Bank of Canada extends oversight to 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”, 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 financialservices 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 etransfer 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 approximately 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.