The Interac Association, which operates Canada’s sole PIN-debit network, is adding a contactless function to its EMV chip-and-PIN cards. Interac plans a national rollout in early 2011.
The Toronto-based association is adding a contactless feature for several reasons, among which is an effort to capture more small-ticket transactions at the point of sale, says Allen Wright, Interac vice president of product management.
“There are still a lot of cash [transactions] in the Canadian marketplace” that Interac would like to displace with debit payments, Wright tells PaymentSource.
Consumers would be able to use the contactless function, called Flash, for purchases less than $50 without the need to enter a PIN.
Canada is in the process of migrating to an EMV-based card system. Visa says its merchants will continue to accept magnetic stripe cards after the 2015 deadline for EMV convertion. "Visa cards may employ either chip technology or magnetic stripes for processing at point-of-sale terminals," a spokesperson tells PaymentsSource.
No Canadian banks have publicly committed to issuing Interac Flash.
Earlier this year, Interac conducted a pilot using Scotiabank debit cards and TD Merchant Services’ point-of-sale terminals. Some 60 Interac, Scotiabank and TD Merchant Services employees participated in the brief pilot.
Scotiabank was unavailable for comment.
Inside Contactless will provide the so-called “dual-interface chips” for the contactless cards.
Several downtown Toronto merchants also participated in the pilot.
Interac has gone out of its way to involve merchants in Flash’s development process, Wright says. “Our approach is to make sure we are targeting each segment [consumers, issuers, merchants] properly,” he says.
Brian Riley, a research director with TowerGroup, believes that is a sound approach, considering the merchants’ importance in mass acceptance and adoption of contactless payments.
Interac is particularly targeting retailers that have a high volume of debit transactions. Such merchants include quick-service restaurants and clothing stores that cater to teenagers and young adults, Jeff van Duynhoven, president of Toronto-based TD Merchant Services, tells PaymentsSource.
“Debit card use is particularly high with that age demographic,” he adds.
TD Merchant Services already is speaking with merchants about accepting Interac contactless payments. The company deploys an Ingenico S.A. contactless POS terminal merchants use to accept Visa payWave and MasterCard PayPass contactless credit card payments. Those terminals would just need a software upgrade to accept Interac Flash.
“We actually could have a situation where there are more acceptance points for Flash than actual cards,” Duynhoven says.
Interac also added contactless functionality to give debit cards more value as a payment product for consumers, Wright says. “Our feedback from consumers is that they really like the Interac debit service and want to see more utility around it,” he adds.
Indeed, it remains to be seen whether Canadian consumers will take to the new technology, Riley says. “There is an aversion to new technology,” whether the consumer is American or Canadian, he adds.
Canadian consumers will have to determine whether the technology is more than just a “cool factor” and actually is faster to use that chip-and-PIN, Riley says.
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