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  1. Country Surveys
December 18, 2013

Country Survey: Canada

The Canadian card payments channel has grown well although cash continues to dominate. Changes to regulation and promotion from banks and retailers makes contactless a area likely to see high adoption in 2014. CI looks at the latest data from the country

By Verdict Staff

The Canadian card payments channel has grown well although cash continues to dominate. Changes to regulation and promotion from banks and retailers makes contactless a area likely to see high adoption in 2014. CI looks at the latest data from the country.

The Canadian card payments channel recorded growth during the review period (2008-2012). In terms of the volume of cards in circulation, the card payments channel posted a review-period CAGR of 4.55% to reach 153.1m cards in 2012. Growth in consumer spending, a shift in consumer preference towards cashless transactions, and the increased acceptance of cards by retailers contributed to the growth of the Canadian card payments channel. The volume of cards in circulation is expected to post a forecast-period (2013?2017) CAGR of 4.66%, to reach 190.8m cards in 2017.

The Canadian card payments channel has positive growth potential

The Canadian card payments channel grew substantially both in volume and value terms during the review period. In terms of the number of transactions, the channel grew from 7.2bn in 2008 to 8.5bn in 2012, at a review-period CAGR of 4.27%. Debit card transactions were the key driver, followed by charge cards. The growing demand for prepaid and credit cards among Canadian consumers also contributed to the growth of the number of transactions during the review period. Over the forecast period, total card transactions volume is expected to post a forecast-period CAGR of 3.57%, to reach 10.2bn in 2017.
In terms of transactions value, the Canadian card payments channel grew from CAD580.5bn (US$544.1bn) in 2008 to CAD662.2bn in 2012. In value terms, the channel is expected to post a CAGR of 3.97% over the forecast period from CAD695.0bn in 2013 to CAD812.2bn in 2017.

Consumer preference for cashless payment provides growth opportunities

Consumers are slowly moving away from cash and adopting other modes of payment such as cards and electronic fund transfers. While cash continues to be an important part of the payments system, it is increasingly being displaced by non-cash channels. The share of cash transactions fell during the review period, from 2.3% in 2008 to 2.0% in 2012. To capitalize on this, banks and other card issuers have been adopting various marketing and pricing strategies with the aim of encouraging customers to use card payments. Offers such as discounts, rewards points, increasing daily limits for cash withdrawals and insurance cover are common strategies that banks are employing. Growing consumer preference for cashless payments and the introduction of new card products are expected to increase the number of cards issued over the forecast period.

Contactless cards likely to change the market structure with enhanced security measures

Commercial banks and retailers have been aggressively promoting contactless payment technology to increase the speed and convenience of payments for consumers. The technology also offers improved security and helps to control fraudulent transactions. The major contactless payment technologies used in Canada include Interac’s Interac Flash, Visa’s payWave and MasterCard’s PayPass.
Interac Flash is a contactless payment system embedded in Interac debit cards. Cardholders simply show their card to a reader that supports Interac Flash to instantly make a payment from a bank account without inserting the card or entering a PIN. It also provides cardholders with security against fraudulent activity. Secure chip-processing technology is used to protect the card from fraud such as skimming, counterfeiting, and electronic pick-pocketing. A number of banks, including Royal Bank of Canada (RBC) and TD Canada Trust, are circulating debit cards with this technology.
Visa payWave enables cardholders to make contactless payment transactions using cell phones with near-field communication (NFC) technology. To complete a transaction at the merchant’s contactless payment terminals, the cardholder’s mobile interacts with a banking payment gateway server through a contactless reader. Visa’s prime competitor, MasterCard’s PayPass technology, functions on similar lines, transmitting and receiving information wirelessly and enabling cardholders to make payments using their mobile phones.

