Your next cheque is in the e-mail

Canadians are well known as leaders when it comes to marrying technology and banking. Recently, several Canadian banks took another step by introducing a new concept to its customers: transferring money through e-mail.

CIBC, TD Canada Trust, Scotiabank, Bank of Montreal and Desjardins Group have all implemented Email Money Transfers, an inter-bank service that allows users to send and receive money via an e-mail notification.

Toronto-based CertaPay Inc. developed the technology behind this process, and according to the company’s vice-president of product development, Zack Fuerstenberg, it’s been a long time coming.

“It quite literally took us two years to develop and deploy the infrastructure and get it up to the banks’ specifications,” he said.

This lag in deployment was born out of stringent requirements set up by the banks for an application dealing so directly with money. The banks demanded sophisticated security measures including intrusion detection and fraud detection systems, and insisted on the development of two data centres – a primary and a disaster recovery site, Fuerstenberg said.

CertaPay’s role in the deployment has shifted from the company’s original intention of developing and licensing the application out to the banks to operating the entire network. The banks made this decision so that they could concentrate on their core competency, which is the financial aspect of the service, not the delivery, Fuerstenberg said.

“All of the banks are connected to us. We have created a new network – like Interac, but for Internet-based money transfers – and run all of the servers,” he said.

The process works by a user logging into his or her bank account and specifying a recipient through an e-mail address. The user then fills in the Email Money Transfer information, which includes payment amount, account from which to send the funds, security questions and an optional personal message, and then presses send. At this point, CertaPay generates the e-mail notification which will end up in the recipient’s e-mail inbox. The e-mail itself contains hyperlinks to the recipient’s bank of choice to deposit the funds.

“You can collect the money at any bank account in Canada,” Fuerstenberg said, noting that users dealing with banks not connected to the network will have to wait longer for the funds to appear in their account.

“We’re hoping to get the remainder of the banks on the network, which would drastically improve the user experience for their customers,” he said.

Corrine Charette, senior vice-president of Internet channels and retail markets at CIBC in Toronto, said that she sees this type of service as a potential competitive advantage for her institution.

“The big question is how much will consumers latch onto Email Money Transfers and how dependent on them will the public become? Will it make a dent in paper cheques? In point-of-sale payments? Ask me in a few months,” she said.

While the notification is performed through e-mail, Charette said the actual bank-to-bank settlement of funds is handled through existing inter-bank settlement systems used to clear cheque and ABM transactions.

While most of the participating banks are initially rolling the program out to their consumer market, Fuerstenberg said they have their eyes on the small- to medium-sized business market as well.

“That’s where we’re headed,” he said. “Today, Scotiabank is enabled for small business banking and other banks are working on it as well. We’re adding features for more sophisticated commerce transactions to take place, and are in various stages of this being deployed.”

Miles Storey, a senior partner at Toronto-based Web design and development firm Rigent, said that the idea is exciting, but is skeptical that most businesses will be eager to buy into the e-mail money transfer concept.

“Web and technical people might want to use it, but to convince your average client – a lawyer or barbershop owner or whomever – to use it would be much harder,” he said.

He also pointed out that for many businesses, simplifying billing is often resisted because the process itself is so regimented.

“Billing is a part of a company’s business strategy, and involves clear steps such as cutting cheques. This might just screw things up.”

Aside from process, security is always a key issue when dealing with finances and the Internet, but IDC Canada analyst Warren Shiau is confident that companies will at least consider the concept because of the connection with the banks. This corroborates with the results of an Ipsos-Reid poll, in which 96 per cent of respondents said would prefer an e-mail payment service provided by their main financial institution versus an Internet provider or other technology company.

“For small and medium businesses, I believe it’s a good offering. I trust that the banks are capable enough of evaluating the technology, security and product offering before implementing it and wouldn’t even base a service on this if it wasn’t to their satisfaction,” Shiau said.

Shiau noted that larger businesses will likely continue to use proven secure methods of electronic payment rather than jump on an e-mail-based service.