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Mar/Apr 2018

The Merchant’s Guide to Transactions, Cards & e-Commerce

The new Interac


President and CEO Mark O'Connell
leads company in a changing industry
❱ International payments
❱ Tapping customer
feedback at the POS
❱ Roundtable: payment
cards developments

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March/April 2018
Volume 9 Number 2
Cover story
Editor-in-Chief
Steve Lloyd
steve@paymentsbusiness.ca
Editor
Brendan Read
brendan@paymentsbusiness.ca
4
Publisher
Interac’s Mark O’Connell on the
Mark Henry new Interac and industry trends
mark@paymentsbusiness.ca

INTERNATIONAL PAYMENTS
Robert Fisher
robert@paymentsbusiness.ca
Contributors
Stephen Grainger; Dan Kelly; 8
Corinne MacMillan;
Michael Morin; Georgina Nelson;
Strengthening international payments
Marc-Andre Pigeon; Ryan Stewart;
Robert Vokes 10
Creative Direction The growing transparency of
Jennifer O’Neill
jennifer@paymentsbusiness.ca international payments
Photographer
Gary Tannyan 12
President How Chinese payments preferences
Steve Lloyd
steve@paymentsbusiness.ca
benefits businesses

VENDOR ROUNDTABLE
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march/April 2018 PAYMENTSBUSINESS 3


Cover story

Interac’s Mark O’Connell


on the new Interac and
industry trends
By Brendan Read

P
ayments Business interviewed Mark O’Connell, president and
CEO of Interac Corp. to learn more about the new Interac with
the amalgamation of Acxsys Corporation and opportunities
going forward. He also shared his views of key industry developments
and challenges, including mobile, security, blockchain, open banking
and payments/marketing convergence.

Payments Business (PB): What will the new Interac mean for
merchants, credit unions, processors and for consumers and
businesses? What are your plans to meet their specific needs?
Mark O'Connell (MOC): Our new corporate structure, which has
created a single for-profit corporation called Interac Corp., means we
can be more flexible, nimble and timely with how we invest in our
products, partnerships and people.
We are investing more in our innovation potential, particularly in
ways that help deliver on the ever-changing customer expectations
in today’s digital economy, like mobile and in-app payments and
the continued evolution of our Interac e-Transfer platform. Canadian
consumers and businesses only stand to benefit from continued
enhancements to our products and services. We’ll continue to be
an economical low-cost payment acceptance option for Canadian
merchants, which is our competitive edge in Canada and good for
business. As a result, the payments industry across the board has
been supportive of our need for change into one corporation.

PB: What are the top opportunities that you see for Interac over
the next three years? How do you plan to capitalize on them?
MOC: Here are three of our key growth focus areas:
1. Exploring new use-case opportunities for our technology
For example, take the Interac e-Transfer. What started as a
successful peer to peer (P2P) offering has evolved into a platform
that can facilitate small and medium size business payments with the
introduction of the Request Money and Autodeposit features. These
good funds payments can be game changing to small businesses
from an accounts receivable perspective. In the same way Interac
killed the retail cheque a decade ago, we anticipate the end of
business to business (B2B) and business to person (B2P) cheques as
Mark O’Connell is president we make it easier to facilitate digital real-time payments through the
and CEO of Interac Corp. platform.

