Talkin' about a revolution
The man who started it all . .
by Will Chabun, Regina Leader Post

March 9, 2002 - Ed Gebert's mom got right to the point: "Whose...idea was this?"

And she gestured at the little plastic card with the magnetic stripe down one side.

Ed admitted he had a little something to do with it, in his capacity as vice-president of finance and operations for Regina's Sherwood Credit Union.

It was the summer of 1977 and what he and his mom were discussing was the very first Canadian manifestation of a nothing less than a revolution.

Canadians now are the world's most enthusiastic users of debit cards, with 40 per cent of all purchases in this country made with them.

But many people have a problem understanding what a long way we have come since the 1970s.

Back in the bad ol' days of banking, if you wanted money during a weekend, when credit unions and banks were closed, too bad.

You learned to plan ahead. Or else. Les Tendler, the CEO of the Sherwood Credit Union 25 years ago, recalls that people caught short of cash would desperately try to cash cheques at grocery stores on weekends. Credit cards were still rare and not widely accepted. The afternoons of every June 30 would regularly see his branches absolutely crammed with people buying travellers' cheques, a particularly long and complex transaction.

Friday afternoon line-ups for cash withdrawals at all banks and credit unions were the stuff of legend. People wanted more convenience -- like access to money on weekends and evenings. Financial institutions didn't know how they were going to provide it because those longer hours meant hiring more staff and opening new branches, cutting deeply into their profits.

At some point -- Gebert figures it might have been in the late 1960s -- Chubb-Moser, the lock company, developed a machine that dispensed money, but he remembers being unimpressed with it. Even if you figured out a way of getting out the money to clients, how could a user's account be debited? By a clerk, of course.

Wherein the problem.

Banking in those days was a labour-intensive process. A teller took a deposit and another employee posted it to a ledger, electronic or otherwise. "We just had to automate," recalls Gebert, a Regina kid who had joined the Sherwood Credit Union out of high school and worked his way up.

To be sure, those newfangled computers were not completely unknown in local financial circles. The first computer arrived in this province (at the U of S in Saskatoon ) in 1958 and one was operating in Regina only a few years later. By the 1970s, Sherwood CU had partnered with the Saskatchewan Wheat Pool in the computerized management of mortgages and some investments. As time went along, a new ally emerged: the data processing arm of what's now The Co-operators. (Called Co-operators Data Services Ltd., it's now part of the Quebec-based CGI.) "They were moving ahead of us pretty rapidly in information systems," says Gebert. "We could see that they were more advanced than us in technology and we wanted to get on-line, to improve our productivity because the banking systems were very labour-intensive."

Problem is, the technology of 30 years ago didn't lend itself to that work. The best that could be done were "dumb terminals" on which one could do a transaction. "They couldn't do anything; all they could do is capture it and move it to the big computer," he says.

What changed that was the arrival of IBM's 3600 series of computers, which Gebert discusses with the enthusiasm other men reserve for Mercedes or Corvettes. Not to put too fine a spin on it, but it was one of those great leaps forward in practical computer technology.

Sherwood set out to develop an on-line banking system from scratch with CDSL.

The key, Gebert says, was giving each client a single account number -- which sounds obvious now, but wasn't 30 years ago, when people generally had one account for savings, another for cheques, etc. The resulting central information file "was a very major, major advantage," he says.

That was one advantage that little Sherwood CU held over the far larger chartered banks, with their millions of accounts. When it comes to innovation, smaller is better. For a national bank, making changes meant making absolutely massive, system-wide changes.

The next stop was finding a machine that would accept and dispense money; these were already available in the U.S., though the ones he saw in the Washington-Baltimore area were basically "just cash-dispensing machines -- nothing integrated," Gebert says.

"It was just a matter of integrating it into the banking system we had."

Not everybody was enthusiastic. Gebert admits Sherwood's board of directors "took some convincing." IBM was worried that CDSL's system might fail, hurting its reputation with the big Toronto banks that had just started to consider ATMs.

Gebert authorized buying two of them. At least that's what he told Sherwood Credit Union president Les Tendler.