New government regulations to protect consumers and increase transparency

Through Bank of Canada and the Department of Finance, the Canadian government has been focusing on improving on infrastructure and legal support services to increase the efficiency of its payment systems and bring them in line with international standards. To achieve these objectives, the Department of Finance formed the Task Force for the Payments System Review in June 2010, with the objective of reviewing the Canadian payments system and providing recommendations. The Ministry of Finance implemented the Code of Conduct for the Debit and Credit Card Industry in Canada with the aim of protecting merchant and consumer interests. In addition, the government implemented a new set of regulations for the credit cards category which are intended to protect consumers by enhancing disclosure and increasing transparency. These new regulations, which came into force on January 1, 2010 and were amended on September 1, 2010, are expected to improve transparency.

Growth in payment infrastructure supported an increase in card use

Banks and retail outlets in Canada expanded their infrastructure networks during the review period. The number of automatic teller machines (ATMs) installed increased from 57,900 in 2008 to 60,346 in 2012, at a review-period CAGR of 1.04%. The increasing acceptance of debit and credit cards at retail outlets and a consumer shift towards direct card purchases resulted in a rising number of point of sale (POS) transactions during the review period. The number of POS terminals in Canada recorded a review-period CAGR of 5.93%, rising from 630,534 terminals in 2008 to 794,000 in 2012. With a further increases in the volume of POS terminals and ATMs, the use of cards as a payment method is expected to register widespread acceptance over the forecast period.

Budget-conscious consumers shifting away from credit cards to prepaid and debit cards

The financial crisis changed the perception of the country’s middle classes towards the use of credit cards. Economic contraction made both public and private entities increase their focus on efficiency and working at reduced costs. A shift in consumer preference towards non-credit cards has resulted in the use of debt-free platforms such as prepaid cards. Corporate and government entities are also increasing their use of prepaid cards for employees and welfare payments. Over the forecast period, the prepaid card category is expected to increase its share of the channel from 20.6% in 2012 to 31.0% in 2017.

M-commerce to change the dynamics of the cards and payments industry

M-commerce is growing at a fast pace in Canada and is acting as an engine of overall e-commerce growth, converting potential brick-and-mortar sales to digital sales as consumers use their smartphones in-store. This has been encouraged by an increase in smartphone use. The increasing capabilities of smartphone devices, an exponential rise in mobile device applications, and falling prices have been instrumental in driving the market for m-commerce.
To take advantage of the growth, the Canadian Imperial Bank of Commerce (CIBC), in collaboration with Rogers Communications, introduced a joint mobile payment solution using Rogers near-field communication- (NFC-) enabled smartphones in 2012. Notably, Google is investing in its NFC-enabled Google Wallet service in Canada as well as AT&T, Verizon and T-Mobile are collectively developing the Isis mobile payment network which is expected to be launched in 2013.

Cards targeted at specific consumer groups

Banks and other card issuers have been focusing on various customer segments by offering customized products. Leading banks such as CIBC, RBC and Bank of Montreal (BMO) offer specific cards for retail and corporate customers. A number of banks are also actively targeting younger customers. CIBC offers the CIBC Classic Visa Card designed specifically for students. Other banks such as BMO, Scotiabank and MBNA have also introduced credit cards in Canada to attract students.
The growing number of leisure and business tourists has also created significant business opportunities for travel card providers, and many leading banks and card providers have issued travel cards targeting this demographic. One example is TD Canada Trust’s TD First Class Travel Visa Infinite card.
Canadian banks are also making efforts to target the high-income population, which traditionally exhibits a greater willingness to use non-cash payments such as credit, debit and prepaid cards. HSBC Premier MasterCard, RBC Royal Bank Visa Platinum and TD Platinum Travel Visa Card are examples of cards issued to cater to this segment. Banks are also targeting individuals with poor credit histories with secured cards.

Increasing adoption of near-field communication

An increasing number of banks and telecommunications companies in Canada are enabling NFC payment technology for smartphones. In collaboration with Rogers Communications, CIBC introduced a joint mobile payment solution in 2012. This allows cardholders to pay for small-ticket items via a mobile device at participant retail outlets.
Visa also enables its cardholders to make contactless payment transactions using their cell phones with NFC technology. Its proprietary technology ‘Visa payWave’ is installed in a mobile phone and interacts with a bank’s payment gateway server to transact at the merchant’s contactless terminal. Similarly, MasterCard’s ‘PayPass’ technology allows the cardholders to pay for items through mobile phones. The growth of contactless payments and NFC is expected to provide more mobile customers with an advanced and efficient technique for payment.

