By Marcus Wohlsen
Single-payer health care may make Canada a socialist pariah in the eyes of U.S. conservatives. But when it comes to keeping money flowing out of consumers’ pockets and into merchants’ coffers — a key characteristic of any thriving capitalist economy — Canada has its neighbor south of the border beat.
Few in the U.S. likely know, or would seem to have any reason to know, about Interac, Canada’s nationwide not-for-profit debit system. Interac accounts for more than half of all purchases Canadians make using any card, credit or debit — about 4 billion transactions annually. And it puts Canada ahead of the U.S. in the push to create a truly cashless economy.
Interac started in 1984 when five Canadian banks decided to link up their separate ATM networks (or ABMs — automatic banking machines — as they’re known in Canada, where they also put gravy on their fries). Within 10 years, Interac’s PIN-based debit system was available nationally. In 2000, Interac says its debit cards surpassed cash as Canadians’ preferred way to pay.
Canadians can assume that any merchant that takes a card takes Interac, and for good reason. As a not-for-profit association made up of banks and other cogs in the electronic transaction infrastructure, Interac only charges enough to cover its costs. That amounts to less than a penny per transaction, compared to several cents per transaction charged by standard for-profit systems, says Allen Wright, Interac’s vice president of product and services.
As with health care, Interac taps into Canada’s apparently greater comfort level with creating systems on a national scale that exist more to serve citizens and less to make money. Among the advantages of such a setup: A single, unified system makes rolling out new payment tech easier than in the U.S.
“In the U.S. you’ve got many sort of regional debit networks. We’re one domestic debit network that covers the entire country,” says Wright.