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Illustration of Mark O'Connell, chief executive officer of Interac. (Anthony Jenkins/The Globe and Mail/Anthony Jenkins/The Globe and Mail)
Illustration of Mark O'Connell, chief executive officer of Interac. (Anthony Jenkins/The Globe and Mail/Anthony Jenkins/The Globe and Mail)

Mark O'Connell: Defender of Canada's debit card faith Add to ...

In 2008, he asked the Competition Bureau for permission to change that, arguing that Interac needed to become a for-profit company to compete with Visa and MasterCard. He gave JPMorgan Chase & Co. a mandate to figure out how many shares each of Interac's members, including the big banks, would receive if the bureau gave the green light to a restructuring.

Private equity funds and pension plans came knocking at Mr. O'Connell's door, and an initial public offering was a distant consideration. Mr. O'Connell even managed to convince the country's retailers, who pay merchant fees to accept credit and debit cards, that this would be a good thing. But the bureau shot down the request in early 2010, because Interac still had a dominant position in the debit market - a big blow for Mr. O'Connell.

There's no doubt the lost opportunity was huge. Canadians love their debit cards: Almost 60 per cent of all card payments in Canada are made with debit. When Tim Hortons Inc. announced in November that it would start accepting Interac cards across the country, its stock shot to what was then an all-time high. "It was the only major merchant in Canada we didn't have," Mr. O'Connell says. "We took them out to a Leafs game, and they said 'Boy, that really had a bang.'"

Mr. O'Connell is tucking into his halibut as he says this. But he's got bigger fish to fry.

He and his board are putting the finishing touches on a new proposal for the bureau, a watered-down request that would tackle Interac's governance and funding challenges, but leave it as a non-profit. That would be done through a demutualization that would create a new corporation and a new, independent board. Those stepping stones would give Mr. O'Connell more freedom to make swift strategic decisions for an organization that operates in a constantly changing and highly lucrative global industry.

When customers pay for their purchases with credit cards, the retailer, restaurant or hotel pays a fee of 1.5 to 3 per cent, or more, of the total transaction. To accept an Interac payment, merchants pay roughly 12 cents on average.

Globally, Visa Inc. - which has debit networks in addition to credit networks in most other countries in which it operates - made more than $2.9-billion (U.S.) last year, largely by charging stores and restaurants fees for each of the tens of billions of transactions that route trillions of dollars over its network. In its annual report, the credit behemoth boasted about the October, 2010, launch of its first Visa debit product in Canada, in partnership with Canadian Imperial Bank of Commerce.

But the rollout of Visa debit has not gone as smoothly as planned. Mr. O'Connell played a role in that, helping to convince Finance Minister Jim Flaherty to impose a code of conduct on the payments industry that made it much harder for Visa and MasterCard, which have a reputation as fierce competitors, to muscle their way into the debit business by piggybacking off Interac's network.

"If Starbucks came to Canada, they wouldn't be allowed to sell coffee through all the Tim Hortons," Mr. O'Connell says.

The battle is far from over. In fact, it's just heating up. New technologies - such as contactless debit systems that work simply by waving a card in front of a reader - are about to revolutionize the industry.

Mr. O'Connell is betting that two years from now, Canada will lead the world in so-called tap-and-go cash. His enthusiasm is palpable. Visa and MasterCard's contactless credit products are already big, with retailers such as gas stations already signed on.

"But not a lot of people love putting 30 coffees on their credit card statements; it's a natural debit category," Mr. O'Connell says. And it's the reason Tim Hortons finally came on board.

Interac's contactless product, called Flash, uses the same chip that could be used to turn mobile phones into e-wallets. "If Interac Flash is successful, it migrates to the ultimate platform," he says.

As the bill comes, I insist on paying and plunk my Visa card down on the bill with aplomb. Whoops. Who's sheepish now?


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