Interac: An in-depth guide

Last updated February 9, 2024
  1. Introduction
  2. Where is Interac used?
    1. Customer behavior and business trends
    2. Regulatory landscape
  3. Who uses Interac?
  4. How Interac works
    1. Interac e-Transfer
    2. Interac Debit
    3. Interac Online
    4. Interac Flash
    5. Interac business services
  5. Business benefits of accepting Interac
  6. Interac costs and fees
    1. Switch Fee
    2. Interac Debit with Apple Pay and Google Pay
    3. Interchange fee
    4. Contactless payment interchange structure
    5. Interac Debit for ecommerce with Apple Pay and Google Pay
    6. Interac Debit for online payments Acquirer Service Fees
  7. Interac security measures
  8. Requirements for businesses to start accepting Interac
    1. For Canada-based businesses
    2. For international businesses
  9. Alternatives to Interac

Interac is a prominent Canadian interbank network known for facilitating a wide range of electronic financial transactions. Since its inception in 1984, Interac has grown to become a cornerstone of Canada’s financial infrastructure, providing key services that enable fast and secure money transfers and payments.

The organization offers several important services:

  • Interac Debit
    This service allows customers to make in-store purchases using a debit card and is integral to retail transactions in Canada. The card is linked directly to the user’s bank account and payments are deducted in real time. Interac Debit enjoys widespread acceptance with retailers, and it offers a convenient alternative to cash or credit card payments.

  • Interac e-Transfer
    Interac e-Transfer facilitates transfers of funds between personal and business bank accounts at Canadian financial institutions that participate in the Interac network. In 2022, Interac announced that for the first time, the number of e-Transfers over the previous 12 months surpassed one billion—a milestone that speaks to the service’s massive popularity, ease of use, and speed.

  • Interac Online
    As online shopping and the need for secure online payment solutions continues to grow, Interac Online provides a method for customers to pay for goods and services directly from their bank account without using a credit card. This adds a layer of security and convenience for customers concerned about credit card fraud or those who prefer not to use credit cards while shopping online.

Interac’s operations are deeply embedded in Canada’s highly regulated financial sector. The organization adheres to stringent security standards and protocols to protect user data and transaction integrity, which has earned Interac a reputation for reliability and trustworthiness in handling digital payments.

Interac plays a key role in the Canadian economy, offering a suite of services that are integral to the daily financial transactions of millions of Canadians. Interac’s extensive collaboration with Canadian banks and financial institutions ensures widespread compatibility and accessibility. This cooperative approach has allowed Interac to maintain a significant presence across the Canadian banking environment, providing seamless and efficient payment solutions to a broad spectrum of users.

Below, we’ll cover what businesses need to know about working with Interac for payments—regardless of whether your business is based in Canada.

What’s in this article?

  • Where is Interac used?
  • Who uses Interac?
  • How Interac works
  • Business benefits of accepting Interac
  • Interac costs and fees
  • Interac security measures
  • Requirements for businesses to start accepting Interac
  • Alternatives to Interac

Where is Interac used?

Interac’s popularity offers a view of Canada’s evolving digital payment environment, which is influenced by customer behaviors, business trends, and recent regulatory changes.

  • General trends: In 2022, Canada saw more than 1 billion e-transfers, which was up 11% in volume from 2021, according to Payments Canada. This reflects Canadians’ increasing preference for digital transactions.

  • Credit and debit card dominance: Credit and debit cards remain the top payment methods, with credit cards accounting for 33% of transactions and debit cards accounting for 31% in 2022, according to the Payments Canada report. Electronic funds transfers represented 59% of the total payment value.

  • Rising use of online transfers: Online transfers, including Interac e-Transfer, saw significant growth—with an 11% year-over-year increase in volume and 19% growth in value from 2021 to 2022, according to Payments Canada. Notably, more than three in five Canadians (61%) used Interac e-Transfer to send or receive funds in a given month.

  • Youth engagement: Younger generations, particularly Generation Z and millennials, frequently use Interac e-Transfer, which is a driving factor in Interac’s growth.

