Interac Association is a Canadian organization linking enterprises that have proprietary networks so that they may communicate with each other for the purpose of exchanging electronic financial transactions. The Association was founded in 1984 as a cooperative venture between five financial institutions: Royal Bank of Canada, CIBC, Scotiabank, Toronto-Dominion Bank, and Desjardins.
By 2005, there were over 80 member organizations and there were over 51,000 Automated Banking Machines that can be accessed through the Interac network. In Canada, the word Interac is often used as a synonym for debit card.
Interac Association is the organization responsible for the development of a national network of two shared electronic financial services:
Interac Direct Payment (IDP)
- Interac Direct Payment (IDP): Canada's national debit service for purchasing of goods and services. Customers enter their personal identification number (PIN) and the amount paid is deducted from either their chequing or savings accounts.
- Since its national launch in 1994, Interac Direct Payment has become so widespread that, since 2001, more transactions in Canada were completed using debit cards than cash.
- Beginning in 2004, IDP purchases could also be made in the United States at merchants on the NYCE network.
- IDP is similar in nature to the EFTPOS systems in use in the United Kingdom, Australia and New Zealand.
How IDP works
IDP purchases can be made at all retailers participating in the program, regardless of the financial institution issuing the debit card being used, and normally no fees are charged for using the program. Banks may levy a charge for withdrawing funds from the account used to fund the purchase, but these fees are not associated with Interac Direct Payment itself. Some retailers charge a nominal fee (often $0.25) for Direct Payments (presumably to cover the expense of having the appropriate equipment and any transaction charges), but they are in the minority. There are just under 550,000 IDP terminals in use throughout Canada; 3.5 billion POS and 156 billion Canadian dollars
worth of transactions took place in 2007
On December 23
, a new record for single day transactions was set with 15.5 million transactions processed.
Four steps to completing a transaction
The “Interac Inter-Member Network” is a complex network known as a “distributed architecture” throughout the country. Chances of the entire network shutting down are very remote as the network does not have a specific “point of failure.” If a single member is experiencing short-term technical difficulties, it is not possible for the entire network to fail.
1. The procedure begins at the time a purchaser makes a purchase with his or her banking or debit card; this is processed with the Interac Direct Payment service. The employee will then record the sale and enter the actual price into the “point of sale terminal”.
2. Either the purchaser or the seller will swipe the card through the reader. At this point, the purchaser will enter his or her “Personal Identification Number (PIN)” into the reader. The account to be debited is selected by the consumer.
3. The sale is transferred throughout the Interac system where the purchaser’s financial services firm verifies the debit card, the PIN, and the funds available in the account. The purchase is complete after these three steps are verified by the purchaser’s institution.
4. A receipt of the transaction is returned to the purchaser along with the banking or debit card.
Using the Interac system reduces the need to visit an ATM
or carry large amounts of cash. The processing fees for merchants are much lower than credit card
discounts for the merchants making Interac the preferred payment option for 52% of Canadian merchants .
Overall Risk Reduction
A private Personal Identification Number(PIN) is selected by each card holder to access their individual accounts. This "Two Factor Authentication" (Card/PIN combination) increases the security and confidentiality of the system, helps eliminate the worry of theft, and makes it impossible to access funds in an account without the corresponding PIN.
Consumer protection in Canada
Consumers in Canada are also protected under a voluntary industry code which is overseen by the Canadian federal government. The Canadian Code of Practice for Consumer Debit Card Services (sometimes called the "Debit Card Code") covers all providers of debit card services. Adherence to the Code is overseen by the Financial Consumer Agency of Canada (FCAC), which investigates consumer complaints.
According to the FCAC, revisions to the Code that came into effect in 2005 put the onus on the financial institution to prove that a consumer was responsible for a disputed transaction, and also place a limit on the number of days that an account can be frozen during the financial institution's investigation of a transaction.
Privacy & Security
Compared to other forms of payment, only a limited amount of information is revealed with each transaction. The only personal information found on a typical receipt will be the client's card number and account selected (chequeing/savings).
In comparison, when a cheque is made out to a merchant, the customer's name, address, and phone number are in the top left hand corner of a cheque and the MICR encoded account number is printed on the bottom of the cheque. In addition, because cheques are easily forged, merchants will often ask for identification documents, typically containing a photo, to confirm the cheque issuer matches the information on the cheque.
IDP flaws and features
Interac Direct Payment is a PIN-based system where the information entered on the PIN pad is encrypted and verified at a central server, rather than being stored on the card itself. Because of this, it is significantly more secure than traditional signature or card-based transactions. Despite these security features, there are ongoing fraud concerns, particularly when debit cards are duped
— a compromised automated teller machine
or point-of-sale terminal will record the account information contained in the magnetic strip of the card, allowing for duplicate cards to be created at a later time. The owner of the card is then unknowingly video taped or observed entering their PIN, allowing a criminal to use duplicate cards to make fraudulent purchases.
The move to Interac Chip Cards
In an effort to combat fraud and increase security, Interac announced
it will be moving to EMV Chip Card
technology starting with a market trial in the Kitchener-Waterloo
area in the Fall of 2007
The main benefit to this technology over the existing magnetic stripes is that the chips are almost impossible to copy due to high levels of encryption. This is seen as being able to reduce the amount of debit card fraud caused by card skimming and duplication. However new Interac Chip Cards will continue to feature a magnetic stripe in the interim in order for them to be used at ATMs
or retailers which have not yet been upgraded, as well as in countries which have not yet adopted chip cards, such as the United States
The purchase experience for consumers will remain largely unchanged, except instead of swiping the card, it will be inserted into a chip reader on the PIN Pad and will remain inserted for the duration of the transaction. PIN numbers will still be used as the means to authenticate transactions.
Interac expects the transition to chip cards to take several years to complete, but will be completed before certain milestone dates:
- After 31 December 2012, all ATM transactions must be completed with a chip card
- After 31 December 2015, all POS transactions must be completed with a chip card
Shared Cash Dispensing
- Shared Cash Dispensing (SCD): cash withdrawals from any ABM not belonging to a cardholder's financial institution.
- This Canada-specific service is similar to international systems like PLUS or Cirrus.
- Virtually every ABM in Canada is on the Interac system.
Interac Email Money Transfer
Email Money Transfer service is offered by CertaPay. It allows online banking customers to send money to anyone with an e-mail address and a bank account in Canada. This is an Interac
branded service operated by Acxsys Corporation.
Online service allows customers to pay for goods and services over the Internet using funds directly from their bank accounts. Because it removes the need to provide any financial information to the online merchant, the Interac
Online service is more secure than online credit card payments. This service, also an Interac
branded service operated by Acxsys Corporation, began in 2005 and is expanding as more merchants choose to participate. As of November 2007, the service is available to customers of four major Canadian banks and offered by 116 merchants.
Services not offered on Interac networks
It is currently not possible to transfer money internationally using the Interac network; however, most Canadian ABM cards are also linked to PLUS
, or other networks with more global reach.
- Interac Association (2006). At the Merchant 2006. Retrieved 19 June 2006, from http://www.interac.ca/en_n2_11_howitworks.html
- Interac Association (2006). At the Merchant 2006. Retrieved 19 June 2006, from http://www.interac.ca/en_n2_12_benefits.html
- Interac Association (2006). At the Merchant 2006. Retrieved 19 June 2006, from http://www.interac.ca/en_n2_13_fees.html