The series: We look at decision makers among Canada’s mid-sized companies who took successful action in a competitive global digital economy.
It’s probably no big deal for you to tap your debit card at the store, but for Mark O’Connell at Interac (below), launching flash-and-pay technology in 2010 was one of the biggest decisions he and his organization had to face.
“We had to get it right. We’re the backbone of Canada’s debit payment system,” says Mr. O’Connell, president and chief executive officer of the Interac Association, which operates and manages the system for banks and merchants across the country.
“We do more than five billion transactions a year, so a bad decision could affect the GDP of Canada.”
The decision to issue Interac, or debit, cards that can be tapped on machines like credit cards was a key one for everyone at the organization, because the timing had to be right.
“It’s equally as dangerous to be too far ahead of the curve as it is to be a laggard. So we take great care in those decisions, Mr. O’Connell says.
Interac is a not-for-profit network regulated by Ottawa that banks and businesses join to make it possible for consumers to pay without cash and without using credit cards.
“That means we have to consult and collaborate to make decisions. We sit in the middle of the country’s commerce,” he says.
The organization faced challenges coming from many directions when it introduced tap payment, called Interac Flash. The first was that Interac had to be nimble with its limited resources and staff.
Interac is a not-for-profit network regulated by Ottawa that banks and businesses join to make it possible for consumers to pay without cash and without using credit cards. Introducing tap-and-pay meant shoppers could use their debit cards for contactless payment.
“We’re a medium-sized company that makes big-company decisions. We have about 200 employees, but our system handles $1-billion of transactions in the first six days of a given month,” Mr. O’Connell says.
It was important to make sure that Interac’s own employees understood the details.
“Responsive, accelerated organizations enabled by technology will ... address new competitors head-on – to drive growth through disruption," says Robert Vokes, managing director, financial services for consultancy Accenture in Canada.
"Testing new ideas, tools and technologies ... is not just about innovation but rather how to make it work, to transform at speed, and improve an organization’s market position," he adds.
"Converting an idea to reality requires scaling up to handle around-the-clock availability and support, integration with other technology and processes, and compliance with security and regulatory requirements." This means businesses need to be skilled in managing multiple new options that can stand up to continuous assessment and change, he says.
In addition to its debit cards, Interac also lets people transfer money to each other online – Canada was among the first countries to introduce e-transfers, in 2004, Mr. O’Connell says, and it is moving quickly into smartphone payment apps.
Consumers don’t pay for debit cards (although some banks charge customers after a certain number of transactions), but using the cards costs merchants. Every time a debit payment is made, the merchants pay a flat fee to their bank.
Robert Vokes, managing director, financial services for consultancy Accenture in Canada: 'Testing new ideas, tools and technologies ... is not just about innovation but rather how to make it work, to transform at speed, and improve an organization’s market position' (Accenture)
It is important to know that the head of a payments industry organization like Interac takes consultation so seriously, says Satinder Chera, president at the Canadian Convenience Stores Association. His group belongs to an advocacy organization called the Small Business Matters Association, which has accused Canadian credit card companies of charging excessively high fees for merchants to use card payment services.
Interac also made a good decision to talk to merchants about the introduction of the flash-and-pay technology itself, he says. “It’s helpful because any new technology will have an impact on retailers. They have to change their systems and make adjustments to allow for the changes,” Mr. Chera says.
The result: “Interac Flash is growing at more than 160 per cent year over year; we’re approaching a billion Flash transactions,” Mr. O’Connell says.
“It sounds simple, but our product managers needed to truly understand that there’s going to be a cost for merchants and there’s going to be revenue generated from banks. To introduce a new process like this you have to understand how everyone is going to be affected,” Mr. O’Connell says.
The internal process for decisions is important, too. “The second part of our ‘secret sauce’ is that we are participatory,” Mr. O’Connell explains. “We have regular standing committees in each of our product areas, for e-transfers [of money], for debit cards, everyone gets together to talk about these systems.”
In a business association like Interac, “it’s important to include people who represent all sides of the marketplace,” Mr. O’Connell says. Banks, merchants, the tech specialists who make the system work and the government agencies that regulate the financial system are all included.
Consultation is key
Interac went out for two years to the marketplace talking to merchants and issuing bankers to fine-tune strategy. (iStockphoto)
“It has to be part of our DNA,” Mr. O’Connell says.
“The final step is to make sure that there’s oversight. We have to be sure that our board supports our decisions.”
Another of the biggest challenges for a mid-sized business or organization is to make its decisions quickly enough to meet the demands of the marketplace.
In a fast-forward sector such as finance, disruptive technologies are constantly being introduced that affect the way people borrow money, obtain credit scores, buy and sell stocks and conduct big business deals using smartphones.
“It’s always interesting to consult and collaborate but not so much that you’re not moving. Sometimes you just need to shoot the puck,” Mr. O’Connell says.
Interac knew early on that introducing Flash would take work. “It was a new product, that had new value to merchants, because it meant their checkout lines would be faster. It needed investment from our side and from the banks, and it needed to be marketed enthusiastically,” he says.
“We also shared our thoughts and reasoning with Ottawa, to make sure that our process was understood and that they knew our pricing is fair.”
All this collaboration and communication has paid off, Mr. O’Connell says.
“Now we have all of the banks issuing their cards with Flash capability. We didn’t surprise anyone, we gave them a long runway.”