Canadian Banks Will Launch PIN Debit for the Web Next Spring

Canada's five major banks next spring will roll out a service that will allow consumers to pay for goods and services on the Internet with debit cards linked to personal identification numbers. The service, called iDebit, has been at least 18 months in the making and is expected to be the first major initiative in North America to allow the use of PIN debit cards as a payment option in e-commerce. The banks behind iDebit– Bank of Montreal, CIBC, Royal Bank of Canada, Scotiabank, and TD Canada Trust?control nearly all PIN debit card accounts in Canada. The banks are now talking to merchants and acquirers in anticipation of going live in April or May. “Demand for this service from merchants in Canada is extremely high,” says Bob Grant, senior vice president of electronic banking at Scotiabank. “Merchants are eager to extend PIN debit to the Internet.” The major acquirers in Canada, Moneris Solutions, Global Payments, Paymentech, and TD Canada Trust, have all participated in planning for iDebit, says Grant. He says he can't project transaction volumes or merchant participation, but predicts a wide spectrum of merchants will be signed on before the service goes live. PIN debit at the point of sale, introduced in Canada in 1990, has been extremely popular. It accounts for about 16% of all payments, or some $116 billion in 2003. Debit cards secured by signatures are not issued in Canada. The company administering iDebit will be Acxsys Corp., the operating company for Interac, the national electronic funds network. Acxsys, which is owned by Canada's major banks, will set interchange rates for iDebit transactions, though the rate structure has not yet been worked out, according to Grant. As debit transactions at the point of sale in Canada are processed at par, iDebit's pricing will represent the first use of interchange for debit in Canada. Pricing to merchants will be determined by their negotiations with acquirers. With iDebit, consumers who are ready to pay a Web merchant will be able to click on a button labeled “Pay by Interac.” This will produce a drop-down menu of participating banks, from which the consumer makes a selection and is routed to that bank's online banking page. Here the consumer enters his password for online-banking access along with his account number. This data, says Grant, will authenticate the consumer so there is no need to enter a PIN. The bank site will show the consumer the page on the merchant site he just left to confirm the transaction, establish which account the consumer wants to pay from, and will then redirect him to the merchant's site. Funds will clear and settle overnight. Grant says online merchants are clamoring for PIN debit because they hope it will unlock a huge reservoir of transactions. “The launch of debit increased transactions significantly in physical stores,” he says. “The more payment options customers have the more consumers will spend in the store. I believe that's true of the Internet as well as physical stores.” He says the potential to reduce the fraudulent transactions?and associated chargebacks?online merchants experience with credit cards has also made PIN debit a popular idea among Internet retailers.