Increased installation of POS terminals at retail outlets to encourage card-based payments

The increasing acceptance of debit and credit cards at retail outlets, coupled with a consumer shift towards debit card purchases, resulted in an increasing number of transactions at POS terminals during the review period. ATM transactions are expected to decline as consumers move away from cash-based payments, and customers can access cashback, discounts and reward points with the use of cards at POS terminals. The number of POS terminals in Canada recorded a review-period CAGR of 5.93%, growing from 630,534 terminals in 2008 to 794,000 in 2012. The number of terminals is expected to post a forecast-period CAGR of 2.53%, to reach 905,755 in 2017.
Debit card transactions at POS terminals formed 85.1% of Canada’s total debit card transactions, while credit card transactions at POS terminals formed 98.7% Canada’s credit card transactions in 2012. The increasing number of terminals at retail outlets is expected to drive card-based payments over the forecast period.

 

  1. Analysis
August 19, 2011updated 04 Apr 2017 4:15pm

Country Survey: Canada

Canada is a world leader in debit cards and ATMs. However, B2B payments are mired in a legacy infrastructure that has not kept up with businesses needs. Robin Arnfield reports on a countrys payments industry hindered by a fragmented regulatory environment.

By Verdict Staff

Photograph of Canadian cityscape

Canada is a world leader in debit cards and ATMs. However, B2B payments are mired in a legacy infrastructure that has not kept up with businesses’ needs. Robin Arnfield reports on a country’s payments industry hindered by a fragmented regulatory environment.

 

Table showing Canadian retail payments volume in 2004, 2009 and 2014In 2010, Finance Minister Jim Flaherty MP created an independent task force to help give Canada an efficient electronic payments system covering all types of payments from B2B to mobile, billing, and P2P transfers. The Task Force for the Payments System Review will present its report at the end of 2011.

Separately, the Canadian Payments Association (CPA) has been conducting a strategic review of the payments infrastructure that it supervises, as well as a survey of payments industry stakeholders. Both the CPA and the Task Force’s initiatives are driven by the advent of new entrants such as PayPal and the demand by businesses for efficient, low-cost electronic payments.

A major issue is the fact that new entrants have so far escaped the heavy level of regulation that incumbents labour under.

"Canada’s payments regulatory environment is fragmented," says Caroline Hubberstey, director for public and government affairs at Canadian debit card scheme Interac Association.

"In terms of consumer electronic payments, Canada is ahead of other countries," says Pat Meredith, the Task Force’s chairwoman.

"But our B2B payments systems are lagging behind the rest of the world, and we haven’t kept pace with developments in Europe such as SEPA."

The CPA, which is governed by the Canadian Payments Act under oversight from the Finance Minister, plays a similar role to associations such as the UK Payments Council and the Australian Payments Clearing Association.

It operates the Automatic Clearing and Settlement System (ACSS) and the Large Value Transfer System (LVTS).

In 2010, the ACSS cleared and settled 6.02bn transactions worth C$5.15trn ($5.28trn), while the LVTS handled 6.04bn transactions worth C$37.66trn.

 

Bilateral system

The ACSS is a bilateral system enabling CPA member financial institutions to exchange payments data with each other for low-value transactions. The CPA also operates the US Bulk Exchange (USBE), a parallel system to the ACSS which handles payment items in US dollars, drawn on and payable to Canadian bank accounts.

The ACSS provides end-of-day clearing and settlement of cheques, automated fund transfers (AFTs), Interac debit card transactions, and bill payments via online banking. AFTs are pre-authorised debit (standing orders) and credit transfers between consumers and merchants.

The ACSS was built 40 years ago, when cheques were the dominant payment method. This makes it 10 years older than the US automated clearing house (ACH) system, which uses a central counterparty for the exchange of value.