  • Small business adoption: Small business transactions involving Interac grew by 38% in the 12 months ending in April 2022, indicating a significant shift in business payment behaviors.

Regulatory landscape

  • Retail Payment Activities Act (RPAA): Originally enacted in June 2021, the RPAA regulates retail payment activities in Canada with the goal of keeping customers’ money safe while also setting operational risk requirements for payment service providers (PSPs). PSPs must register with the Bank of Canada to operate under the RPAA.

  • Canadian Payments Act (CP Act) amendments: The RPAA aligns with amendments to the CP Act, finalized in November 2023, which expand eligibility for membership to Payments Canada’s systems. These additions further strengthen Canada’s payments infrastructure, setting the stage for the introduction of the Real-Time Rail system—a soon-to-be-launched payment system for real-time transactions.

The Canadian digital payment environment demonstrates a substantial, ongoing shift toward electronic transactions. This shift is evident in the growing preference for online transfers, particularly among younger people, and the increasing adoption of digital payment methods by small businesses. Regulatory developments such as the RPAA and CP Act amendments will continue to encourage this shift while ensuring a secure payment environment.

Who uses Interac?

Interac’s users range from individual customers to businesses of all sizes. Here’s an overview of some of the key audience segments:

  • Retail customers: A 2022 survey revealed that 88% of eligible Canadians have used Interac’s e-Transfer service, moving a total sum of $338 billion CAD over the previous 12 months. This widespread popularity can be attributed in part to the service’s convenience and efficiency.

  • Small businesses: Small businesses have increasingly adopted Interac e-Transfer, especially for payroll and other outgoing payments. The introduction of Interac e-Transfer for Business in August 2021 facilitated this growth: this service allows businesses to send up to $25,000 CAD per transaction and provides immediate electronic payment confirmation, reducing the need for manual reconciliation processes.

  • Corporate Canada: Nearly three-quarters of Canadian businesses are planning to phase out the use of checks within five years in favor of faster digital payment methods such as Interac e-Transfer, a 2023 Interac survey found. Payments to, from, or between businesses in Canada account for nearly one-quarter of all Interac e-Transfer transactions, indicating a significant shift in corporate payment behaviors.

  • Financial decision-makers: Among financial decision-makers, 59% said in a survey that they are motivated to move away from checks for the potential of cost-saving with digital payment methods, according to the 2023 Interac survey. Additionally, 68% of decision-makers polled reported a desire for further improvements to digital transaction reconciliation, indicating a strong move toward digital efficiency.

How Interac works

The Canadian interbank network offers a comprehensive suite of services to meet the needs of individuals and businesses. These services include:

Interac e-Transfer

  • Function: This service allows for direct transfers between bank accounts.

  • Applications: It is a versatile tool for personal use—such as sending money to friends and family—as well as business use, such as making payments to vendors and employees.

  • Usage statistics: This service is extremely popular, as 88% of eligible Canadians have used e-Transfer, according to a 2022 survey. In addition, more than $338 billion CAD moved through the platform in a 12-month period as of May 2022, marking a 16% year-over-year increase and totaling 1 billion transactions.

  • Business relevance: Small businesses have increasingly used the service for payroll and other payments. With e-Transfer for Business, the service has an increased transaction limit of up to $25,000 CAD and electronic payment confirmations, which makes it an efficient—and appealing—tool.

Interac Debit

  • Function: This is a debit card solution that allows customers to make purchases directly from their bank account.

  • Retail usage: It is a standard payment method in Canadian retail stores.

  • Security features: The service emphasizes security with chip-and-PIN technology for safer transactions.

Interac Online

  • Function: This platform facilitates online purchases by debiting funds directly from a user’s bank account.

  • Growth trend: The service witnessed a significant uptick in usage during COVID-19, with more than a 70% increase in transactions from 2019 to 2021.

  • Retail integration: Its increasing integration into online retail checkout processes reflects its growing acceptance by businesses.

