Visa Inc. is in talks with several major Canadian banks about offering debit cards that would carry its logo alongside that of the Interac Association, the country's only debit network.
The "co-badged" cards would let merchants send transactions across either network. Analysts said they would likely be more popular with online retailers.
"We're actively discussing Visa PIN debit with banks, explaining the card's value to them, consumers and merchants," Tim Wilson, the head of Visa Canada in Toronto, said in an interview last week.
Canadian issuers can issue debit cards only on the Interac network, and only for PIN debit transactions. There are no signature debit cards in Canada.
Interac said in 2007 that it would adopt the Europay, MasterCard, Visa security format, which uses cards with embedded chips and require people to enter a PIN to initiate purchases at the point of sale. It expects all of Canada's point of sale terminals to be chip-enabled by 2012, and some merchants are already using them.
Wilson said the cards Visa is promoting would feature both chips, which store cardholders' PINs, and standard magnetic stripes. If a consumer selected the chip function to complete a purchase, the merchant could processing the transaction over either VisaNet or Interac's systems, he said.
"If a merchant chooses not to accept Visa debit at the point of sale or is not chip-enabled, the Visa debit card can still be used, but the purchase will be processed as an Interac transaction," Wilson said.
Co-badged cards are available in 17 countries, including Australia, Brazil, France and Russia. Visa Canada is promoting them as way to give Canadians more than one payment choice.
"We believe choice is a good thing," Wilson said.
Visa Canada may face a tough sell; Interac was formed in 1984 by several top Canadian banks.
Wilson would not say which banks he hopes will agree to issue the cards. Several Canadian financial companies would not discuss their debit strategies.
Gwenn Bezard, a research director at Aite Group LLC, said merchants may be reluctant to use the Visa network, because it may carry higher interchange rates. "For the merchants, Visa will likely mean higher costs."
Online retailers may be more intrigued, he said. "Where it brings value is the ability to use a debit card online."
Interac offers online debit services, but Bezard said they are less developed than Visa's well-known network. "Interac online has not got massive adoption from merchants," he said.
Both Visa and MasterCard Inc. are eager to gain a foothold in the Canadian debit market, he said. The companies have said they want to expand abroad, and one of the most likely ways is through debit, which in many countries is controlled by local networks.
Interac is seeking to change its charter from a not-for-profit organization to a for-profit business, a move that could help it compete more effectively in Canada's evolving PIN debit market.
It said it is well aware that Visa and MasterCard are promoting their debit products in Canada, but it remains confident in its ability to meet the market's needs.
"Interac has become Canada's leading payment brand for a reason — we have been providing Canadians with a convenient, reliable and trusted form of payment nationwide," the network said in a e-mail last week. "When consumers think debit, they naturally think Interac."
According to Interac's Web site, "the association operates on a cost-recovery basis, which means the association charges member financial institutions a 'per-transaction' fee sufficient to cover operating costs."
Wilson said low costs also equate to a lack of access. Online acceptance is low, he said, and the cards are accepted only in Canada and in the United States. An agreement with Metavante Technologies Inc.'s NYCE Payments Network LLC allows the cards to be accepted here.
Visa is accepted in 170 countries, he said, and its cards can be used for online phone and mail-order purchases.
The growth of Internet shopping is one of the key drivers behind Visa's decision to enter Canada's PIN debit market, Wilson said; the other is innovation.
"We're at the forefront of innovation, offering cardholders such products as contactless cards," he said.
The Retail Council of Canada, a trade group for merchants, has sought to block Visa and MasterCard from gaining access to the country's debit market, urging government officials this month to bar the two companies. Officials have declined to do so.
