Nationwide Debit Card System Planned in Canada

Nine Canadian banks are banding together to launch a nationwide debit card system next year.

Customers will be able to use their teller machine cards at point-of-sale terminals in supermarkets, liquor stores, and other retailers to pay for purchases by debiting their bank accounts.

Scaling the debit system up from regional to national is expected to cost about $100 million.

Expansion in Stages

The system will be expanded from Ottawa, where it is currently available, to Quebec and British Columbia in September. Eventually it will be spread throughout the country, according to Fred J. Harris, general manager of Interac, Canada's nationwide shared network.

Interac, which links about 13,000 teller machines from nine nationwide banks, will run the debit card system. Members in Interac include the nation's largest: Bank of Montreal, Canadian Imperial Bank Corp., Royal Bank of Canada, and Toronto Dominion.

Over the past few years, several Canadian banks have set up limited card programs in various parts of the country, but each program has been restricted to a single bank.

In the United States, some regional networks already offer debit-card service in their regions.

Better Focus for Banks

A national system will be easier to set up in Canada than in the United States. Most Canadian commercial banks are national in scope and Interac is the only shared network in the country. As a result, the banks can concentrate on marketing the service to retailers and building systems to capture transactions.

In the United States, Visa U.S.A. and MasterCard International have already both entered the debit card arena, and Shared regional networks are engaged in extensive talks to set up their own system.

All nine Canadian banks that belong to Interac have been participating in a year-long test of point-of-sale in the Ottawa region. Mr. Harris said that the pilot had exceeded expectations, spurring expansion.

By the end of the test, about 20% of Interac's transactions in the Ottawa region were originated in retail stores. Some retailers reported that as much as 10% of their own transactions were made with debit cards, he noted.

That is an extraordinarily high percentage by U.S. standards, where a successful POS program might be one in which 4% or 5% of transactions are made by debit.

One reason the service seemed to appeal to consumers so strongly is that Canadian grocery stores and liquor stores do not accept credit cards, according to Doreen Guthrie, project director, Consumers Association of Canada.

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