Interac Flash

  • Function: Interac Debit’s contactless payment service for quick, tap to pay transactions.

  • Usage volume: In 2018, Flash recorded 2.37 billion total transactions, an increase of 600 million more contactless debits over the previous year, for a total value of $45.3 billion CAD—up from $31.1 billion CAD in 2017.

  • Business adoption: Approximately 281,000 businesses accepted this payment method in 2018, with the number growing annually by an average of 49,000 businesses from 2016 to 2018.

Interac business services

  • Function: These services equip businesses to accept Interac payments.

  • Components: The suite includes tools such as point-of-sale (POS) terminals and mobile payment solutions.

Business benefits of accepting Interac

Interac’s services offer a range of important benefits. Its deep integration with the Canadian financial system, high level of customer trust, reputation for strong security, and business-specific solutions provide an expansive set of value propositions for businesses. The potential benefits of working with Interac include:

  • Market familiarity and trust: Interac is a well-established name in Canada and enjoys a high level of trust among customers. When customers see a familiar and trusted payment option such as Interac, they are more likely to feel secure in their transactions.

  • Tailored for Canada’s banking systems: Interac’s services are designed specifically for the Canadian banking infrastructure. This means seamless integration with nearly all major Canadian banks, paving the way for smooth, reliable transactions. For businesses, this translates to fewer transaction errors and declined payments, leading to an improved customer experience and fewer lost sales.

  • Comprehensive fraud protection: Interac’s powerful fraud prevention measures incorporate advanced security technologies such as end-to-end encryption. This high level of security helps protect businesses against increasingly sophisticated fraud and cyber threats.

  • Direct bank-to-bank transfers with e-Transfer: Unlike other electronic payment methods that may involve third-party processors, Interac e-Transfer facilitates direct bank-to-bank transfers. This direct approach reduces processing times and fees, and it eliminates the risk of intermediary failures and delays.

  • High transaction limits for businesses: Interac offers higher transaction limits for business-to-business (B2B) transactions and businesses dealing with high-value sales, which allows them to use e-Transfer for a broader range of transactions—from paying suppliers to receiving large payments from clients.

  • Ubiquitous acceptance in Canada: Interac enjoys widespread acceptance in the Canadian market. For businesses, this means access to a large customer base that is already comfortable with using Interac for payments.

  • Mobile and contactless payment solutions: Interac Flash caters to the growing demand for mobile and contactless payments. This is key for businesses that want to provide customers with modern, convenient payment options.

  • Data analytics and insights: Interac provides businesses with valuable data analytics and insights that they can leverage to better understand customer behavior, transaction patterns, and market trends.

  • Reduced reliance on cash and checks: By offering a reliable electronic alternative, Interac helps businesses reduce their reliance on cash and checks. This shift makes operations more efficient and also reduces the risks and costs associated with handling and processing physical money.

Interac costs and fees

Here is a guide to the costs and fees associated with Interac’s main services and products:

Switch Fee

  • Interac debit and contactless payments: The current fee is $0.012852 CAD per transaction. This will change to $0.011380 CAD effective April 1, 2024.

  • ABM withdrawals: The current fee is $0.016614 CAD per transaction. This will change to $0.011480 CAD effective April 1, 2024​​.

Interac Debit with Apple Pay and Google Pay

  • Acquirer service fee: For all applicable transactions, the acquirer service fee is $0.025 CAD, which includes the Switch Fee.

Interchange fee

  • ABM withdrawals: $0.75 CAD flat-fee per completed cash withdrawal transaction.

  • Interac Debit: Does not apply.

  • Contactless payments: The fee ranges from $0.02 CAD to $0.055 CAD per transaction, based on the qualifying tier of the business initiating the transaction.

  • Interac Debit with Apple Pay and Google Pay (ecommerce): 60 basis points capped at a transaction value of $300 CAD, with a flat fee of $1.80 CAD for transactions of more than $300 CAD.

