ccording to the Canadian Bankers Association and a 2003 survey by the Bank for International Settlements (BIS), Canadians are the world's top debit card users, making 76.4 transactions per person in 2002 compared to 54.0 in the United States. But it wasn't always this way.

In 1990, two-thirds of non-cash transactions conducted by Canadian consumers were completed with checks. That was the same year Interac Direct Payment, Canada's national debit card service, debuted. Just seven years later, debit accounted for one-third of payments and check transactions decreased to 31%. Credit cards remained stagnant at one third of non-cash payments.

Based in part on these trends, a Canadian company, UseMyBank Services, Inc., has recognized the potential for debit on the Internet. Online shoppers want to use their debit card and UseMyBank has a way for them to do so.

UseMyBank was founded in July 2002 based on the concept that the existing online bank systems provide the necessary interfaces to facilitate instant online debit payments. The company went live in December 2002 and has doubled its sales every month since.

UseMyBank is the first online payment provider to enable consumers to purchase items on the Web using their existing bank or credit union. An entire segment of consumers exists who do not have credit cards—now they have a way to purchase online, and online merchants have a way to access their dollars.

"It's all about giving consumers choices—the more choices you offer, the better you are in the market," said UseMyBank CEO Joseph Iuso. "If merchants don't offer debit, they are eliminating 30-40% of the market."

According to Iuso, in Canada today, debit accounts for 47% of transactions, credit has 25% and checks have just 1%. UseMyBank reports that by adding debit, merchants can increase their overall sales by up to 20%. They also reduce the problems associated with credit, such as fraud and chargebacks.

More than 500 sellers and 6,000 buyers worldwide use UseMyBank's services, and the company plans to add financial institutions in Europe and the United States in the next six to 12 months.

"We are here to help e-commerce grow by joining all of the world's online banks so all online businesses and consumers can transact with each other," said Brian Crozier, Vice President of Business Development for UseMyBank.

UseMyBank provides a secure online instant payment method using the buyer's own financial institution. It's similar to paying bills online with one's bank, but better. This is how it works: A buyer goes to the online checkout, clicks the UseMyBank button for payment and enters his e-mail address and telephone number. He then selects which bank account he would like to pay from.

UseMyBank processes the payment and informs the seller. Once the payment is made, the seller is notified of the buyer's e-mail address only. No personal information is shared with the seller about the buyer and both the buyer and seller receive a receipt of payments. Buyers do not have to sign up with UseMyBank to make payments.

Online and phone payments can take at least two to seven days, or more, to be deposited in the merchant's account. With UseMyBank, the fund transfer is instant. This allows the merchant to deliver the product or service right away.

In essence, the buyer makes an immediate online payment with the funds being directly debited from their account. Summary and detailed reporting and management tools are also provided.

Buyers and affiliates are not charged to use UseMyBank. For merchants, a discount rate is applied to the purchase with a minimum transaction fee. The buy rate is 1.5-3.5% and a $1.00 (Canadian) electronic signature fee to activate an account. According to Iuso the average is 2.5%, with a $1.50 minimum per transaction. While UseMyBank is similar to online banking, it differs from credit card transactions. Traditionally, payments by credit card require merchant accounts and contact with financial institutions or service providers.

These transactions also require the buyer to enter their credit card, bank account number or other form of personal traceable markers. Payments with UseMyBank do not. Merchants don't need a credit card merchant account, nor a rolling reserve or major set up fees. Additionally, UseMyBank does not store any personal information in its system.

"Internet-based companies that do not offer a payment alternative to credit cards are missing out on 40-50% of consumers who either don't own or resist using credit cards online," Crozier said. "Checkout abandonment occurs in nearly 50% of all cases at the time credit information is requested."

The seller also benefits from direct payments, no chargebacks, no merchant account, quick direct transfer of funds and the ability to serve more customers. "The net effect for sellers who add our instant debit solution to their credit card payment option is an overall 10-20% increase in online sales," Crozier said.

The benefits to the consumer include control of payments, no fee for payments and no need to sign up, and since UseMyBank does not store any of the buyer's personal information, it's private and anonymous.

Iuso predicts great success for UseMyBank and the MLSs who get in on the ground floor. "It's like getting involved with Visa when it first started," he said. "It's a win for all involved.

UseMyBank accepts sellers from all over the globe, and MLS benefits include no competition; fees as long as the merchant uses the account; and no learning curve since it uses the same model as credit cards.

MLSs who have established relationships with large merchants can simply add UseMyBank and begin increases in income immediately. Commissions are 5-30% of initial sales and residual income, and 10-50% bonuses based on setup fees. Affiliates can also benefit. When a seller is referred to UseMyBank, the affiliate earns 5% of fees collected from referred sellers. "We have an excellent reseller program—the packet works out to about 25% of fees," Iuso said.

Canada's eight major national banks control most of the banking assets and UseMyBank works with six of these banks, representing 85% of Canadian account holders. On the other hand, the United States has more than 17,000 banks and credit unions, and UseMyBank is eager to enter the U.S. market. The company is constantly adding financial institutions and is seeking U.S. processors.

With the enactment of The USA Patriot Act, it's had to adhere to new regulations. The processors UseMyBank planned to work with were unable to meet the regulations required of the Act; the company wants to work with processors in United States that are compliant with the new regulations.

The principals at UseMyBank believe that the financial services sector is evolving at a remarkable rate and that companies must keep up with the pace of change. "As payment systems and infrastructure become increasingly complex, many companies will seek service providers to deliver all the basic infrastructure components—bundled in a way that they can be obtained and paid for in simple terms," Iuso said.

"Furthermore, we believe customers will pay a premium for these services if they are integrated seamlessly, can be delivered in a flexible manner, and are ready to embrace leading-edge thinking with existing online payment technologies."