U.S. Electronic Debit Payments System Saves Consumers Billions, Offers More Choices When Compared to

Unlike in the U.S., every major bank in Canada charges its customers a per-transaction fee every time they use their debit card. Moreover, there is only one form of debit in Canada -- PIN- based -- and it is supported by only one electronic funds transfer network, Interac. Those are among key findings of a newly released white paper commissioned by PULSE EFT Association, the nations leading independent industry-owned and directed electronic funds transfer network. Late last year, PULSE engaged Boston-based Dove Consulting, one of the nations leading electronic payments research and consulting organizations, to analyze and compare the debit system utilized in Canada with the debit payment environment in the United States. Highlights of the Dove Report: -- The two countries, though neighbors, are different in almost every respect relative to payment systems. -- Canada has only eight major national banks, which control 93% of banking assets. By contrast, the U.S. has more than 17,000 banks and credit unions, and the eight largest banks control only 41% of banking assets. -- Canada has only one electronic payments system and consumers have access to only PIN-based debit, whereas the U.S. has multiple competing national and regional debit networks and consumers have a choice of PIN or signature-based payments. (Recent studies show that nearly 40 percent of cardholders in the U.S. prefer signature-based debit, an option not available in Canada.) -- Canadian consumers pay a fee (C$0.50-0.60) to their financial institution for each electronic payment transaction, whether making a purchase or getting cash from an ATM. In the U.S., consumers generally pay nothing to make purchases or access cash from their financial institutions ATMs. -- Canadian consumers typically pay a fee each time they write a check, whereas many U.S. banks promote free checking. These per check fees paid by Canadian consumers generally are higher than those they pay for PIN debit transactions. -- Canadian merchants pay no interchange fees for a debit transaction, thereby getting a valuable service without compensating the card-issuing financial institution, whereas U.S. financial institutions receive revenue for use of their databases and for guaranteeing payment for every transaction. After contrasting the two systems, the Dove white paper concludes that the Canadian model is unlikely to be embraced in this country anytime soon.