Contactless payment interchange structure

Fees vary based on transaction amount and merchant tier, ranging from $0.020 CAD to $0.055 CAD per transaction.

Interac Debit for ecommerce with Apple Pay and Google Pay

Effective December 1, 2023

Fees range from 55 basis points to 60 basis points per transaction, capped at $300 CAD, with variations based on the business’s annual transaction volume and specific merchant category codes (MCCs).

Interac Debit for online payments Acquirer Service Fees

Fees vary based on the transaction amount and type of business, ranging from $0.015 CAD to $0.765 CAD per transaction. There’s also an international processing fee of 150 basis points for transactions at online businesses operating outside of Canada.

Interac security measures

Interac incorporates high-level security measures to verify transactions are safe. These measures are designed to meet and often exceed industry standards, providing businesses and customers with confidence in their financial transactions. Here’s a detailed look at these security features:

  • End-to-end encryption
    Interac employs strong encryption protocols for data security. This encryption safeguards transaction data from initiation to final processing, which makes it extremely difficult for unauthorized parties to intercept and decipher transaction information.

  • Chip-and-PIN technology
    For Interac Debit transactions, chip-and-PIN technology is a standard feature. The chip on the card stores information more securely than magnetic stripes, and the requirement for a PIN adds an extra layer of security.

  • Contactless transaction limits
    Interac Flash, the contactless payment option, has built-in limits for transactions. These limits are set to reduce the risk of large fraudulent transactions if a card is misplaced or stolen. Once the cardholder reaches the limit, they must insert the card and enter their PIN to confirm their identity.

  • Real-time fraud monitoring
    Interac’s systems include real-time fraud monitoring and detection capabilities. This system continuously analyzes transactions for suspicious patterns, helping identify and prevent fraudulent activity.

  • Zero liability policy
    Interac provides a zero liability policy to protect cardholders. Under this policy, cardholders are not held responsible for unauthorized transactions made with their cards as long as they have complied with their cardholder agreement, which includes safeguarding their PIN.

  • Regulatory compliance
    Interac adheres to the regulatory standards set by the Canadian government and Payments Canada. These regulations include compliance with the Payment Card Industry Data Security Standard (PCI DSS) and other local financial transaction regulations. Acting under the Canadian Payments Act, Payments Canada oversees the safety and soundness of payment systems, including those operated by Interac.

  • Authentication and authorization
    Every Interac transaction requires authentication (verification of the user’s identity) and authorization (approval of the transaction by the issuing bank). This double confirmation means that only valid and authenticated transactions are processed.

Requirements for businesses to start accepting Interac

Below are the specific requirements and steps for businesses that want to start accepting Interac as a payment method. These requirements ensure that businesses will be compatible with the Interac system and comply with necessary regulations.

For Canada-based businesses

  • Banking relationship: A business must have an account with a Canadian financial institution that offers Interac services. This is the foundational requirement, as the financial institution will facilitate the transactions.

  • Merchant account creation: Businesses need to set up a merchant account specifically for handling electronic transactions. This involves working with their bank or an independent payment processor that supports Interac transactions.

  • Compatible POS systems: To accept Interac Debit and Interac Flash payments, businesses must have compatible POS terminals that are equipped to handle chip-and-PIN as well as contactless transactions. The financial institution or payment processor usually provides or recommends compatible POS equipment.

  • Compliance with PCI DSS: Businesses must comply with PCI DSS. This global standard ensures that cardholders’ information is secure at every step.

  • Integration with business systems: Integrating the POS system with the business’s accounting and inventory systems is key, as this helps the business track sales, manage inventory, and reconcile financial records.

For international businesses

  • Canadian acquirer partnership: International businesses need to partner with a Canadian acquiring bank or payment processor that can facilitate Interac transactions. This partnership is necessary because Interac is primarily a Canadian network.

  • Compliance with local and international regulations: In addition to adhering to Canadian regulations, international businesses must comply with their local financial transaction regulations as well as international standards such as PCI DSS.