4 PAYMENTSBUSINESS March/April 2018


Cover Story

2. Mobile and e-commerce Additionally, we are investing in resiliency and standards, while
Canada is lagging in this space as compared with other countries working in close collaboration with FinTech companies alongside
but is catching up, which means there is considerable opportunity of banks and regulators, in order to keep our security and fraud
as this industry grows. Groceries and quick service restaurants are prevention strategies one step ahead. Security is innate in how we
mobile and e-commerce growth sectors. And Canadians’ financial build our solutions and will continue to be moving forward, which is
transactions are increasingly migrating to mobile. one reason why our fraud rates are among the lowest in the world.
In 2017 we saw 76 per cent of Interac e-Transfer transactions Developing a solution that delivers on customer experience without
deposited using mobile devices. Canadians have their mobile devices sacrificing the bank-grade security we’re known for—two concepts
with them at all times, and we want to make it easier than ever to that are often at odds with each other—is our bread and butter.
send or request money from anyone in Canada while on the go.
Currently, Interac Debit is supported in all the major mobile wallets PB: Sometimes even the best technologies fail. Outline what
from technology providers and financial institutions. Moving forward, happened with the e-Transfer outages last year. What steps have
we will focus on in-app payments by offering Canadians the ability to been taken to resolve the issues and prevent future incidents?
pay in-app using their own money and at a low cost to merchants. MOC: Last year, we experienced a technical software issue that
The Interac Token Service Provider (TSP) allows us to tokenize a caused significant degradation to the e-Transfer service, which we
bank account number and create a device account number, which made the difficult decision to take down to solve properly.
is separate and unique to a mobile device. This allows a customer to This experience drove home how important the Interac e-Transfer
make purchases using Interac Debit on their device without sharing service is to Canadians. They used the service over 660,000 times
or storing any financial information. For the merchant, this is a a day in 2017. Canadians rely on the service to pay their rent, their
key benefit because it eliminates the need to secure any customer monthly bills and send funds to family members in need, and we
information they have access to. take this seriously.
We are also exploring opportunities for this same technology We have and will continue to invest in added resiliency to our
beyond payments and into the digital identification and authorization infrastructure, so that Canadians and Canadian businesses can rely
space. By using the TSP to tokenize and create an identifier in the on Interac e-Transfer to send or receive funds to anyone with an
digital space, we can replace “make a payment” with activities like email address or mobile phone and a Canadian bank account.
“signing a document” or “registering for government services”,
using the same security architecture we’ve designed our processes PB: How you see blockchain and alternative currencies like
and technology around for years. Bitcoin? What roles do they have in the payments ecosystem?
What plans, if any, do you have to utilize and manage them?
3. International MOC: We’re actually in the process of exploring a proof of concept
Another area of focus is strengthening our ability to help Canadians using blockchain, and it has been a great opportunity for us as an
as they transact cross-border and internationally. While we are organization to play around with the technology and learn how
focused on the Canadian market, the change to our internal structure it works. This is our first step in understanding how we could use
increases our flexibility to partner with international payment providers blockchain technology in payments at Interac and we’re really excited
to facilitate seamless transaction experiences for Canadians abroad about what we’re learning so far.
(editor's note: see U.S. chip debit card sidebar page 6). We’re also
exploring international remittance solutions for popular corridors like PB: Discuss the planned digital identity service and your role in
India through a partnership with Toronto-based start-up Nanopay, developing it.
for example. MOC: Interac has been in the ID and authentication space for 35
years because we’ve always had to ensure that those individuals and
PB: Conversely, outline the key challenges that Interac faces over organizations making payments and transferring funds—and those
the next three years. What strategies are you considering to receiving them—are who they say they are. From PIN authentication
resolve or manage them? to e-Transfer authentication through a customers online banking
MOC: As the digital economy grows, security should be at the account to our ability to enable tokenized digital debit transactions
forefront of business strategy, particularly as it relates to personal on mobile, authentication technology has been built into all our
information. We strive to keep as little personal information as possible solutions. This experience well positions Interac to offer a solution in
so as not to create a centralized collection of data. In fact, most of the digital identity and authentication space.
our transactions have no personally identifiable information. The same TSP that enables Interac to provision and process
Protecting personal information in this digital economy is mobile transactions is the cornerstone of our strategy. By providing
paramount. A lot of this comes down to systems’ abilities to a layer of security through abstraction, the TSP divides a person’s
authenticate users while protecting these credentials, which identity from a sensitive detail like a bank account number by issuing
is something we feel our investment in the digital identity and a unique identifier as a proxy. That identifier is confirmed by the
authentication space can help address. individual’s service provider and the transaction is allowed. That