As part of its review, the CPA is considering replacing the ACSS with a multilateral ACH based on a centralised clearing and settlement system (CCSM) model.

"The ACH can be a great utility for risk management and fraud checking, and we are looking at developing a case for a CSSM mechanism in Canada, but only for retail payments," says Doug Kreviazuk, the CPA’s vice-president of policy and public affairs.

"However, the review does not necessarily mean we will move to CSSM."

The LVTS is an electronic clearing and settlement system that is used for wire transfers between financial institutions for payments over C$50,000. It processes the majority of Canadian business payments and securities trades.

LVTS payments, which are backed by collateral pledged to the Bank of Canada by participating financial institutions, are near-real time and irrevocable.

Visa and MasterCard’s Canadian members use the LVTS for end-of-day clearing and settlement, although neither card scheme belongs to the CPA.

The LVTS’s main shortcoming is the lack of information provided about LVTS transfers.

"End-to-end STP [straight-through-processing], which would integrate banking systems with accounts payable and ERP [enterprise resource planning] systems without manual intervention, continues to be challenging," says the CPA in its submission to the Task Force.

Pie charts showing the evolution of Canadian retail payments

 

Task Force

An estimated C$7bn-C$8bn worth of savings would accrue to the Canadian economy if the percentage of B2B and business-to-government electronic payments ways increased to 90% from the current much lower level, Meredith estimates.

"The Task Force’s aim is to enable Canada to become a world leader in payments by 2020," Meredith says.

"We want to increase automation and digitisation of payments to individuals, to suppliers, and to government. We want to capture the cost-savings of automation and provide incentives for moving to electronic payments.

"Also, we want to make it easier to implement payments industry legislation in the [Canadian] House of Commons."

However, the Task Force faces obstacles.

"The infrastructure hasn’t been set in place, nor have the standards been developed for business electronic payments in Canada," says Meredith.

"Wires are expensive, and the ACSS and AFTs aren’t efficient for B2B electronic payments. Canada needs to develop a quasi-real-time small-value payment system for B2B electronic transfers, similar to those emerging around the world."

"The drawback with AFTs is that they don’t allow the transmission of remittance information such as customer billing account numbers with the bill payment," says Oscar van der Meer, chief technology officer at credit union clearing house Central 1.

"So billers need to do manual reconciliation, which increases their costs."

Unlike Europe, which is adopting the ISO 20022 international payments messaging standard for SEPA, Canadian AFTs use an ageing, proprietary framework for exchanging financial data, Standard 005.

"The remittance problem is due to 005’s limitations," says Kreviazuk.

"The question is whether the CPA should expand 005’s remittance data capabilities, or replace 005 with ISO 20022."

An electronic payment system that automatically reconciles with their firm’s current accounting software was the top requirement cited by financial executives surveyed in May by the Canadian Financial Executives Research Foundation (CFERF), a subsidiary of Financial Executives International (FEI Canada).

The executives also wanted to be able to link invoice and payments electronically and pay multiple invoices with one payment.

"The challenge lies in the different types of electronic payments, ranging from email to credit card, wire and debit, each of which involve a plethora of different technologies," the CFERF says.

"Also, reconciling payments with the multitude of internal accounting systems in use by corporations remains challenging."

 

Cheques

Cheques remain Canadian businesses’ primary payment method, with 85% of executives surveyed by the CFERF indicating they use cheques. However, consumer cheque usage is falling by 13% a year, says John Mavriyannakis, Deloitte Canada’s senior manager, consulting.

"In 2010, the CPA processed 910m cheques," says the CPA’s Kreviazuk.

Cheque usage is driven by SMEs, which still make 70-80% of their payment transactions by cheque.

As the CPA’s recent consultation with stakeholders revealed continued support for cheques in Canada, the association has no plans to eliminate cheques.

Yet, in 2008, the Canadian banking industry rejected the option of cheque-image scanning.

