Interac
Encyclopedia
Interac Association is a Canadian organization linking enterprises that have proprietary networks
so that they may communicate with each other for the purpose of exchanging electronic financial transaction
s. The Association was founded in 1984 as a cooperative venture between five financial institution
s: Royal Bank of Canada
, CIBC, Scotiabank
, Toronto-Dominion Bank
, and Desjardins
. Interac's request to become a for-profit organization was rejected by the Competition Bureau.
By 2005, there were over 80 member organizations and there were over 600,000 Automated Banking Machines that can be accessed through the Interac network.
Using the Interac system reduces the need to visit an ATM
or carry large amounts of cash. The processing fees for merchants are much lower than credit card
discounts for the merchants making Interac the preferred payment option for 52% of Canadian merchants.
A private Personal Identification Number(PIN) is selected by each card holder to access their individual accounts. This "Two Factor Authentication
" (Card/PIN combination) increases the security and confidentiality of the system, helps eliminate the worry of theft, and makes it impossible to access funds in an account without the corresponding PIN.
Consumers in Canada are also protected under a voluntary industry code which is overseen by the Canadian federal government. The Canadian Code of Practice for Consumer Debit Card Services (sometimes called the "Debit Card Code") covers all providers of debit card services. Adherence to the Code is overseen by the Financial Consumer Agency of Canada
(FCAC), which investigates consumer complaints.
According to the FCAC, revisions to the Code that came into effect in 2005 put the onus on the financial institution to prove that a consumer was responsible for a disputed transaction, and also place a limit on the number of days that an account can be frozen during the financial institution's investigation of a transaction.
Compared to other forms of payment, only a limited amount of information is revealed with each transaction. The only personal information found on a typical receipt will be the client's card number and account selected (chequing/savings).
In comparison, when a cheque is made out to a merchant, the customer's name, address, and phone number are in the top left hand corner of a cheque and the MICR encoded account number is printed on the bottom of the cheque. In addition, because cheques are easily forged, merchants will often ask for identification documents, typically containing a photo, to confirm the cheque issuer matches the information on the cheque.
or point-of-sale terminal will record the account information contained in the magnetic strip of the card, allowing for duplicate cards to be created at a later time. The owner of the card is then secretly video taped or observed entering their PIN, allowing a criminal to use duplicate cards to make fraudulent purchases.
Chip Card
technology, which began with a market trial in the Kitchener-Waterloo
area in Fall, 2007. The main benefit to this technology over the existing magnetic stripes is that the chips are almost impossible to copy due to high levels of encryption. This is seen as being able to reduce the amount of debit card fraud caused by card skimming and duplication. However new Interac Chip Cards will continue to feature a magnetic stripe in the interim in order for them to be used at ATMs
or retailers which have not yet been upgraded, as well as in countries which have not yet adopted chip cards, such as the United States
.
The purchase experience for consumers will remain largely unchanged, except instead of swiping the card, it will be inserted into a chip reader on the PIN Pad and will remain inserted for the duration of the transaction. PIN
s will still be used as the means to authenticate transactions.
Interac expects the transition to chip cards to take several years to complete, but will be completed before certain milestone dates:
.
, and TD Canada Trust
. As of February 2009, the service is offered by roughly 300 merchants including two large universities (for tuition payments), two major wireless carriers, provincial lottery corporations, and a wide variety of retailers. Interac Online is an Online Banking ePayments
service very similar to iDEAL
in the Netherlands
, Giropay in Germany
, and Secure Vault Payments in the United States
.
, or other networks with more global reach.
Computer network
A computer network, often simply referred to as a network, is a collection of hardware components and computers interconnected by communication channels that allow sharing of resources and information....
so that they may communicate with each other for the purpose of exchanging electronic financial transaction
Financial transaction
A financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. It involves a change in the status of the finances of two or more businesses or individuals.-History:...
s. The Association was founded in 1984 as a cooperative venture between five financial institution
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
s: Royal Bank of Canada
Royal Bank of Canada
The Royal Bank of Canada or RBC Financial Group is the largest financial institution in Canada, as measured by deposits, revenues, and market capitalization. The bank serves seventeen million clients and has 80,100 employees worldwide. The company corporate headquarters are located in Toronto,...