march/April 2018 PAYMENTSBUSINESS 5


Cover Story

same technology can be used to tokenize and create an identifier


in the digital space, replacing “make a payment” with activities like Interac to expand U.S. chip debit card
“signing a document” or “registering for government services”. Canadians visiting the U.S. will have more opportunities to pay with
their chip-equipped Interac Debit cards.
PB: How you see open banking, including suggestions for a ICC Solutions and B2 Payment Solutions are respective cross-border
Canadian version of the EU’s PSD2? debit certification providers that now support chip testing for U.S.
MOC: As the push towards payments modernization continues merchants and acquirers and are validating Interac’s certifications
in Canada, I hope that the collaborative efforts that our country results, in accordance with Interac’s U.S. specifications.
is known for will continue to be the name of the game. From our “Millions of people cross the U.S. and Canadian border every
perspective, we want to see innovation in our banking infrastructure year for leisure, work and other activities,” said Edwin Lam, director,
within the critical confines of the banking framework and regulatory international products at Interac. “We’ve seen an increased appetite
standards. We create the scheme rules and technology that allows for amongst U.S. merchants to better serve their Canadian consumers
the interoperable exchange of information not just with e-Transfer, when it comes to cross-border payments.”
but also with Inter-Member Network debit transactions and the “Working with our preferred chip certification vendors will help
Interac TSP. us bridge the gap between our borders and to help merchants and
As the payment ecosystem evolves, Canadians’ security, privacy acquirers on both sides to ensure that Interac-branded debit cards are
of data and trust will be the guiding principles, which is why bank- working seamlessly at certified U.S. merchant locations in accordance
sponsored innovation will play a tremendous role. We see strategic with Interac’s U.S. specifications,” added Lam. “Working with ICC
partnerships as integral to responsible openness and we feel we’re Solutions and B2 Payments Solutions will help us bring the Interac Debit
well positioned in the middle of the Canadian payments industry to service’s chip and pin payments to more merchants across the U.S.,
broker these. offering Canadians a more secure way to pay across the border.”
Here is an example. Our e-Transfer application programming “ICC Solutions is delighted to be selected as the preferred chip
interface (API) will be released publicly later this year. It will give non- certification vendor for Interac in the U.S.,” said Derek Ross, head of
financial institutions (FIs) access to core e-Transfer functionality while sales and business development at ICC Solutions. “We welcome this
maintaining FI settlement and risk oversight. This experience will unlock new opportunity to partner with Interac Corp., having successfully
tremendous innovation potential, as we’ve already seen through pilot worked together on chip projects during the migration to chip in
programs with university hackathons and innovation hubs where we’ve Canada. Our proven expertise in the provision of chip test tools and
allowed groups to use the API to achieve unique results. services will enable merchants in the U.S. to experience an efficient
Interac certification campaign.”
PB: Do you think payments and marketing are converging “B2 is thrilled to be selected as a preferred chip certification vendor
and if so how does Interac see itself helping your clients use for Interac Corp.,” said Bruce Murray, president of B2. “We have
customers’ data? worked with Interac for many years to ensure that acceptance terminals
MOC: While data is becoming increasingly important, security needs and Interac-branded debit cards are thoroughly tested and certified
to be at the forefront of everyone’s strategy, particularly as it relates within Canada. We are happy to continue to partner with them as a
to personal customer information. When it comes to data, Interac preferred vendor to ensure that terminals will be fully supported and
has strived to keep as little personal information as possible and certified in the U.S. as well.”
most of our transactions have no personally identifiable information, The B2 and ICC partnerships will further enable Interac to strengthen
which is a big benefit to merchants as they don’t need to worry its relationships with U.S. networks, including NYCE. It will also
about securing this data. As we look forward to offering in-app encourage more American merchants to accept Interac Debit. Interac
payments through proprietary mobile wallets, we’ll be able to offer offers a lower cost option for U.S. merchants processing Canadian
merchants visibility into certain types of data like purchase and transactions when compared to credit.
payment patterns, offering valuable trends at the macro level that In turn, Interac Debit enables Canadians to know instantly what funds
relate directly back to their business. they have available when making purchases in the U.S. The greater
convenience of Interac Debit will also encourage more Canadians to
PB: What are your predictions for the future? minimize their use of cash when visiting the U.S.
MOC: No one has a crystal ball to knows where the digital economy “The Canada–U.S. corridors are strategically important for U.S.
is going. We can predict and make projections, but the truth is we’re merchants and acquirers, and we have an opportunity to facilitate
all waiting to see what will “win” with consumers in the future of seamless cross-border transaction experiences for Canadians by
payments. strengthening relationships with new and existing payment providers,”
Our strategy is to be present in each area, from mobile wallets and said Mark O’Connell, president and CEO, Interac Corp. “Together,
wearables to the Internet of Things and blockchain technology, so we can build efficient payment solutions that consider the nuanced
we’re ready to help Canadians pay how they want, where they want, compliance and regulatory requirements of both countries.”
when the want, with their own money.