"Introducing cheque-imaging would just enshrine cheques," Meredith says. "Instead of banks investing in cheque-imaging, it is better to use the money to encourage a move to electronic payments."

Pie charts showing the evolution of Canadian retail payments

 

Internet banking

The Canadian Bankers Association (CBA) says 45% of Canadians currently use the internet as their main banking method, up from 8% 10 years ago.

According to US digital audience measurement firm comScore, in the first quarter of 2011 there were 13.3m PC internet consumer banking customers across the largest Canadian financial institutions. As well as the top-six banks – RBC Royal Bank of Canada, TD Canada Trust, Scotiabank, CIBC, BMO Bank of Montreal and National Bank of Canada – comScore surveyed institutions such as Desjardins, HSBC, ING and President’s Choice Financial.

During March, 12.3% of Canadian mobile subscribers accessed banking, credit card, insurance, or brokerage account information using their mobile phones, comScore estimates. Nine tenths (90.2%) of mobile financial services users surveyed by comScore said they accessed banking information.

Three out of five (62%) PC web banking consumers use their bank’s online bill payment service, comScore says.

An effect of the Canadian postal strike in June was an acceleration in consumers signing up for e-bill payments.

Canadian newspaper Metroquoted a spokesperson for energy supply company Enmax as saying that 5,000 new e-bill subscribers had joined since the beginning of the strike. A spokesperson for Telus told Metro that over half the telco’s customers already used e-billing, but that it had experienced a surge in e-bill subscribers due to the strike.

Canada Post, the government-owned postal service, owns ePost, Canada’s sole B2C electronic bill presentment and payment system. In 2010, ePost had around 6m users and 200 billers on its platform, according to Deloitte.

Most large Canadian financial institutions have integrated ePost with their online banking services, enabling customers to view and pay bills through a single sign-on.

 

Interac

Bar chart showing transaction value by corporate and other useFormed in 1984, the Interac Association is a non-profit entity that manages the Inter-Member Network (IMN), a system enabling Canadians to use ATMs and POS terminals across Canada. Interac’s 60 members include banks, trust companies, credit unions, and payment services companies.

There are two types of Interac member. Direct connectors link directly to Interac’s Shared Cash Dispensing service or the Interac Direct Payment PIN-debit POS service through the IMN. Under Interac’s decentralised network structure, each direct connector maintains physical links with every other direct connector. Indirect connectors access the IMN through direct connectors.

Until 2009, Interac was the sole domestic debit brand, although Interac cards also carry Cirrus or Visa Plus branding for use at ATMs outside Canada. However, in 2009 Visa and MasterCard both announced plans to offer their debit brands, Visa Debit and Maestro, in Canada in partnership with Canadian banks.

So, the Interac Association applied to the Canadian government’s Competition Bureau for permission to change its status from non-profit to a commercial profit-generating business.

Under the association’s mandate, Interac debit transactions are charged for on a cost-recovery basis, whereas Visa and Maestro debit payments attract interchange, making scheme-branded cards attractive options for banks. Interac Association’s non-profit status means it is limited in its ability to raise funds in order to compete with Visa and MasterCard.

In February 2010, the Competition Bureau rejected Interac’s application to become a for-profit organisation.

"The regulator said our ATM and debit services must remain non-profit," says Interac’s Hubberstey. "But it accepted we have funding, governance, and structural challenges and said it would consider a new proposal dealing with changes in these areas. We are close to finalising that proposal."

In 1996, the eight founding members of Interac (BMO, CIBC, RBC, Scotiabank, TD, National Bank, Desjardins, and Credit Union Central of Canada) created Acxsys Corp, a for-profit business that provides management services to Interac and develops and operates new payment services on its behalf.

"Acxsys looks after our e-commerce service Interac Online Payments; Interac e-Transfer, our P2P transfer system; our cross-border debit partnership in the US with NYCE; and our acceptance of foreign cards such as China UnionPay at Canadian ATMs," says Hubbertsey.

