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The Green Sheet Online Edition

February 11, 2008 • Issue 08:02:01

Calling all Canadian ISOs, MLSs

Recognizing a lack of communication and coordination among the ISO and merchant level salesperson (MLS) community in their country, a small group of payments professionals in Canada is poised to launch the first ever Canadian Acquirers Association.

Led by Adam Atlas, a Toronto-based attorney for the payments industry and contributing writer to The Green Sheet, the association will have three main objectives: to provide information and education about Canada's payments industry; to facilitate networking opportunities for association members, including ISOs and MLSs; and to represent the industry to the Canadian government and elsewhere in the hopes of opening up the market to greater competition.

Perhaps 100 industry representatives will gather June 12, 2008, at an, as yet, unspecified hotel in Toronto, where the direction of the proposed CAA will be discussed.

Atlas was not at liberty to divulge the names of any attendees at this time. Companies interested in participating in the kick-off event are invited to register at www.acquirers.ca.

Viewed as a hybrid of a regional American payments association and the international Electronic Transactions Association, Atlas said the CAA intends to foster a "pro-business, pro-competition kind of culture," similar to the marketplace in the United States.

According to Atlas, the payments industry in Canada is a stagnant one, characterized by bank control of acquiring and processing on the one hand and a small, scattered collection of ISOs and MLSs across the country on the other. Atlas called the banking system a monopoly that stifles competition.

Old boys' network

Atlas noted that the Canadian payments industry is dominated by a handful of financial institutions, namely the Royal Bank of Canada, Canadian Imperial Bank of Commerce, Scotiabank, TD Canada Trust and Fédération des caisses Desjardins du Québec.

Together, these banks control Interac Inc., Canada's only debit network. All debit payments in Canada, therefore, must go through Interac. For that reason, Atlas also considers Interac a monopoly.

Furthermore, according to Atlas, the banks have substantial influence over the Canadian Payments Association, the not-for-profit organization that sets the rules and standards for the settlement and clearing of payments in Canada.

Atlas sees the CAA as a counter to the power Canadian banks wield over the payments landscape. The CAA will, therefore, advocate for allowing foreign banks to operate in Canada.

Atlas compared Canada to the state of California. Canada has a population of 32.6 million and boasts the eighth largest economy in the world, with a gross domestic product of nearly $1.3 trillion.

California has 36 million residents and a GDP of $1.7 trillion. California has about 40 banks operating in the state today; Canada has six major banks and about 14 minor ones.

"I have no problem with banks making money in Canada," Atlas said. "I just want there to be more of them."

More banks mean more competition and more opportunities for ISOs and MLSs, Atlas said. As it is, Canadian banks often deal directly with merchants, cutting out the intermediaries altogether.

The little guys

Atlas doesn't think the banks have made it easy for ISOs and MLSs to do business. All merchants that ISOs board must have their electronic payments settled through a Canadian bank. And, according to Atlas, the banks have not been communicative with ISOs.

"Ask any American ISO who has called a Canadian bank and got a call back," Atlas said.

Atlas believes it is time for ISOs and MLSs to organize. Outside of Visa Canada, an arm of Visa Inc., Atlas postulated that no one knows how many ISOs exist in Canada, and he is certain that not many of them are making large profits.

Kevin Turko, President of Data Shapers Loyalty Management Inc., an Alberta-based marketer and reseller of loyalty and gift card programs in both Canada and the United States, is sympathetic to the plight of Canadian ISOs.

According to Turko, Data Shapers routinely receives calls from ISOs and MLSs looking for advice and expressing frustration with the state of the Canadian acquiring industry; ISOs and MLSs had nowhere else to go.

"Where do you go to find out information?" Turko asked rhetorically. ISOs can't talk to peers or even competitors when they don't know who they are or where they do business. "You couldn't pick up the phone and talk to those people," Turko said.

Turko said the CAA would be a centralized hub where Canadian payments professionals could go to research the industry and develop contacts with others.

At present, Canadians have had to attend industry events in the United States to network with other Canadians.

Data Shapers recently signed an agreement with a Canadian sales agent that company representatives met at an industry even in the United States. Up until that time, the agent had been working unhappily with another organization. The agent told Turko, "'Jesus, I wish I would've known you six months ago.'

"If we had an association, perhaps we would have run into [that agent] six months ago and saved him some pain," Turko noted.

Data Shapers is currently a client of Atlas' law firm. "We had no idea of [Atlas'] existence until we met with him at one of the shows in the United States and struck up a conversation and a [business] relationship," Turko said.

A wrench in the works?

With the three-hour founding event, Atlas, Turko and others intend to start off small and modest.

"You have to crawl before you can walk and walk before you can run," Turko said.

Atlas expects a robust turn-out, with the Canadian branches of all the major processors in attendance, such as Nova Information Systems Inc., Chase Paymentech Solutions LLC and First Data Corp.

But Moneris Solutions Inc., Canada's largest processor of credit and debit card transactions, is not planning to attend.

In an e-mail statement to The Green Sheet, Brian Green, Senior Vice President, North American Marketing & Gateway Services, of Moneris Solutions Canada, said, "Moneris is actively involved in advocating on behalf of our merchants and our other clients in several industry forums today.

"These forums involve the exchange of ideas amongst the acquirers. These ... forums include Visa, MasterCard, Interac and CPA working groups. Moneris is also an active member of the Canadian ATM Industry Association and the ETA.

"We believe that these forums are strong opportunities for the collective voice of acquirers to be heard when necessary and for the needs of our customers to be addressed.

"Therefore, at this time, we do not have plans to join the Canadian Acquirers Association nor have we been approached to do so."

Moneris is a joint investment of the RBC and the Bank of Montreal. end of article

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

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