6 PAYMENTSBUSINESS March/April 2018


international
Payments

Strengthening
international
payments

By Stephen Grainger
Payments Canada and industry actions

I
nternational trade is a major component of most There has been a recent drive globally amongst banks, infrastructure
businesses’ revenues. However, cross-border providers, start-up FinTechs and regulators to meet these demands
payment systems have historically failed to keep and respond to the issues. They are upgrading their payment
pace with modern standards. Corporate treasurers infrastructures, strengthening security and introducing cutting-edge
sending international payments have likened the process to a black technologies.
hole: they had no view over when payments are received by the Canada is a great example of a country that is leading the
beneficiaries or the total costs involved. charge on this front. Payments Canada is overseeing a multi-year
Businesses are demanding faster settlement, greater transparency modernization programme to improve the security, speed and
and operational efficiency. Yet a lack of certainty over transaction efficiency of its payments infrastructure. The implementation of
costs and foreign exchange (FX) fees, and friction in payments a new credit risk model, completed on March 12, 2018, marked a
processing are holding businesses back from reaching their potential, major milestone in this journey.
particularly those that make multiple daily cross-border transfers. But industry participants are also playing their part to address

8 PAYMENTSBUSINESS March/April 2018


International
payments

historical issues. SWIFT took a significant step in this regard with Encouraging innovation and competition
the launch of SWIFT gpi, a pioneering initiative that sets the new It is important to have a choice when sending cross-border
standard for cross-border payments. Developed in collaboration with payments and banks are increasingly collaborating with third parties
more than 150 banks, the service allows global banks to credit nearly to share ideas, best practices, policies and technologies to find
50 per cent of payments to end beneficiaries within 30 minutes, and new and innovative solutions. They are working with their clients,
almost all payments within 24 hours. their internal product, technology and operations teams and with
For corporations in countries such as Canada and the U.S., which specialist FinTech firms.
have harmonized cross-border payments, foreign exchange and By working closely with our customers to address their clients’
compliance regulations, payments now often reach the beneficiaries’ requirements, SWIFT has seen a surge in both gpi adoption rates and
accounts within seconds. These near real-time payments greatly number of transactions. SWIFT gpi traffic already accounts for nearly
increase customer convenience, help companies grow their 10 per cent of total SWIFT cross border payments and over USD $100
international business, improve supplier relationships and achieve billion is being transacted daily across more than 220 international
greater treasury efficiencies. corridors. In addition, more than 50 payment market infrastructures,
This is particularly welcome news for Canadian businesses; in including Payments Canada, are enabling gpi payments. It is this
2017, Canada exported almost USD $300 billion worth of goods collaborative approach and willingness to work together that has
and imported more than USD $280 billion1. The ability to receive enabled us to innovate, evolve and meet the needs of our customers
even a small proportion of this value within seconds or minutes can for over 40 years.
transform a corporation’s cash flow and trade cycle. In fact, tens of
thousands of SWIFT gpi payments are being sent between Canada Stephen Grainger is managing director, head of North America for SWIFT. SWIFT
is a global member-owned cooperative and a leading provider of secure financial
and the U.S. per month and this figure is growing.
messaging services, SWIFT’s messaging platform, products and services connect
more than 11,000 banking and securities organizations, market infrastructures and
Addressing payments tracking corporate customers in more than 200 countries and territories.
Ask any business that makes or receives cross-border payments about 1
https://www.census.gov/foreign-trade/balance/c1220.html#2017
the challenges they face, and a lack of transparency and traceability
are likely to be high on their list. When they send payments, they
want to know what is happening with it and when it has been
received.
Historically, there has not been a payments-tracking mechanism
that allows treasurers to track when a payment has been received
by the seller or supplier, as each bank can only guarantee and share
information on its own leg of the payment. Given the levels of trade
flow that takes place between Canada and the U.S. the inability to
track payments has long been a source of concern for businesses in
these countries.
A faster, more transparent and consistent cross-border payment
process would lead to better customer relationships. The SWIFT
gpi Tracker allows banks to follow the status of a payment in real-
time and provide that information to their corporate client. The
technology is analogous to tracking the delivery of a parcel from a
warehouse to a customer, with the additional benefit of knowing
that it has been opened and inspected. The tracking service is cloud-
based and accessible via application programming interfaces (APIs),
offering banks efficient and cost-effective connectivity which they
can integrate into their corporate offerings.
A real-time view of payments means Canadian banks can provide
businesses with improved cash management services. Companies can
be informed immediately when payments are received via automatic
status updates from their banks, which helps them optimize their
cash flow. In turn, banks receive fewer queries and have told us their
enquiry-related costs are reduced by as much as 50 per cent when
they use SWIFT gpi. This is a major service improvement to end-users
and a considerable cost saving for the industry.

