Interac: From Market Leader to Laggard
Let me begin by saying that I am a big fan of Interac. It is a great “Made In Canada” success story and a solid example of the benefits of a tightly knit and consolidated banking system. Most Canadians have been using their debit cards to pay for items at stores for as long as they can remember; something that has only been an option in the United States the past few years. In fact, Interac is so prevalent in Canada that the few stores who do not accept it often post “No Interac” signs on their doors. In short, Canadians love Interac, it is the most popular form of in-store payment in Canada (over credit cards and even cash).
I’ve talked about Interac before here. If you aren’t familiar with the brand, it is the national electronic payment network for Canada. It has been around since 1984, originally being formed by Royal Bank, CIBC, Scotiabank, TD Bank and Dejardins. It allows anyone with a debit card from a Canadian bank to pay for goods and have the cost deducted directly from their chequing or savings account. The system also connects ABM’s across the country (like its International cousins Cirrus and PLUS). You can learn more about that at Interac’s site interac.ca, Wikipedia also has a good run-down on Interac here.
So what’s the problem?
So far, everything sounds good. Interac has insane market share, enviable brand recognition and an in-store network that would cost millions to build out from scratch. The issue – Interac has not made significant progress in online payments and no discernible progress in mobile payments.
Let’s start with Online payments – a well-established field.
Interac’s penetration in this field is negligible. You can see their entire list of online merchants here. They have a few heavy-weights like Empire Theatres (Disclosure – I helped roll out the Interac online payment system there), Cineplex Entertainment, Chapters-Indigo (a Canadian competitor to Amazon), Sony, almost all the mobile telecoms and Live Nation. More important though is who they are missing:
- iTunes (which I lament about here). Update – I had a question about the availability of Interac as a payment option in the Android market. It is not.
- Futureshop/Best Buy
- All the major Canadian Airlines
That is the who’s – who of E-commerce. Not surprisingly, aside from the airlines, they aren’t Canadian (where most of the heavy-weights listed as accepting Interac are). Intuitively, one could probably assume that Canadian companies understand the importance of Interac to Canadian consumers and go to lengths to integrate it.
Where there has been success is Interac online/mobile money transfers. Essentially anyone can email cash from their bank account to someone else’s. This is fairly common (despite a $1.50 service fee). This is also an option with any of those same financial institution’s mobile apps (and I give credit to the Big 5 Canadian banks for having excellent mobile apps).
Where there hasn’t been success
What is missing is the obvious option of a “bump” or ‘handshake” to transfer cash mobile app. There are three main reasons that a bump to move cash ecosystem hasn’t gained widespread success in North America:
- Trust – not an issue with Interac – it is probably one of Canada’s most trusted brands
- Technology – also not an issue. This technology already exists and is being used. Interac either needs to sub-license this or develop there own. DoubleTap for example has a mobile app that allows Android users to bump phones to exchange music (see demo here). Bump Technologies does the same for a variety of personal info (more on them here). Incorporating this type of technology into the bank’s already existing mobile apps is certainly possible.
- Network size – unlike Square, Bump and even Paypal, Interac’s network consists of almost every single Canadian. If you have a bank account, you almost certainly use Interac. This is Interac’s advantage over Isis, and its Canadian brother, Zoompass (more on my thoughts about Zoompass here).
So what is the hold-up?
- If they (the banks) don’t want a feature – or are competing over it – it won’t be adopted
- Interac is a non-profit. It isn’t flush with cash and able to pour money into R&D like a public entity or even a start-up. At one point, Interac did try to become a for-profit entity, but this was rejected by the Canadian Competition Bureau.
There is a three-way battle for hearts and minds being waged between the wireless telcos via Zoompass (Telus, Bell, Rogers), Visa/MasterCard and the banks (via Interac). They are fighting for control of the billions in transaction and merchant fees. Interac would be able to compete a lot better against international giants like Visa/MasterCard if they partnered with another struggling Canadian group like Zoompass. Thus far though (at least publicly) there hasn’t been movement here.
What I want to see:
- Reduced merchant fees (via Moneris and Chase Paymentech) for online payments
- A better API for online payments (the current one is a nightmare to integrate and provides a choppy User Experience).
- A focused campaign with a dedicated sales-force to pull key merchants like Amazon and Apple into the ecosystem. A good start would be Amazon; they take heat for hurting “Canadian” content producers and this Canadian-centric move would be a win for them.
- A bump-to-transfer funds feature included in the Big 5 bank’s mobile apps
- A merger or major co-licensing agreement with Zoompass (probably the most important of the three items – but likely the most difficult to execute)