  • Currency conversion mechanism: Since Interac transactions are processed in Canadian dollars (CAD), international businesses need to have a mechanism for currency conversion. Typically, the payment processor handles currency conversion.

  • Compatible POS systems: Similar to Canadian businesses, international businesses need POS systems that are compatible with Interac transactions. This might involve upgrading or acquiring new hardware.

  • Integration with ecommerce platforms: For online transactions, international businesses need to integrate Interac Online into their ecommerce platforms. This typically involves some degree of technical setup.

  • Understanding Interac’s fees and settlements: International businesses should have a clear understanding of the fees associated with Interac transactions and the settlement process, which may involve currency exchange and cross-border transaction considerations.

  • Marketing to Canadian customers: Since Interac is a well-known brand in Canada, international businesses that accept Interac payments should target marketing efforts toward Canadian customers to highlight the availability of this payment option.

As a global payment platform, Stripe offers solutions to help foreign businesses work with the Interac network. Here’s how Stripe can facilitate this process:

  • Integration with Stripe Payments: Stripe supports a variety of payment methods, including Interac for businesses operating in Canada. Foreign businesses can integrate Stripe’s payment processing system with their websites or mobile applications. This integration allows them to accept Interac payments alongside other payment methods.

  • Currency conversion and settlements: Stripe handles currency conversion, which is an important step for all international transactions. When a foreign business accepts an Interac payment, Stripe converts the amount from CAD into the business’s local currency.

  • Compliance and security: Stripe adheres to international security standards, including PCI DSS compliance, which safeguards the business and its customers from fraud.

  • Easy integration with ecommerce platforms: Stripe offers easy integration with several ecommerce platforms. This ease of integration means that foreign businesses can add Interac as a payment option on their online stores without facing significant technical challenges.

  • Access to Stripe’s Dashboard and analytics: Stripe provides a user-friendly Dashboard and analytics tools. Businesses can leverage these tools to track their transactions—including those made via Interac—manage refunds, and gain insights into sales patterns.

  • Customer support: Stripe offers customer support to assist businesses with any issues or questions related to payment processing, including transactions made through Interac. This support is particularly valuable for foreign businesses unfamiliar with Interac or those that might need assistance with the integration process.

  • Market expansion: By using Stripe to accept Interac payments, foreign businesses can expand their market reach to Canadian customers who are familiar with and trust Interac payments. This expansion can be particularly beneficial for businesses with a significant Canadian customer base or those targeting the Canadian market.

Alternatives to Interac

Interac is a major force in the Canadian economy, but it’s not the only player. Here are some of Interac’s main competitors for electronic financial services such as debit cards, bank transfers, and online payments:

  • Visa Debit and Debit Mastercard: These are direct competitors to Interac’s debit services, and they allow customers to make online and in-store purchases that draw directly from their bank accounts. They offer similar conveniences as Interac but are linked with the Visa and Mastercard networks, which offer wider international acceptance.

  • PayPal: A well-known global online payment system, PayPal is a significant competitor to Interac’s online payment and money transfer services. It’s widely used for both personal and business transactions and is particularly popular in online retail and services.

  • Square: Square offers a range of payment processing tools, including mobile POS systems. While it’s better known for hardware solutions than for in-person transactions, Square also provides online payment processing.

  • Apple Pay and Google Pay: These mobile payment and digital wallet services offer contactless payment solutions. They allow customers to make payments in stores, through apps, and online—providing a convenient alternative to traditional debit transactions.

  • Electronic transfer services by banks: Most Canadian banks offer their own electronic money transfer services, which compete directly with Interac e-Transfer. While these services often use the Interac network, banks may brand them differently and offer additional features or different fee structures.

  • Credit unions’ payment solutions: Many credit unions in Canada have developed their own payment solutions and networks, which provide similar services to Interac. These are often tailored to the specific needs of their members and can offer more competitive rates or benefits.

  • Email money transfer (EMT) services: Some financial institutions offer EMT services that are not necessarily branded as Interac but provide similar functionalities for sending and receiving funds electronically.

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