march/April 2018 PAYMENTSBUSINESS 9


international
Payments

The growing transparency


of international payments
By Corinne MacMillan
FinTech firms. These companies are building new systems with API-

W
e live in the Information Age. Billions of driven architectures, which allows systems to communicate more
bytes of data are created every day and the seamlessly with each other. With all this data and a drive to provide
answers to almost all of our questions are their clients with exceptional user experiences, FinTech businesses
right at our fingertips. However, business payments, are finding that they can offer more payment visibility for their clients
especially cross-border business payments haven’t kept up. in user-friendly interfaces.
Once a payment is sent it is still difficult for sender to track their Blockchain technology is another technology driver. Let’s put
status. Most information is one directional on the current payment aside the discussion of cryptocurrencies that blockchain has been
rails. This lack of visibility during the payment journey to its destination very publicly linked to. For those who aren’t familiar with blockchain
makes it difficult to identify where the problems are when they arise. and how it works, it is comparable to a document that has been
shared across a computer network. This network is designed to
International payments issues update regularly, with those computers included in the network all
When errors happen, investigations are opened to try to find what receiving the same updates.
went wrong. But if there isn’t enough data available to be analyzed, For payment providers blockchain typically reduces the number
finding where the problems started becomes that much harder. For of intermediaries in the flow of funds, as the senders and receivers
the senders, it can be frustrating getting their payment providers to typically have direct relationships on the chains. This environment can
provide the necessary information in a reliable and timely fashion, then result in improved speed of delivery and accuracy of payments
leading to painful and time-consuming exercises. amount upon receipt.
International payments are even more complex, as they generally
entail foreign exchange conversions while the payments can hop Suitable payment providers are key
between many intermediaries along their journeys. Consequently, Equally critical in facilitating international payments is partnering
when errors occur there are more institutions involved where the with the right payment provider. There are several factors that
problems could have started. International payments also tend to be should be considered:
more expensive, as the intermediaries typically charge fees for allowing • To avoid problems with speed, hidden fees and a lack of visibility,
them to travel through their systems. These fees sometimes are taken ask for as much information as possible about the providers’
from the payments, causing the amounts to be less than expected when systems. For example: does the provider have multiple channels to
they reach their destinations. And the more stops that payments make intake payment requests, including a user-friendly interface which
increases the amount of time that the payees wait to receive them. highlights key information, such as value dates and bank holidays
With so many hands in the pot, the speed and accuracy of international in the destination countries?
payments are severely affected. These experiences understandably • It is also important to see if there’s a module that provides the
leave the senders and receivers frustrated. But allowing payments to ability to track the payment with real-time status updates as it
be more visible and reducing the number of intermediaries in the flow travels on its journey, and which payment rail it is traveling down.
of funds, payments can become more efficient. By ensuring these standards are met, organizations can feel
confident when choosing a payments provider.
Enabling efficient payments
The payments industry is working to close this information gap. New Organizations face daily challenges. But their payments system,
technology is making it possible for payments to be more transparent. particularly for international payments should not be one of them.
They are creating a more data rich environment for senders and As the payments industry catches up in terms of information flow,
receivers. Payment providers are uncovering new value by leveraging aided by new technologies like blockchain and new payment rails,
faster payment rails and strengthening the communication to and the ease and speed of international payments will only increase. The
from the rails. They are using application programming interfaces future of international payments lies with the firms that can provide
(APIs) to improve the speed of delivery and make the flow of funds the most transparency.
more transparent.
One driver behind these technology advances is the rise of the Corinne MacMillan is chief technology officer, Cambridge Global Payments

