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A person exits a Toronto store with Interac, Visa and MasterCard signs. Interac Association, best known for its debit card payment system, is seeking permission from Canada’s Competition Bureau to restructure its operations and re-tool for future growth.

Deborah Baic/The Globe and Mail

Interac Association, best known for its debit card payment system, is seeking permission from Canada's Competition Tribunal to restructure its operations and re-tool for future growth.

Interac has filed a request to unite its operations under one board of directors and to establish a research and development fund that allows it to invest in emerging technologies, such as mobile payments.

The organization also hopes to tack an end-date on the Bureau's existing consent order, signed in 1996, that dictates how Interac must be run.

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"Payments is experiencing unprecedented change and [requires] investments in new products," Interac chief executive officer Mark O'Connell said.

Interac also believes its current structure limits its ability to compete with well-funded giants such as Visa Inc. and MasterCard Inc., who are ramping up their debit card capabilities in Canada. Plus, Visa recently launched its "smallenfreuden" campaign, which attempts to convince Canadians to use their Visa cards for small purchases – Interac's bread and butter.

When Interac first became popular, the Competition Bureau ruled that the organization must operate as a not-for-profit and established the groundwork for a strict division of church and state within the company. Today that divide has separated Interac's traditional debit card payment system from emerging areas such as Interac e-transfers, which allow clients to transfer money to one another by e-mail.

The wall forces each unit to have different boards of directors, and any money made from the traditional payments network cannot be used to fund development of the emerging arm.

Mr. O'Connell likens this structure to limiting Toyota to using only nascent fuel cell revenues to fund the company's entire R&D budget.

Frustrated with these limits, Interac's executives started piecing together a proposal roughly five years ago that would scrap this wall, while also establishing an R&D fund. However, their initiative included a total re-work, going so far as to request turning the organization into a for-profit institution.

That request was ultimately sent to the Competition Bureau, and in 2010 Commissioner Melanie Aitken struck it down, arguing the Bureau did not believe "that the removal of the restriction against for-profit activities by Interac would be pro-competitive, or is necessary to allow Interac to remain competitive."

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However, the Bureau did note that it was "prepared to re-examine Interac's request in the future if there is new information or material changes in the marketplace, or if Interac advances an alternative proposal" – hence the re-submission three years later.

This time around Interac worked closely with the Competition Bureau to make sure its staffers were onside. Interac also tweaked what it's asking for. Instead of requesting to become a profit-driven company up front, Interac said it will keep its non-profit structure and pricing limits until 2018, after which it hopes to become a for-profit organization.

It is now up to the Bureau's tribunal judges to rule if Interac's proposal should be approved. If it is, Interac's 58 members – which range from the biggest banks to small ATM providers – will become shareholders in the streamlined organization.

(Tim Kiladze is a Globe and Mail banking reporter.)

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