Interac as Model for Public Media

THE PUBLIC RADIO SYSTEM – BYPASS – THE CHALLENGE AND A
RESPONSE

What happens when a direct bypass opportunity arises in a system that has always been local in the past? One choice is system disintegration where the strongest race to capture the direct channel and the weaker go to the wall. Another choice is to create a network where all the value of the local system builds an even stronger system that satisfies the customers’ desire to have it their way while providing even more value for the local participants. Fantasy?  Wishful thinking? No a 30-year-old success story in banking in Canada.

In the 1980’s the technology arrived that would allow a bank customer to access their account directly. It had the power to end the line-ups and the need to fit into Banker’s Hours. It had the potential to reduce the need to have cash on hand to make small purchases. It was potentially a huge win for the customer. But for the banks that had spent a fortune on building a branch on every corner it looked like a disaster. They would be bypassed and their investment in local real estate and in large staffs would be compromised.

Knowing that competitively they could not stop this new channel, each bank determined at the outset that they would build their own private system. They would contain all their customers in a private network. They would adopt the new but only in the context of their own channel. It did not take long to realize that there was not enough money in the world to install 5 competing systems that would have ABM’s and point of sales terminals all over the nation.

Reluctantly the 5 major banks met and agreed to fund a common network that would help them all and offer the customer the best of all worlds. The customer would have access to their accounts from every outlet, every restaurant, every merchant and from any branch of any bank in the country. In fact customers would in the end have access to their account from any bank in the world. The banks would have a common delivery system that would have the power to expand the total pie and that became so valuable that they were successfully challenged by all other financial organizations in Canada to allow them to access to this new common channel. Today 90% of transactions occur outside the branch but the branches remain the locus of the relationship.

What is at the heart of this model and how might it apply to public radio?

Ironically The Interac Association is a non-profit cooperative owned by the members. Who would imagine banks running a coop? The Association’s main purpose is to set and enforce the rules governing transactions in the network and to manage the operations of the network. The association also provides common marketing services and promotes the use of the Interac Net-work for its members. Members can also conduct their own marketing. A 14-member board governs the Association. Each year, members appoint directors to the board based on the transaction volume. Appointments are also subject to additional criteria to ensure that all perspectives are heard.  Today any company incorporated in Canada can join. There are two types of members. The “Hub Members” who are called Direct Connectors who have to maintain direct connections to all other Direct Connectors and “Node Members” called Indirect Members who connect only via a Direct Member.

The system is connected by a series of protocols.

The system is completely decentralized. There is no single switch and hence there is no single point at which the entire system can fail. This redundancy gives the system great robustness that has been tested when occasionally a Direct Member has had a major system failure that has not taken down the whole system.

The Interac Association does not set or collect fees from its cardholders – the end customers. It charges its members its costs. Members however can and do charge their customers for transactions made using the Interac service.

Has this been successful? Canadian are now the most active users of non branch services and the Canadian retail banking system is among the worlds most profitable.

What may be the parallels for public radio? The Direct two way listener experience is here now and will only expand. Public radio has a shared distribution network already.

There is a possibility to create a web-based distribution network along the technical and organizational lines of Interac.