(June 17, 2005) The introduction in Canada of a bank-sponsored commercial payment service allowing consumers to buy goods from e-commerce merchants with their PIN debit cards is sparking widespread interest among retailers, according to Moneris Solutions Corp., the first processor to handle transactions for Interac Online. Moneris has been processing Interac Online payments in a pilot for DVDsoon.com and has signed agreements with The Source By Circuit City and CompuSmart, both Web-based sellers of computer gear. More merchants are lining up in the pipeline, the processor says, without naming them. "There's a ton of excitement in the merchant community," says a Moneris spokesman. "We've taken a lot of calls from merchants wanting to get on the service."

Moneris plans to market Interac Online to its existing base of merchants with e-commerce units that process credit card transactions through the company. It estimates the new Internet payment service, when fully commercialized, could add another one to two percentage points to an existing 3% to 4% growth rate in overall online transaction-volume growth, the spokesman says, without projecting volume numbers. In part, he says, this is because the service appeals to consumers who can't or won't use credit cards on the Web. "It opens the door to people who don't purchase online otherwise," he says.

Interac Online is backed by Interac Inc., the national Canadian PIN debit network, and its members, which include the nation's major banks. These include Royal Bank of Canada and Bank of Montreal, the joint owners of Moneris. Half a dozen big banks control most PIN debit accounts in Canada, and the banks are in the process of enabling their cardholders' accounts to handle the new payments. The service, which has been in development for several years under the name iDebit (Digital Transactions News, Sept. 1, 2004), relies on technology that switches consumers from Internet retailers' checkout screens to specialized versions of their banks' online-banking services for authentication and authorization of transactions. The banking screens are automatically populated with data from the transactions the cardholders are trying to consummate. Consumers use the screens to pay from their checking accounts and then are redirected to the Web merchants' sites.

Unlike Interac transactions at the point of sale, which carry a fixed fee, Interac Online charges acquirers a percentage-based fee of approximately 1.5%, according to Moneris. Interac stresses merchant fees are determined by negotiation between acquirers and merchants. As with PIN debit at the point of sale, merchants receive guaranteed funds, with next-day settlement.

PIN-based debit is much more popular in Canada, where signature-based debit has not been introduced, than in the U.S. A recent survey showed nearly half of Canadians favored debit for payments ranging between $25 and $75. In response to this popularity, and because debit carries lower acceptance costs to merchants than credit cards, a number of non-bank startups have emerged in Canada to process Web transactions that debit payments from consumers' checking accounts. These include UseMyBank Services Inc., Toronto, which began operations in 2002, and Montreal-based Othentik Technologies Inc., whose technology helps facilitate transactions in a manner similar to that of Interac Online (Digital Transactions News, Dec. 9, 2004). In the U.S., NACHA, the rules-setting body for the automated clearing house, is working on a similar service, provisionally referred to as "credit push" (Digital Transactions News, April 13).