A new online payment system has been rolled out by a Canadian company that relies on existing bank bill payment services to allow consumers to pay for Internet purchases. Developed by Ottawa, Ont.-based MODAPay, the service has been piloted by all of the top banks in Canada and now is being offered to U.S. banks, according to Marwan Forzley, MODAPay president and chief executive.
The way the program works is that consumers register for direct payment out of their checking accounts with their bank. They are then given a customer identification number. When they purchase an item from a participating online merchant, they click the MODAPay option at the checkout and type in their identification number. Rather having funds immediately transferred to pay for the purchase, however, a bill is sent to the customer’s online bill-payment service offered by the bank. Customers must have an existing bill-payment service with that bank or sign up for one. When the customer is finished shopping, he or she pays any “bills” just as if they were ordinary utility or other bills. Funds are then transferred through the automated clearinghouse.
Other direct-payment options have been piloted or proposed using online debit cards or electronic-check options. But Forzley argues consumers don’t feel safe transferring debit account numbers and personal identification numbers over the Internet. If someone’s account number was compromised under this program, a bill would be created, but the account owner simply could refuse payment of the bill. The disadvantage with the MODAPay approach, though, is the limited penetration of online bill payment among bank customers. Forzley refuses to say how many retailers are participating.