, CIBC, Scotiabank
Scotiabank
The Bank of Nova Scotia , commonly known as Scotiabank , is the third largest bank in Canada by deposits and market capitalization. It serves some 18.6 million customers in more than 50 countries around the world and offers a broad range of products and services including personal, commercial,...
, Toronto-Dominion Bank
Toronto-Dominion Bank
The Toronto-Dominion Bank , is the second-largest bank in Canada by market capitalization and based on assets. It is also the sixth largest bank in North America. Commonly known as TD and operating as TD Bank Group, the bank was created in 1955 through the merger of the Bank of Toronto and the...
, and Desjardins
Mouvement Desjardins
The Desjardins Group is the largest association of credit unions in North America. It was founded in 1900 in Lévis, Quebec by Alphonse Desjardins....
. Interac's request to become a for-profit organization was rejected by the Competition Bureau.
By 2005, there were over 80 member organizations and there were over 600,000 Automated Banking Machines that can be accessed through the Interac network.
Services
Interac Association is the organization responsible for the development of a national network of two shared electronic financial services:Interac Direct Payment (IDP)
- Interac Direct Payment (IDP): Canada's national debit cardDebit cardA debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...
service for purchasing of goods and services. Customers enter their personal identification numberPersonal identification numberA personal identification number is a secret numeric password shared between a user and a system that can be used to authenticate the user to the system. Typically, the user is required to provide a non-confidential user identifier or token and a confidential PIN to gain access to the system...
(PIN) and the amount paid is deducted from either their chequing or savings accounts. - Since its national launch in 1994, Interac Direct Payment has become so widespread that, since 2001, more transactions in Canada were completed using debit cards than cash.
- Beginning in 2004, IDP purchases could also be made in the United StatesUnited StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
at merchants on the NYCENYCEThe New York Currency Exchange is an interbank network connecting the ATMs of various financial institutions in the United States and Canada. NYCE also serves as an EFTPOS network for NYCE-linked ATM cards....
network. - IDP is similar in nature to the EFTPOSEFTPOSEFTPOS is the general term used for debit card based systems used for processing transactions through terminals at points of sale. In Australia and New Zealand it is also the brand name of the specific system used for such payments...
systems in use in the United KingdomUnited KingdomThe United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, AustraliaAustraliaAustralia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
and New ZealandNew ZealandNew Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
.
How Interac Direct Payment (IDP) works
IDP purchases can be made at all retailers participating in the program, regardless of the financial institution issuing the debit card being used, and normally IDP will not charge any fees to the purchaser for using the program. Banks may levy a charge for withdrawing funds from the account used to fund the purchase, but these fees are not associated with IDP itself. IDP will instead charge flat fee to the retailers. There are just under 550,000 IDP terminals in use throughout Canada; 3.5 billion POS transactions and 156 billion Canadian dollars worth of transactions took place in 2007. On December 23, 2005, a new record for single day transactions was set with 15.5 million transactions processed.Four steps to completing a transaction
The “Interac Inter-Member Network” is a complex network known as a “distributed architecture” throughout the country. Chances of the entire network shutting down are very remote as the network does not have any single “point of failure.” If a single member is experiencing short-term technical difficulties, it is not possible for the entire network to fail.- The procedure begins at the time a purchaser makes a purchase with his or her banking or debit card; this is processed with the Interac Direct Payment service. The employee will then record the sale and enter the actual price into the “point of sale terminal”.
- Either the purchaser or the seller will swipe the card through the reader, or insert the EMVEMVEMV stands for Europay, MasterCard and VISA, a global standard for inter-operation of integrated circuit cards and IC card capable point of sale terminals and automated teller machines , for authenticating credit and debit card transactions.It is a joint effort between Europay, MasterCard and...
chip card into the chip reader (usually integrated into the pin pad). At this point, the purchaser will enter his or her “Personal Identification Number (PIN)” into the reader. The amount of the transaction is verified, and the account to be debited is selected by the consumer. - The sale is transferred throughout the Interac system where the purchaser’s financial services firm verifies the debit card, the PIN, and the funds available in the account. The purchase is complete after these three steps are verified by the purchaser’s institution.
