The hierarchy of the financial world is often depicted in very black and white terms: Large financial institutions innovate less frequently while enjoying market share. In contrast, emerging fintechs can release cutting-edge products, but are competing for a small piece of the market. This oversimplification ignores the relationships between FIs and fintechs. These networks provide the essential infrastructure that every FI relies on; dependability, access, execution, governance and more.
Interac is one of those networks in the middle of the fintech revolution. In fact, for Canadians, they are the dominant network and a household name. Interac has a simple mission at its core: Allow Canadians to transact across the country, regardless of who they bank with. And Interac users do just that, to the tune of over 16 million transactions every single day.
And yes, Interac is a Canadian Fintech–a designation that’s easy to forget considering that yellow square on your debit card has been there, probably as long as you’ve owned it. With essentially 100% market penetration and 35-plus years of experience, Interac has become an essential part of Canada’s financial infrastructure: Many Canadians’ daily interactions involve Interac in some way, whether it is the 371 million Interac e-Transfer transactions performed in 2018, or the 15 million active monthly users, which is close to half of the entire country. Interac is also connected to almost every single financial institution in the country.
This places Interac in a unique position, unlike almost any financial institution in the world. The company has a massive user base, with hundreds of billions of dollars in transactions each year, yet they are not hindered by the slow-moving processes associated with major banks. Interac uses this atypical placement in the financial market to their advantage by playing a huge role in shaping what Canada’s digital economy will look like over the next few years, and that’s led by their innovation group.
Debbie Gamble is the chief officer, innovation labs and new ventures at Interac, a division the payments network sprung up roughly six months ago to fully realize their potential within Canada’s financial ecosystem.
“Now is a super exciting time to be in finance,” Gamble explains. “The digitization of everything means that we can provide all kinds of unique capabilities. That led to our love affair with mobile devices, and then that led to consumers and businesses wanting relevant on-demand capabilities.”
The innovation labs and new ventures team was built to look at what Interac already has in their back pocket as well as what they will need in order to stay relevant down the line. Gamble’s focus is on a three-year horizon and beyond as she tries to understand the evolving role of a payments network and what customers want from their money. This initiative has been on the mind of Interac for a while but came to fruition with the creation of the team in October 2018.
“We are enabling major players in the ecosystem and we’re able to do it to benefit the users.” – Debbie Gamble, chief officer innovation labs and new ventures.
“The pace of change of technology has brought some really interesting user experiences, and that, in turn, has enabled customers to have a view of how they want to transact,” says Gamble. “It has forced incumbents to look at how they do things, and also set the stage for new players to look at new services. It’s a natural convergence of technology and we’re at this really interesting point.”
The makeup of the innovation labs and new ventures team itself says a lot about the commitment Interac made to building an innovation framework and exploring new ways to deliver value.
“Even though its early days for the team, we have the benefit of being spun out from existing product teams,” explains Oscar Roque, a AVP of innovation for the research and emerging solutions team at Interac.
“That knowledge capital, if I can call it that, is tremendously beneficial when you think about innovation. We already have ties and a lot of intellectual expertise and know-how built up out of existing products. We can understand how we can innovate off those, and around the perimeter of the network.”
Innovation as a Service
Innovation as a deliverable is exciting, but as a strategy, it can be a daunting mandate. The Interac products, including the Interac e-transfer platform, the reliable debit system, the contactless debit solution Interac Flash, and the platform itself already work well. Any fintech startup with a product as successful might fly the ‘mission accomplished’ banner and seek a lucrative exit. For Interac however, there’s little value in relying resting on laurels.
The deep understanding of product within the innovation labs and new ventures team may be the organization’s secret weapon. The company views innovation unlike any other in the country—they refuse to chase after low-value and near-sighted market opportunities. That low-hanging fruit can be plucked by the companies fighting for their own customers, as Interac can look beyond monetary transactions and focus on adding value to the Canadian financial world in more ways than topping up a bank account.
“We look at innovation as a new lens to reimagine how we can leverage who we already are,” says Gamble. “It’s understanding what the assets and capabilities we have in the market are so we can continue to enable Canadians across the country to transact securely.”
Choosing what to focus on then creates a bit of a challenge. Open banking, AI, blockchain, mobile wallets, automated wealth management, digital identity and authentication—these are all viable options to explore in the modern fintech world. The innovation labs and new ventures team has the freedom to ideate visions, and bring them all the way to MVP and commercialized status if they want. So where do they focus resources?
“I imagine balancing what to work on like a funnel,” says Roque. “There’s an endless list of potential technology trends and there’s a lot being analyzed and generated at the top of the funnel. But when we go to the bottom of the funnel, it’s emerging solutions and product delivery. We start to whittle away those hundreds of opportunities to just a handful. The work becomes more elaborate because, in those handfuls of opportunities, we have a lot to do.”
“We need to think about how we leverage our existing core competencies and business models and build off that, then look at adjacent markets and build into those. It’s everything you’d expect from end to end, from strategy to product delivery to commercialization.”
