Bank of Canada to regulate Interac’s e-transfer service
Interac Corp.’s e-transfer service is now so essential that a breakdown of the payment system could wound the economy and unnerve companies and consumers, the Bank of Canada says.
The digital-transaction service has become such a key way of paying for things that the central bank’s governor, Tiff Macklem, decided to use his limited regulatory powers to designate Interac e-transfer a “prominent payment system” as of Monday, a notice published in the Canada Gazette said.
The new label means Interac’s e-transfer system will now be regulated by the Bank of Canada, and highlights the importance of digital payments to both people and businesses, particularly during the coronavirus pandemic. The financial-services firm is owned by Canadian banks, credit unions, payment processors and other shareholders.
“Interac e-transfer has become central to the Canadian payments system,” the Bank of Canada said in a news release. “A disruption or failure of the Interac e-transfer system could cause a significant adverse effect on economic activity in Canada, potentially leading to a general loss of confidence in the overall Canadian payments system.”
Interac’s e-transfer system was launched in 2003, allowing Canadian bank account holders to electronically send and receive payments, the Bank of Canada noted. Financial institutions pay a fee to Interac for the e-transfers, and may recoup that cost by charging customers for sending the payment.
In the 2019 fiscal year, Interac’s e-transfer system logged about 486 million transactions that were worth around $169 billion. Its popularity, the company says, has given it an important role in the payments system.
“This, combined with its potential to grow into new business sectors, makes the platform a critical service in Canada,” Interac said in an email to the Financial Post. “The Bank of Canada is already an important stakeholder for Interac and this designation will increase its oversight and general involvement as we work to ensure Canadians have access to secure and convenient money transfer solutions.”
The central bank’s decision comes as the use of contactless and digital payments increased during the coronavirus pandemic. Interac said April saw 61.3 million transactions — a monthly record for e-transfers. Last year there were about 40.5 million e-transfers per month in 2019, with March of 2020 being the first month in which there were more than 50 million sent, the company said.
The rise of contactless and digital payment systems was partly powered by a boom in e-commerce and an increased aversion to handling coins and paper money during the outbreak. The drop-off in cash usage in the early days of the pandemic was so pronounced that the Bank of Canada urged retailers to keep accepting it, saying refusing to do so “will put an undue burden on those who depend on cash and have limited payment options.”
Payments Canada, a non-profit that owns and operates the country’s payment clearing and settlement systems, found 62 per cent of Canadians it surveyed in April were using less cash than they were before the pandemic.