Canadian Payments Association Plans New Online Payments Rules

The Canadian Payments Association is planning to implement a new rule for clearing Internet transactions involving the electronic debiting of consumer accounts. The association hopes to finalize the rule in December, which if approved would take effect early next year, according to Roger Dowdall, vice president of communication and education for the group, which establishes rules for the clearing and settling of checks and electronic funds transfers in Canada. At that point, any payment service that debits a consumer account to process an Internet transaction would have to abide by the new rule for the payments to be cleared and settled through the CPA, whose 115 member financial institution include almost all deposit-taking institutions in Canada. The new rule, which was promulgated earlier this year and on which comments were due Aug. 6, responds to increasing interest in providing new payment channels for Web transactions. “There's been a lot of interest in alternatives to credit cards online, not just from financial institutions but from other stakeholder groups,” says Dowdall. The rule would provide for so-called credit push payments, which allow consumers shopping online to instruct their banks to transfer funds to Internet merchants in payment for goods and services bought on the merchants' sites. The rule would hold consumers' banks responsible for authenticating their customers, using at a minimum a single-factor method, such as a password and user name combination. Credit push calls for consumers to initiate funds transfer themselves, rather than relying on merchants to debit their accounts, as at physical points of sale. The National Automated Clearing House Association recently announced it was planning to begin testing a form of credit push for Web payments next spring (Digital Transactions News, Sept. 30). Also, a number of major Canadian banks in the national Canadian EFT network Interac say they will begin offering a new service next spring, tentatively called iDebit, that will rely on consumers' use of online-banking system authentication to initiate payments to Web merchants (Digital Transactions News, Sept. 3). The iDebit transactions would then be cleared and settled through the CPA, as are Interac debit transactions at ATMs and point of sale terminals. As part of the CPA's effort to facilitate Web payments, it is proposing to create a new payment stream separate from its existing automated funds transfer streams that track payments equivalent to automated clearing house credits and debits in the U.S. The separate stream for online payments would still flow into the CPA's automated clearing settlement system, which calculates financial institutions' settlement balances at the Bank of Canada. Other payment streams cleared through the CPA include paper checks and ATM and POS transactions secured by personal identification numbers. Created by an act of Parliament in 1980, the CPA clears and settles 17 million payment items worth $106 billion U.S. daily.