to join the Association.
Feldman says, "The framework is a 'co-opetition.' On the back end, members cooperated to build the network and establish standards of service. On the front end, members are competing to sell the services to merchants and consumers in the marketplace. The reliability level of the services is well-known, and Canadians have traditionally been early adopters of new technology."