Building on the Interac e-Transfer
Through all of the innovation labs and new ventures teams’ research expertise, a few identified focus areas float to the top: Digital identity and authentication, open banking and blockchain. Interac is consistently researching and publishing white papers on these trends, and the of deep exploration is made possible by leveraging the robust interoperable network that they operate.
“What we create for our end users helps everybody,” says Neil Butters, the head of digital ID for the innovation team at Interac.
“We try to stick with open standards and industry best practices for how we approach new market opportunities. Closed networks have utility to the extent of providing services for a limited period of time. But if you really want to reach ubiquity, you have to provide an interoperable type of solution, and the only way you can get there is by providing an open network.”
Open banking is one of the areas the team is focusing on. This is when banks’ data troves are opened up to developers through APIs to build applications and services that better serve their users. The notion of open banking plays into what Interac does best: Understanding the infrastructure role they play as a major network and leveraging their ubiquity to become the top governance authority in any financial ecosystem. Canadian legislating is admittedly slow to adopt these open protocols, but change is coming. Earlier this year, Canada’s department of finance launched open consultations, an important first step to embracing a trend other countries have long since been on board with.
“We sit in this unique position,” says Gamble. “We’re in a role today where we provide that interconnectivity to bridge every consumer and business together, so Canadians across the country can be a part of that open ecosystem with their FI of choice.”
“Think of that connectivity that we have,” continues Gamble. “We are enabling each of those players in the ecosystem and being able to do it to benefit the users, which is what we have always done. That sets the stage to think about governance. We’ve had the role of providing the capabilities and oversight around debit and access into real-time funds for 35 years. We play that role today and are poised to think about how that access will play out in an open banking scenario.”
“We power scale, and that’s because of our reach. What Interac brings is not limited to just one financial institution’s perspective. We have to enable an entire ecosystem.” – Debbie Gamble
This is where that wide network plays a critical role for Interac. As open banking becomes more of a reality, the innovation labs and new ventures team will continually expand opportunities to both guide and innovate within the evolving framework.
“We bring insight into that governance side,” says Gamble. “It’s really about the practicality. How do you run this system, and ensure that various entities are adhering to the engagement practices?”
When emerging solutions meet ubiquity
Another area of innovation Interac is focusing on involves blockchain, and it plays into the continuing evolution of what Interac believes a transaction can and should look like. Interac recently entered into a production state with IBM and an energy utility organization to create an MVP that allows the utility’s customers to trade excess created energy to the grid and be compensated with credit, which is then tokenized by Interac. The customers can then spend that money anywhere Interac is accepted.
“When we look at this ability to conduct transactions in real time, we can say realize that it’s not just about those purely monetary use cases,” says Roque, who leads this blockchain project. “We can actually broaden those out to enable organizations like utility companies to be able to issue real-time incentives to Canadians when they perform a certain desired behavior.”
Imagine it like this: electric car owners can be contacted by utility companies and asked to delay charging their cars until an off-peak hour, and be rewarded with real-time incentives in the form of Canadian dollars, leveraging Interac if they choose to wait. Or maybe that same utility company enters into an agreement to tap into a solar panel farm on top of someone’s roof and can access it whenever they need it by offering incentivized credit. At that point, the transactions Interac is enabling go far beyond money and reach into the ‘innovation for social wellness’ realm. Roque calls it a “win-win-win”. The utility company can pick up energy when they need it, the user picks up a few extra dollars, and the environment is a little better off due to a lesser reliance on non-renewable energy sources.
This type of ‘evolved transaction’ is something that can only be executed with the Interac network
“Trust is very important in building these net new products,” says Roque. “At the end of the day, consumers want to understand and participate, but they also won’t do that at the cost of security and trust. If Interac is in the equation, using their network, and proving existing value on things I already use today, it’s worth it.”
“The quality of life generated from that is one of the neatest things about this project,” he continues. “Yes, there’s an incentive around it, and yes the consumers can make additional money, but if you think more broadly about it as a loyalty program, most of those programs are about spend and earn. The nice thing about this is it’s a do and earn situation. You don’t have to spend. You can earn money just by doing something, and that’s rallied around something good for the environment.”
“It’s about combining how you can think about new ways to approach something in the financial world with whole new areas to look at, like with the blockchain project, and you get to do it in an organization that can bring both to life at scale, which is really unique,” says Gamble.
Interac is a company that relies on partnerships—whether it is with major tech players, energy utilities, banks, retailers, and more. For Gamble, Roque, Butters and the entire innovation team at Interac, the idea of advancing the company’s offerings are no longer simply rooted in how money plays into those partnerships. The main focus is understanding the connectivity of their network and the value they can deliver to partners and customers through that linked system of governance and trust. It started with managing Interac Debit and the Interac e-transfer service, and now it has evolved to governing open banking protocol, incentivizing environmentally-minded behavior, and other things such as enhanced fraud protection and authentication.
“We power scale,” says Gamble. “And that’s because of our reach. What Interac brings is not limited to just one financial institution’s perspective. We have to connect an entire ecosystem.”
“What that means is we are a conduit to get to that level of scale. We get to realize those initial ideas and enable them across the country. That’s very gratifying, and it completely sets us apart from other players in the ecosystem.”
Techvibes is an Official Media Partner of Interac.