Cards were mailed out and the launch was set for Labour Day of 1976, using a terminal in the lobby of the Co-operators building (downstairs from the CDSL's troubleshooters). Would people accept it?

Indeed they did. The test run worked well and the opening of its first ATM (at Sherwood CU's north Albert branch) in the spring of 1977 -- 25 years ago -- found people "lined up 50 deep."

It quickly became so popular that the machines kept running out of cash and had to be filled. A delighted Tendler asked Gebert how long it would take to bring in and install more ATMs.

"Oh, about a week," replied Gebert, finally admitting he'd already bought them -- in sheer faith the project would work. (He believes one of those first Sherwood ATMs is in a museum somewhere in Saskatchewan.)

For his part, Tendler recalls occasionally doing duty on a Saturday in the lobby of a Sherwood CU branch that summer 25 years ago, telling money-hungry citizens sorry, but the branch was closed. But, hey, if you had an ATM card, you could be taking money out of that ATM right over there right now. "We took a number of applications over that summer," he smiles.

The ATMs, of course, were "down" for six hours each day for servicing and system maintenance. Sherwood's young marketing manager Ken McDougall coined a phrase that long-time Reginans will remember: "18-hour Teller Power".

To build on this momentum, Sherwood had staff members at ATMs, giving lessons on their use. The same IBM Canada execs who'd been so leery came back, one saying, "I have to eat crow ... I didn't think you could do it."

There were glitches, of course. Some people ignored Sherwood's warnings and blithely wrote their personal identification number on their cards -- then lost them.

Crooks would open an account with a tiny amount in it, then make a fake deposit into an ATM and instantly withdraw a large amount of cash. Sherwood CU felt it necessary to publicly assure its customers they would be fully covered from unauthorized withdrawals.

But all these problems eventually were overcome, setting the stage for the next step.

Gebert left Sherwood CU in 1981 for Credit Union Electronic Transaction Services, the Regina-based subsidiary of the Credit Union Centrals of Alberta and Saskatchewan, which began work on a radical idea: a debit card. Use it -- and money comes directly out of your account, as opposed to piling up as a credit card bill, with interest possibly payable. "Even the U.S. didn't have it," says Gebert.

Sid Bildfell, who was then the general manager of Swift Current's Western Credit Union, chuckled when he recalls that the impetus for the project might have been nothing more than articles that such a system was being considered in that other stronghold of credit unions, Quebec. "I doubt if it was any more scientific than that."

The guinea pig, so to speak, was Swift Current's Pioneer Co-op, which had a long-standing link with Western CU. CDSL and SaskTel were interested in experimenting, too.

Writing the program had its challenges. Another was getting the handheld device into which customers would key their PINs. Now, they're common as computer mice, "but then, we just had a heck of a time getting somebody to build that sort of thing."

"The other neat thing was the direct-debit capability," Bildfell added. With a MasterCard II, the debit "went right through to our checking account." No other human interaction was needed, a considerable saving in labour.

Fraud was low, Pioneer Co-op promoted it heavily and there was "very quick take-up" by customers. In fact, Bildfell, who is now president of Saskatchewan's Credit Union Central, says the Swift Current experiment never really stopped; it just evolved around 1986 into the Interac system familiar to all of us.

"It was the first entrance in western Canada to the concept of direct payment. You and I now just take it for granted because every merchant has a terminal and it just evolved into a national payment system. But at the time, it was quite unique."

The future? Gebert figures the next step will be a credit card that also functions as a debit card. It would have an embedded plastic chip electronically loaded with credits that can be used in parking metres or vending machines. If you run out of credits, then you find a phone or Net-capable computer, access your account and reload it.

Heck, such a card could also carry your picture and other personal information. Maybe health card and driver's licence, too. Imagine a thick wallet's duplicate cards becoming obsolete and replaced by a single card. Yeah, losing your card would be a drag -- but then so is losing your card-filled wallet today. And a single card is a good deal easier to button safely into a shirt pocket than a wallet packed with cards, bills and whatnot.

"A lot of changes," agrees Tendler. "And they're not over yet."