Thank you, Mr. Chairman and honourable members, for giving me this opportunity to tell you about Interac Association.
In a private not-for-profit association, our eighty-plus members have cooperated to build a national payment network that allows Canadians to access their money at any time, from just about anywhere in Canada. It offers two shared electronic financial services to Canadian consumers: Interac shared cash dispensing at automated banking machines, and Interac direct payment at the point of sale.
Shared cash dispensing allows cardholders to make cash withdrawals from ABMs not belonging to their own financial institution. Interac direct payment is Canada's national debit service, allowing consumers to make purchases by using their debit cards at more than 400,000 merchant locations from coast to coast. Through the success of these Interac services, Canadians enjoy a standard of banking convenience that is virtually unmatched around the world.
Our membership at Interac includes banks, credit unions, trust companies, payment processors, terminal deployers, and merchants. These members compete vigorously with one another in the provision of Interac services to Canadian consumers and merchants.
The members built the systems that enable the network to continuously operate in the 24/7 environment. We built and maintain the equipment that links the systems together. In addition, Interac sets and enforces the payment rules that govern the transactions over the network, we provide common marketing activities, and we provide security support for our members. Security support includes initiatives such as the fraud alert system and support of the migration of systems to chip technology to combat debit card fraud and to protect cardholders.
Interac Association does not set or regulate fees charged by our members to consumers or merchants. In fact, as an association of competitors, competition law expressly prohibits us from setting or influencing this marketplace pricing. We are, however, committed to full and fair fee disclosure for consumers. Our regulations require ABM operators to display their fees, providing consumers with an opportunity to cancel a transaction if they do not wish to pay the fee.
Interac Association does have a role in setting service pricing between our members. We set an interchange fee of 75ยข, which is paid by the customer's financial institution to the ABM operator. This fee is designed to partially compensate the ABM operator for the service of providing cash to the financial institution's customer.
Canada's ABM marketplace is vibrantly competitive. The result is convenience and choice for Canadian consumers. In 1996, the Competition Bureau required our founding members to liberalize access to Interac services and removed the existing prohibition against surcharges. This enabled ABM operators to charge fees directly to consumers, encouraging new competition and promoting expanded ABM deployment. That gave birth to the white label industry. Since then, the number of ABMs in Canada has more than tripled, from 18,000 bank-owned ABMs then to roughly 55,000 ABMs today. Non-financial institutions now own and operate greater than 60% of these ABMs.
Today Canadians indeed have vast choice, and that choice is a direct result of the introduction of fees and the liberalization of the ABM marketplace. Consumers' choices for access to cash also include many low or no-cost alternatives. For example, most consumers do not pay a fee when withdrawing cash from their own financial institution's ABM or in-branch. In fact, roughly 75% of ABM cash withdrawals are made by customers using their own banks at no additional charge. Furthermore, we have seen a precipitous decline in the use of Interac shared cash dispensing, as many consumers are opting for lower-cost ways of accessing their cash, such as cash-back at the merchant, and Interac direct payment itself. Some 65% of Interac direct payment customers say they have used the cash-back option this year, up from 54% in 2000.
In summary, Interac Association is a not-for-profit organization made up of a diverse membership that competes vigorously with one another to provide customers with 24/7 access to their money. The diversity of the parties and the competitive marketplace enable consumers to enjoy a standard of banking convenience that is virtually unmatched around the world.
Thank you very much.