Dennis Bluecoat pays his bills with a prepaid Visa payment card
instead of a traditional bank account, but it isn't because he
doesn't like banks. He just can't get to one.
The 49-year-old carpenter and plumber lives in Fort Severn,
Ontario, an aboriginal reserve located on Canada's Hudson Bay about
925 miles north of Toronto with no regular road access. Planes
carrying the mail, including checks, often are delayed by
blizzards.
"They would come in a month late, and I would have a hard time
paying my bills on time," Mr. Bluecoat said.
Mr. Bluecoat is one of an estimated 3% of Canadians who don't
have access to a regular bank account. That population is creating
a growth opportunity for payments company Visa Inc., which is
teaming up with one of North America's oldest companies to launch a
direct-deposit service in one of the world's most forbidding
regions: Canada's northern regions.
The service, offered with retailer North West Co. Inc., will
allow Canadians to have virtual bank accounts in communities with
no physical branches and in places where consumers have trouble
accessing online- and mobile-banking services.
Visa plans to use the Canadian program as a blueprint for
launching direct-deposit services in remote communities in other
developed countries, including the U.S. and Australia. The service
also gives Visa a new avenue for growth in Canada, a market where
big banks are eager to boost revenue from payment cards, including
prepaid cards. The prepaid market is expanding and expected to
reach 4.9 billion Canadian dollars ($3.98 billion) in retail
spending this year compared with C$4.2 billion in 2014, according
to rival MasterCard Canada, a unit of MasterCard Inc.
The prepaid payment cards are similar to prepaid debit cards in
the U.S.
The new Visa program will enable Canadians across the country's
northern regions to have paychecks and government benefits directly
deposited onto reloadable Visa prepaid cards instead of into a
checking account. North West is the program manager and Bank of
Nova Scotia, Canada's third-largest bank by assets, will issue the
cards.
The cards can be used for paying bills, transferring funds and
shopping. All transactions flow over Visa's network, allowing the
company to generate fees from banks.
"We're very much looking at this as a model for working with
remote or underbanked communities in developed countries," said Rob
Livingston, president of Visa Canada.
Some 107,265 people live across the Yukon, Northwest Territories
and Nunavut—an area comprising one-third of Canada's land mass—but
there were just 23 branches and 42 ATMs operating across the region
in 2013, according to the Canadian Bankers Association.
Many people either don't have access to online banking or the
cost of Internet or cellphone access is prohibitive.
Mr. Bluecoat said his Internet service is too slow to bank
online and his phone doesn't support mobile banking or remote check
deposit. He recently became one of the first in his community to
enroll in the new direct-deposit service offered by his local North
West store.
"The reason why I use it is because we have a hard time getting
to the bank," Mr. Bluecoat said.
North West operates some 226 stores across Northern Canada,
Western Canada, Alaska, the Caribbean and the South Pacific. It has
offered its current prepaid Visa cards since 2013, but the
direct-deposit function is new. "There are no bank branches in 90%
of the markets that we serve in the north," said North West Chief
Executive Edward Kennedy.
The direct-deposit program is expected to achieve more scale
once the Canadian government phases out paper checks for federal
benefits, such as tax refunds, in April 2016.
Robin Sidel contributed to this article.
Write to Rita Trichur at rita.trichur@wsj.com
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