 

Code of conduct

In April 2010, Finance Minister Flaherty published a voluntary code of conduct for credit and debit cards, after consultation with card companies, merchants, and consumer groups.

The code allows merchants who accept MasterCard and Visa credit cards to refuse Visa Debit or Maestro and to instead accept lower-cost Interac cards. Retailers are also allowed to offer discounts for cheaper payment methods, such as cash or debit.

While issuers may co-badge Interac with Visa or Maestro, they cannot put competing applications on the same card. This means that, if a card contains Interac debit, it cannot also contain Visa Debit or Maestro for domestic transactions. However, issuers can combine domestic Interac debit with Visa Debit or Maestro for foreign POS transactions.

The effect of the code has been to restrict the rollout of Visa Debit and Maestro in Canada. So far, no major bank has abandoned Interac’s domestic debit platform. CIBC and BMO, for example, have opted for cards operating over Interac in Canada and an international debit brand abroad.

 

ATMs

In 2008, Canada led the world in terms of the number of ATMs perm inhabitants, with 1,799, the Bank for International Settlements says. It came fourth (31) behind the UK (47), Belgium (33), and Sweden (32) in terms of ATM withdrawals per inhabitant in 2008.

The number of Interac-cleared cash withdrawals at Canadian ATMs fell from 243.6m in 2009 to 237.1m in 2010, following a consistent decline in withdrawals since 2000. These figures don’t include ‘on-us’ transactions.

According to UK-based Retail Banking Research, Canada had a total of 59,635 ATMs in 2010, up from 58,200 in 2009. Financial institution-owned ATMs totalled 22,240 in 2010, including 4,739 ATMs deployed by credit unions and caisses populaires, Quebec’s version of credit unions. Non-financial institution deployers operated 37,395 white-label ATMs in 2010, RBR says. White-label ATMs connected to the Interac network were first permitted in Canada in 1996.

A controversial draft bill in Quebec, the Money Services-Businesses Act, will require white-label ATM operators to pay a licensing fee. The Act, which was approved by the Quebec legislature in December 2010 and released in draft form for comment in June, aims to combat the use of ATMs and non-bank money services for money-laundering.

Due to come into effect in April 2012, the Act will make Quebec the first Canadian province to require non-bank ATM operators to be licensed and undergo criminal record checks. Quebec regulator Autorité des marchés financiers (financial markets authority) will be responsible for licensing service providers.

 

Credit cards

According to the CBA, there are 23 Visa and MasterCard issuers in Canada. Until November 2008, issuers were not allowed to offer both Visa- and MasterCard-branded credit cards. Despite the lifting of the ban on duality, only a few issuers, such as RBC, have actually launched on both platforms.

In the year to 31 October 2010, there were a total of 71.3m Visa- and MasterCard-branded credit cards in Canada, up from 69.7m a year earlier, the CBA says. The total number of credit card accounts with balances rose to 28.8m from 27.6m in the same period.

Net Visa and MasterCard credit card net dollar volume (including cash advances) rose to C$308.90bn in the year to 31 October 2010 from C$296.21bn a year earlier. Net retail volume (excluding cash advances) rose to C$279.80bn from C$264.47bn in the same period.

In December 2010, the Competition Bureau launched a legal challenge to the rules Visa and MasterCard impose on merchants accepting their credit cards. These rules bar merchants from encouraging consumers to use lower-cost options such as cash or debit, and prohibit them from surcharging for high-cost credit cards.

"Also, once merchants accept one of Visa or MasterCard’s credit cards, they must accept all credit cards offered by that scheme, including cards with significant merchant fees such as premium cards," the Bureau said.

 

Debit cards

With 23.9m monthly users of Interac debit cards in 2010, and 110 debit transactions per inhabitant in 2008, Canada has one of the highest debit card usage rates worldwide. There were 3.971bn Interac debit transactions in Canada in 2010, worth C$175.62bn, up from 3.881bn, worth C$171.62bn, in 2009.

The total number of Interac debit-connected POS terminals rose to 727,300 in 2010 from 708,700 in 2009, while the number of Interac-accepting merchants rose to 450,700 from 435,800 in the same period.

