Wednesday, December 8, 2010

Interac e-Transfer Security

Interac is renaming its email money transfer to Interac e-Transfer in part because people can now send or receive money with mobile phones as well as their computers. This is a potentially convenient way to send money, but it brings up the obvious question of how safe it is to send money by email or with a mobile phone. The answer is partly encouraging.

Interac attempts to allay security concerns as follows:
“The sender’s financial institution and the recipient's financial institution transfer funds using established and secure banking procedures. Personal or financial information, such as address, phone number and bank account information, is not shared and remains private.”
So the sender doesn’t need to know the banking details of the receiver, and the money is actually transferred using traditional secure banking procedures. This seems to close the door on any problems, but there is one potential security hole.

When we pay bills online, we choose one of our accounts as the source of the money and some institution’s account to receive the money. With e-Transfer, you choose an account as a source of the funds, but the receiver gets to choose the destination account. For security, the sender chooses an answer to a personal security question such as “what is your favourite city?” and the receiver must enter the correct answer. The procedure is explained nicely in pictures on the Interac web site.

So, if someone else intercepts the email and can guess the answer to the security question, this person could receive the money. I don’t see this as a big threat for modest sums, but I'd be concerned about sending large sums of money this way. I did not investigate the fees that are charged for this type of transaction.

14 comments:

  1. Do you know, how long it takes to transfer funds - are the funds released and available immediately by the recipient?

    ReplyDelete
  2. @Canadian Investor: I don't know how long it takes before the recipient has access to the money. But you raise an important point. If there is a delay this limits the usefulness of e-Transfer.

    ReplyDelete
  3. I have used the e-mail transfer a few times to receive funds from relatives in the U.S. and it works quite nicely, but yes, choose a good security question to ensure a little more safety would be my advice.

    It works very nicely and the transfer seems instantaneous.

    ReplyDelete
  4. Delay will be 30 minutes or less, Interac says.

    ReplyDelete
  5. @Big Cajun Man and @Art: My guess is that anything under 30 minutes is good enough in most cases. So, if you're satisfied with the level of security and whatever fees are charged, this Interac feature can be useful.

    ReplyDelete
  6. It's under 30 minutes between most banks, but when I tried to transfer money to myself from RBC to PC banking, I had to wait several days.

    ReplyDelete
  7. Mmmm, yes, bad idea to use questions like "Who wore 99 for the Edmonton Oilers?" I did use a similar question though the last time I emailed money, so I guess I'm a little careless on this issue. Usually I just want to use a question the receiver will find mildly entertaining or amusing.

    ReplyDelete
  8. @Gene: Maybe the bad buys will have a hard time spelling "Gretzky" :-)

    That reminds me of the Simpsons episode with Homer saying "Quick! What's the number for 911?!"

    I think I could laughingly use just about any funny question for amounts under about $200. But I'd sober up quickly if $5000 or more was on the line.

    ReplyDelete
  9. I like these security posts. Your career has brought out a healthy scepticism to your analysis. Either that or you've always been healthily sceptical.

    I had a hilarious pitch tonight on the phone from an insurance company my credit card company sent to me. The woman explained how if I enrolled in their service, I would be paid for any bone I or my family break. Break a pelvis? Cha-ching! $1000! Break a finger? Well, that's $25 you lucky duck! Then she told me about how she dropped her husband's table saw on her foot and broke three bones. "I made $100 though!... And you know how I invested that money?... In wheels for his table saw. Now when you want to move it, just unlock the wheels and roll it."

    I don't much like telemarketing, but I actually enjoyed that call. It was so funny. Now, it doesn't really relate to this post or scepticism all that much, but it does highlight some moral hazard: "Well, I really shouldn't jump off this cliff, but think of the money I could make!"

    ReplyDelete
  10. @Gene: I pity people who think that $1000 could offset the pain and suffering of broken bones. I pity them even more if their circumstances are such that they are right about their calculation.

    ReplyDelete
  11. I've used it several times. IIRC, there's a maximum transfer of $1000

    ReplyDelete
  12. @Matt: Thanks for the information. Given the level of security, a cap of $1000 makes sense, although some people might prefer to stay below this level.

    ReplyDelete
  13. if I received interac e-transfer and deposit it in my account will that be taxable?

    ReplyDelete
  14. @Anonymous: If the money is income that would normally be taxable, then yes the transfer would be taxable. The method of deposit doesn't affect tax-ability.

    ReplyDelete