10 PAYMENTSBUSINESS March/April 2018


International
payments

Cambridge pilots Ripple’s


digital asset international
payments solution
Digital assets offer a potentially superior international payments
solution than existing methods. The method promises to free up
dormant capital that is tied up when payments are in transit and
ensure more timely and accurate funds delivery.
Cambridge Global Payments is the latest such company that is
seeking to find out. It is piloting Ripple XRP digital asset payments
solution for cross-border payment flows. They are being handled
through Ripple’s blockchain-enabled xRapid liquidity management
solution. Cambridge is also exploring piloting xCurrent, Ripple’s
messaging and international transaction settlement software.
As part of the Fleetcor group of companies, Cambridge handles
$20 billion in international transactions annually for its 13,000+
global clients. Incorporating XRP in those flows will provide, the
company says, its clients with a cross-border payments experience
that is significantly faster, cheaper and more transparent than its
current solutions.
Cambridge works with businesses to facilitate critical and
secure payments for fuel, tolls, lodging and general payables
through its own proprietary payment networks in North America,
Latin America, Europe and Australasia.
These international payment flows allow for a streamlined
experience for customers that depend on Cambridge to
ensure their businesses stay healthy and expand. With xRapid,
Cambridge said it aims to provide an even better experience for
Want to know more about
those customers. your card programs?
Mark Frey, chief operating officer for Cambridge Global
Payments, is confident that blockchain powered solutions like Do you issue fleet cards?
xRapid can not only help Cambridge improve their customers’
payments journey, but also spur critical innovation in their
Manage transactions?
industry. Is it vital to keep on top of technology
“We are excited for the insights this pilot program is expected
to deliver and we will use that information to help both Cambridge which affects your mobile solutions?
and Fleetcor develop our use cases for blockchain in international
payments,” said Frey. “We strive to deliver best-in-class cross-
Sign up NOW for a free subscription
border payments services, with speed and transparency. We look to Payments Business magazine.
forward to exploring how Ripple can help us continue to improve
the customer experience using new technology.” Visit our website at
Ripple’s director of business development, Danny Aranda,
believes that partners like Cambridge recognize the revolutionary
www.paymentsbusiness.ca
potential using XRP has for financial institutions. and learn more about the magazine
“We’re focused on working with partners like Cambridge that
understand the benefits of digital assets and are serious about
using XRP to overcome the inefficiencies in the global payment
system,” said Aranda. “We look forward to collaborating
with Cambridge during this pilot to enhance the speed and Payments Business is a Lloydmedia, Inc publication.
transparency of cross-border payments for their clients.” Lloydmedia also publishes Financial Operations magazine,
Canadian Treasurer magazine, Canadian Equipment Finance magazine,
Direct Marketing magazine and Contact Management magazine.

march/April 2018 PAYMENTSBUSINESS 11


international
Payments

How Chinese
payments
preferences
benefits
businesses
By Michael Morin
From cash to cashless

