Believing consumer are ready to abandon cash for small purchases, Scotiabank and RBC will be the first banks to put InteracFlash chips onto their debit cards in Canada. The banks both feel the product is a test case for the eventual move of debit payments to mobile phones.
What's driving this deployment?
Collins: There [are] a great deal of cash payments still being made. How do we move some of that to debit transactions? A lot of the small ticket [cash] transactions are typically the kinds of transactions that are migratible to a debit solution. So with the introduction of the chip, we can put new technology on debit cards that can drive more [debit payments].
Currie: We did a test of the technology with some family and friends. In [that] technical pilot, we found that [contactless debit payments] will gravitate toward small payments, generally less than $50. That includes items such as gas, and businesses such as convenience stores and some restaurants.
How does the product work on the consumer side?
Collins: We will replace existing debit cards with new cards with the contactless debit card chip. That will allow debit cards that are PIN-based as well as [enabling] contactless payments.
What will merchants have to do to upgrade-will a major overhaul be required for compatibility?
Collins: Merchants will have to install a reader. But many merchants already have some of the technology that's consistent with accepting InteracFlash. There have been contactless credit card payments in Canada for some time [which would accommodate contactless debit]. And there may be some terminal changes required for the debit transactions.
Currie: Many times the [merchant upgrade] is just a patch that can be sent remotely. The contactless readers can accept all kinds of card schemes.
Will you expand the InteracFlash service into the U.S. market?
Collins: At this point in time, InteracFlash is not geared toward the U.S. marketplace [Ed. Note: Interac says that since the product is geared toward EMV compliance, there's probably not a huge market in the U.S., given the reluctance of U.S. merchants to adopt the EMV standards]. Within the Canadian market, we believe it will bring about a whole new payment strategy. Many of our Canadian consumers are still carrying around a lot of cash, and this will allow for faster transactions that are simpler to process.
How are you marketing the service to merchants and consumers?
Collins: We haven't started on our communications strategy yet for the contactless debit product. We're letting the merchant community know that we're supporting InteracFlash and are looking to deploy in 2011. Consumers are already aware of contactless payments, but haven't had it yet on the debit side.
Currie: We will market toward the summer [of 2011, the target rollout], making people aware of the zero liability protection. The security of the product is another area in which we have to make consumers aware. With chip and PIN debit, people are accustomed to entering PINs [InteracFlash doesn't require a PIN for each payment]. We'll need to ensure people that those protections are still in place.
Beyond marketing and consumer education, how else are you addressing security concerns?
Collins: There are a whole bunch of controls that are built in. Consumers can, for example, customize the transactions that are allowable before a PIN is requested. Consumers will make the choice as to what the appropriate limits are, and those limits will be included on the chip. We can set those limits up for a certain dollar amount, such as everything over $20 triggers a PIN request; or for a certain number of transactions-at the 20th transaction, for example, the consumer has to enter a PIN.
Do you offer other contactless payments?
Collins: We offer contactless on the credit card side. We also see InteracFlash as a stepping stone through debit to other mobile devices. We will be able to use the [debit card] product to test clients' interest in overall mobile payments; and will go forward with further mobile payments deployments in the future. Canadians are very good at adopting technology-we have the second highest [rate] of debit card usage in the world, so we hope to see high adoption rates for InteracFlash. [Scotiabank also offers credit card contactless payments.]
What are your plans for expanding your contactless payments offerings to mobile?
Collins: Out current mobile app includes services such as balance inquiries, transaction histories and transfers, so there is an opportunity to use [Interac] as a step to mobile payments. Once we get a better read on clients' propensity to use contactless, and customers get comfortable and know that we have strong fraud controls in place [there will be an environment for phone payments].
Currie: We see contactless as a precursor to using mobile devices [for payments.] But there's a lot to sort out. There's hurdles to clear in regards [the role of] telco providers and handset manufacturers. But the consumer behavior that we are creating through InteracFlash will make mobile phone payment adoption that much easier.