Interac has said that RBC and Scotiabank are rolling out debit cards containing the Interac Flash contactless application. This coincides with similar moves by MasterCard and Visa Canada.

Interac debit cards can only be used with a PIN, limiting them to the point-of-sale. But a recent change in CPA rules means that PIN-less debit is now permissible for NFC payments.

"This was intended to facilitate Interac Flash and Interac NFC," says Wright.

Canada is on track to meet its deadlines for EMV migration, Wright says.

"We are hitting our targets in terms of EMV cards issued and EMV merchant acceptance," he adds. "The timelines stipulated by Interac are that, by the end of 2012, all Canadian-issued cards and ATMs must have migrated to EMV, and by the end of 2015 all other acceptance devices [including POS terminals] must be EMV-compliant."

Visa Canada’s domestic chip liability shift occurred on 31 March 2011.

"This means that, if merchants hadn’t upgraded to EMV technology by then, they may be held accountable for fraud," a Visa Canada spokesperson says.

 

Alternative payments

Bar chart showing the value of transactions by consumers and small businesses in 2009PayPal is the dominant provider of alternative payment services in Canada, with the highest transaction volumes, according to Deloitte.

It competes with rivals such as Interac Online Payments, Interac e-Transfer, hyperWALLET, and Zoompass.

According to Nielsen Canada data cited in Technology Strategies International’s Canadian Payments Forecast 2010 report, PayPal was used by 42% of Canadian online shoppers in 2009. Deloitte estimates PayPal Canada represents 5-8% of its parent’s total North American operation.

PayPal Canada managing director Darrell MacMullin says PayPal has more than 4m active Canadian accounts.

"In Canada, we see a lot of cross-border PayPal transactions, both from Canada to other countries and also by foreign buyers purchasing in Canada," he says.

"PayPal wants to work with the banks, and play a role in all the various payment segments in Canada such as B2B, mobile, and NFC, not just C-to-B online payments.

"We think we can help remove some of the efficiencies from B2B payments by providing electronic-invoicing and real-time clearing on bank networks for Canadian businesses."

Under CPA’s charter, only deposit-taking institutions can become CPA members.

"As they aren’t CPA members, closed-loop, stored-value systems such as PayPal and Zoompass are exempt from CPA supervision and rules, and have their own rules," says the CPA’s Kreviazuk. "The CPA feels there needs to be a single regulatory structure that encompasses closed-loop systems as well as regular banking transactions."

Because it is unregulated, PayPal is able to move faster than CPA members such as the banks, whose activities in the low-value retail payment space are heavily regulated.

"This differentiation may have an impact on the safety, soundness and transparency of retail payments cleared outside the CPA, and on the CPA’s ability to respond more quickly to the market for clearing and settlement services," the CPA says in its Task Force submission.

Interac Online, which is offered by retailers, government agencies, charities, and educational institutions, enables Canadians to pay for internet purchases through a direct transfer from their bank account.

Interac e-Transfer (formerly known as Interac Email Money Transfer) is available in PC and mobile versions, enabling anyone with a Canadian bank account to send money to any Canadian email address or mobile phone number.

"The number of Interac e-Transfer payments has risen from 4m in 2006 to 14.6m in 2010," says Hubbertsey. "Over 40 financial institutions offer the service to their clients."

"We are adding features to Interac e-Transfer to make it attractive to businesses," says Wright. "Some banks already offer e-Transfer for their SME clients and are seeing some transaction volumes from this service."

hyperWALLET Systems provides a white-labelled service enabling Canadian credit union customers to send funds online domestically and internationally for a low cost. International transfers cost $6 per transaction, while domestic transfers cost C$1.

Zoompass is an m-payments service operated by EnStream, a joint venture between three Canadian telcos, Bell Canada, Rogers Communications, and Telus. It offers a mobile wallet which can be used for P2P transfers and for NFC purchases if linked to a Zoompass-issued contactless prepaid MasterCard.

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