Interac’s Proposal Brings Down Resistance

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Business opposition is suddenly dissipating as a proposal made by Interac Association to become a for-profit company as Visa and MasterCard begin bringing out their debit products in Canada.

Retailers and small business owners were once wary of the proposed restructuring, have now dropped any plans to intervene at the Competition Bureau now that Interac has vowed to the public to maintain a low-cost, flat-fee model.

However, this is a proposed plan, until it is approved nothing will come about from it for that reason, merchants and business owners are urging Commission of Competition Melanie Aitkin to quickly approve Interac’s request, especial when there is a $168 billion debt market at stake.

Interac made not that time is a factor here as foreign based credit card companies are challenging its status.

Interac was set up in 1984 by the 5 leading financial institutions to create a national shared network that allows Canadians to access their money from bank machines across the country.

With its current structure, Interac reflects a 1996 Competition Tribunal Decision designed to ensure that major banks did not restrict access to the network. The tribunal required that Interac to be non-profit, as it is believed that it would eliminate any incentive to restrict access.

Sadly, that very structure is what’s inhibiting Interac’s ability to make other strategic decisions to compete with Visa and MasterCard.

Interac has been working with the Competition Bureau to amend the order since fall of 2007.

As it stands, the Canadian Bankers Association (CBA) has not taken a position on Visa and MasterCard debit; apparently banks are somewhat divided on the issue.

Canadian Imperial Bank of Commerce (CIBC) is expected to issue the first Visa debit cards in early 2010, while Royal Bank of Canada (RBC) has also agreed to issue Visa debit cards.

Other big banks are worried they might alienate business clients by issuing Visa debit card.

Banks are also concerned about their own brands superseded by Visa and MasterCard.

Let us hope that Interac’s proposal is approved soon, because it looks like that is the only thing that can keep merchants and small business owners happy at this point.

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