- A receipt of the transaction is returned to the purchaser along with the banking or debit card.
Convenience
Using the Interac system reduces the need to visit an ATM
Automated teller machine
An automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...
or carry large amounts of cash. The processing fees for merchants are much lower than credit card
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...
discounts for the merchants making Interac the preferred payment option for 52% of Canadian merchants.
Overall Risk Reduction
A private Personal Identification Number(PIN) is selected by each card holder to access their individual accounts. This "Two Factor Authentication
Two-factor authentication
Two-factor authentication is an approach to authentication which requires the presentation of two different kinds of evidence that someone is who they say they are. It is a part of the broader family of multi-factor authentication, which is a defense in depth approach to security...
" (Card/PIN combination) increases the security and confidentiality of the system, helps eliminate the worry of theft, and makes it impossible to access funds in an account without the corresponding PIN.
Consumer protection in Canada
Consumers in Canada are also protected under a voluntary industry code which is overseen by the Canadian federal government. The Canadian Code of Practice for Consumer Debit Card Services (sometimes called the "Debit Card Code") covers all providers of debit card services. Adherence to the Code is overseen by the Financial Consumer Agency of Canada
Financial Consumer Agency of Canada
The Financial Consumer Agency of Canada is an independent government agency of the Government of Canada. FCAC provides consumer information and oversees financial institutions to ensure that they comply with federal consumer protection measures. Created in 2001, the Agency investigates cases of...
(FCAC), which investigates consumer complaints.
According to the FCAC, revisions to the Code that came into effect in 2005 put the onus on the financial institution to prove that a consumer was responsible for a disputed transaction, and also place a limit on the number of days that an account can be frozen during the financial institution's investigation of a transaction.
Privacy & Security
Compared to other forms of payment, only a limited amount of information is revealed with each transaction. The only personal information found on a typical receipt will be the client's card number and account selected (chequing/savings).
In comparison, when a cheque is made out to a merchant, the customer's name, address, and phone number are in the top left hand corner of a cheque and the MICR encoded account number is printed on the bottom of the cheque. In addition, because cheques are easily forged, merchants will often ask for identification documents, typically containing a photo, to confirm the cheque issuer matches the information on the cheque.
IDP flaws and features
Interac Direct Payment is a PIN-based system where the information entered on the PIN pad is encrypted and verified at a central server, rather than being stored on the card itself. Because of this, it is significantly more secure than traditional signature or card-based transactions. Despite these security features, there are ongoing fraud concerns, particularly when debit cards are duped or skimmed — a compromised automated teller machineAutomated teller machine
An automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...
or point-of-sale terminal will record the account information contained in the magnetic strip of the card, allowing for duplicate cards to be created at a later time. The owner of the card is then secretly video taped or observed entering their PIN, allowing a criminal to use duplicate cards to make fraudulent purchases.
The move to Interac Chip Cards
In an effort to combat fraud and increase security, Interac announced it will be moving to EMVEMV
EMV stands for Europay, MasterCard and VISA, a global standard for inter-operation of integrated circuit cards and IC card capable point of sale terminals and automated teller machines , for authenticating credit and debit card transactions.It is a joint effort between Europay, MasterCard and...
Chip Card
Smart card
A smart card, chip card, or integrated circuit card , is any pocket-sized card with embedded integrated circuits. A smart card or microprocessor cards contain volatile memory and microprocessor components. The card is made of plastic, generally polyvinyl chloride, but sometimes acrylonitrile...
technology, which began with a market trial in the Kitchener-Waterloo
Regional Municipality of Waterloo
The Regional Municipality of Waterloo is a regional municipality located in Southern Ontario, Canada. It consists of the cities of Kitchener, Cambridge, and Waterloo, and the townships of Wellesley, Woolwich, Wilmot, and North Dumfries. It is often referred to as the Region of Waterloo or just...
area in Fall, 2007. The main benefit to this technology over the existing magnetic stripes is that the chips are almost impossible to copy due to high levels of encryption. This is seen as being able to reduce the amount of debit card fraud caused by card skimming and duplication. However new Interac Chip Cards will continue to feature a magnetic stripe in the interim in order for them to be used at ATMs
Automated teller machine
An automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...
or retailers which have not yet been upgraded, as well as in countries which have not yet adopted chip cards, such as the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
.