M
y first trip to China was in March 2003. As China has had an interesting path from creating paper money to
a newcomer I had very few reference points cashless payments, mostly skipping credit. When I first arrived,
to build from. everything was paid in cash. With the advent of smartphones, I
But I ended up staying in China for over 10 years started seeing more and more apps and that was when WeChat
and got to know the country very well. And as a result, I have was created.
seen how China’s payments system have changed to where, like WeChat became an all-in-one lifestyle app. People could “go
the country itself, it is leading the way with innovations that other dutch” with it, they could book doctors’ appointments with it,
nations are following. they could call each other, chat, send photos and share moments.
One of my earliest memories (apart from eating a scorpion kebab), Meanwhile Alipay had always been in payments and continued with
was accessing my funds in Canada through Interac. It was such an its own app for payments across China.
undertaking that there was only one spot where I lived, in Beijing, The last time I was in China, in 2016, everything was paid by Alipay
near Jianguomen in the city centre. I cycled for 50 minutes to get
there every Sunday. It also happened to be the location of the only
Starbucks that I knew of. I have seen how China’s payments
I remember learning to look for the Interac sign at every ATM. I
would eye to find another one where I could withdraw conveniently. I system have changed to where it is
still remember that feeling of relief when I saw a familiar symbol from leading the way with innovations
back home. But by the time Interac became prolific in China, I had my
own bank account and banked the same way as anyone else. that other nations are following.
12 PAYMENTSBUSINESS March/April 2018
International
payments

Arch Rivals
WeChat Pay is taking market share from Alipay

74.92% 74.31% 71.51%


80% 68.40%
63.41%
70% 55.40%
50.42%
60%

50%

40%
23.03%
20.60%
30%
13.18% 15.99%
11.43% 38.12%
20% 32.10%
10%

0%
2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3

Alipay WeChat Pay


Source: Analysys

or WeChat Pay, apps that enable consumers to scan quick response OTT Pay Inc. is looking to the future of payments, but also at how
(QR) codes to make payments. WeChat reported that has over 902 to make the customer experience convenient, secure and enjoyable
million users while Alipay has over 520 million users, according to through intuitive, smart and safe payments, currency exchanges and
data reported by expandedramblings.com. other financial products that we are licensed to offer our clients. We
offer the services in English, French, Cantonese and Mandarin.
Chinese systems arrive in Canada In early 2017, OTT partnered with the payment giants with the
In 2017, I discovered that these methods of payment were coming to intent of continuing to provide convenience to its customers. By
Canada and my excitement was palpable. I begged for a chance to providing newly arriving people a familiar way to pay for their goods,
work with those bringing this technology to Canada. we believe that we are helping merchants attract a new market to
I had seen how convenient and prevalent these payment methods their locations in a very welcoming way. OTT has always been about
had become in China. To top it off 2018 is the Canada-China Year integrating newcomers to Canada.
of Tourism. Chinese families travelled more, had more disposable Canadian merchants benefit from the brand recognition of payment
income than ever before and they had a thirst for high quality items. systems used in the tourists’ home country and the merchant benefits
There are more Chinese families sending their children to study from the extra business. As a result, leading brands including the
in Canada. There are also many entire families that are relocating CN Tower, Ripley’s Aquarium, the InterContinental Hotel Montréal,
permanently here. Oxford Properties, Cadillac-Fairview and over 1,500 other merchants
Canadian merchants can now attract their new Chinese customers are partnering with OTT Pay. The markets are sending a clear signal
by understanding their payment preferences. The value of third- of what is to come and the importance of being ready for it, but also
party payments is expected to be over [USD] $12 trillion (RMB 81.6 the opportunity to tap into a new blue ocean.
trillion) according to Forbes.1
Competition is healthy. Visa versus Mastercard, Coke versus Pepsi Michael Morin is public relations manager for OTT Pay, Inc. OTT Pay is a member of the
OTT Group of companies that strive to make life less complicated by offering payment
and Alipay versus WeChat Pay. Accounting for 91 per cent of the
services, recommendations to their customers and inclusive participation in the new
third-party payment landscape, reports the Financial Times, both economy. OTT Pay Inc. is a proud partner of Toronto Tourism, Tourisme Montréal
Alipay and WeChat Pay are looking to expand throughout Canada to and Kingston Tourism, helping them to win Chinese tourism and long-term Chinese
consumers.
continue serving their end users, but also to establish their footprints
in North America. 1
www.forbesindia.com/printcontent/48759 , November 29, 2017

march/April 2018 PAYMENTSBUSINESS 13


Vendor
roundtable

Payment cards
developments
the movement away from lending on credit cards. Finally, we are
seeing a shift from single products offerings to more holistic-focused
customer solutions.