The purchase experience for consumers will remain largely unchanged, except instead of swiping the card, it will be inserted into a chip reader on the PIN Pad and will remain inserted for the duration of the transaction. PIN
Personal identification number
A personal identification number is a secret numeric password shared between a user and a system that can be used to authenticate the user to the system. Typically, the user is required to provide a non-confidential user identifier or token and a confidential PIN to gain access to the system...
s will still be used as the means to authenticate transactions.
Interac expects the transition to chip cards to take several years to complete, but will be completed before certain milestone dates:
- After 31 December 2012, all ATMAutomated teller machineAn automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...
transactions must be completed with a chip card - After 31 December 2015, all POSPoint of salePoint of sale or checkout is the location where a transaction occurs...
transactions must be completed with a chip card
Shared Cash Dispensing (SCD)
- Shared Cash Dispensing (SCD): cashCashIn common language cash refers to money in the physical form of currency, such as banknotes and coins.In bookkeeping and finance, cash refers to current assets comprising currency or currency equivalents that can be accessed immediately or near-immediately...
withdrawals from any ABM not belonging to a cardholder's financial institution. - This Canada-specific service is similar to international systems like PLUS or CirrusCirrus (interbank network)Cirrus is a worldwide interbank network operated by MasterCard Worldwide, and was founded in 1986. It links MasterCard, Maestro, Diners Club credit, debit and prepaid cards to a network of over 1,000,000 ATMs in 93 countries....
. - Virtually every ABM in Canada is on the Interac system.
Interac Email Money Transfer
The Interac Email Money Transfer service is offered by CertaPay. It allows online banking customers to send money to anyone with an e-mail address and a bank account in Canada. This is an Interac branded service operated by Acxsys CorporationAcxsys
Acxsys Corporation is a Canadian company involved in banking. It is based in Toronto....
.
Interac Online
The Interac Online service allows customers to pay for goods and services over the Internet using funds directly from their bank accounts. Because no financial information is shared with the online merchant, the Interac Online service is more secure than online credit card payments. This service, an Interac branded service operated by Acxsys Corporation, began in 2005 and is expanding as more merchants choose to participate. Since November 2007, the service has been available to customers of four of the five largest Canadian banks: RBC Royal Bank, BMO Bank of Montreal, ScotiabankScotiabank
The Bank of Nova Scotia , commonly known as Scotiabank , is the third largest bank in Canada by deposits and market capitalization. It serves some 18.6 million customers in more than 50 countries around the world and offers a broad range of products and services including personal, commercial,...
, and TD Canada Trust
TD Canada Trust
TD Canada Trust is the personal, small business and commercial banking operation of the Toronto-Dominion Bank in Canada. TD Canada Trust offers a range of financial services and products to more than 10 million Canadian customers through more than 1,100 branches and 2,600 ATM Green Machines...
. As of February 2009, the service is offered by roughly 300 merchants including two large universities (for tuition payments), two major wireless carriers, provincial lottery corporations, and a wide variety of retailers. Interac Online is an Online Banking ePayments
Online Banking ePayments
Online Banking ePayments is a type of payments network, developed by the banking industry in conjunction with technology providers, specifically designed to address the unique requirements of payments made via the Internet....
service very similar to iDEAL
IDEAL
iDEAL is an Internet payment method in the Netherlands, based on online banking. Introduced in 2005, this payment method allows customers to buy securely on the Internet using direct online transfers from their bank account. iDEAL processed 4,5 million transfers in 2006, 15 million transfers in...
in the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
, Giropay in Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, and Secure Vault Payments in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
.
Services not offered on Interac networks
It is currently not possible to transfer money internationally using the Interac network; however, most Canadian ABM cards are also linked to PLUS or CirrusCirrus (interbank network)
Cirrus is a worldwide interbank network operated by MasterCard Worldwide, and was founded in 1986. It links MasterCard, Maestro, Diners Club credit, debit and prepaid cards to a network of over 1,000,000 ATMs in 93 countries....
, or other networks with more global reach.