Greg Noga (GN): We see people move to mobile means of


payments, such as mobile wallets and branded payment apps, like
the Starbucks app. We also are seeing increasing consumer use of
stored value i.e. pre-paid cards. They also are using credit cards for
Brett Mooney, senior vice president, Greg Noga, senior assistant vice
credit cards and unsecured lending, president, sales and marketing, smaller transactions that they had predominantly debited.
Scotiabank. Canadian Western Bank. We have also seen increasing requests from consumers for
individualized or branded debit cards, like there is in the credit card
By Brendan Read industry. We would expect to see loyalty and affinity programs
become more prevalent for debit cards to mirror credit cards.

W
hat are the key changes, trends and challenges being faced
in the card industry? Payments Business discussed them PB: What are the driving factors?
with Brett Mooney, senior vice president, credit cards and BM: The needs of customers are evolving, and we as an industry
unsecured lending, Scotiabank and Greg Noga, senior assistant vice need to evolve in how we continue to meet their needs. They are
president, sales and marketing, Canadian Western Bank. looking for payment mechanisms that integrate with their daily
Our conversation looked at developments such as digital commerce, lives, centered on frictionless experiences and more robust personal
open banking, mobile, new lending options, personalized cards and financial management tools.
non-card payments hardware and methods. Customers are increasingly looking to have their payment solutions
incorporated into an overall picture of their financial health and for
Payments Business (PB): What are the top changes that you financial services organizations to help support their financial goals.
seeing in the card industry? Both technology and software are also key drivers. These drivers
Brett Mooney (BM): We are seeing many changes to payment continue to shape everything that we as consumers do in our day-
form factors. As regulations change and with ever-increasing digital to-day lives. We have always and will continue to look at ways to
innovation, there are more options than ever before. help customers become better off as they seek to simplify their
Digital commerce and open banking, such as the European Union experiences and payment needs.
PSD2 and application programming interfaces (APIs) continue to
open new opportunities for consumers to experience payments. GN: Client experience. Starbucks has made their app a “cool”
These include tokenization, mobile in-app and P2P [peer to peer] experience and younger generations are drawn to great experiences,
payments and card on file solutions which could help simplify and particularly on their phones. Phones are now easier to access with
enrich their lives. fingerprint or facial recognition. Consequently, there is less reliance
We are also seeing a major evolution in lending patterns, given on passcodes.
the lower technology costs of entering the payments industry and Credit card use for smaller payments gives consumers more
the role of non-traditional lenders. There are new lending options, opportunities to earn reward points and some of the more interesting
including installment loans, deferred payments, point of sale (POS) rewards programs use gamification to enhance the experience.
lending, P2P and social/marketplace lending which could result in Branded and individualized cards allow consumers to feel unique

14 PAYMENTSBUSINESS March/April 2018


Vendor
Roundtable

and/or affiliated with their favourite brands and more emotionally built into everyday objects like jewellery for example and a shift to
invested in them. instant issuance of credentials for immediate use and tokenization
advancements.
PB: How are you responding?
BM: Firstly, we are pivoting to become a technology-focused entity GN: “Replace” is a strong word. But, yes, I do believe phones and
that provides financial services. This change and transformation is wearables will make considerable inroads into the payments space
permeating all levels, products and markets in which we operate. and phones in particular, in the nearer term.
Technology will remain a key part of our business strategy, with
a focus on the increased use of mobile, data, analytics and artificial PB: Do you see any changes in the security features impacting
intelligence (AI). We are committed to building a sound operating the way cards are manufactured?
model that will consistently deliver great end-to-end solutions for BM: With the integration of payments into non-card-based products,
all our customers. the shift to digital and biometrics will change how consumers
Secondly, we are investing significantly in digital. At last year's interact with payment mechanisms. It will become increasingly more
Digital Investor Day, we committed to becoming a digital leader in important to determine how payment providers address the security
the financial services industry. We articulated our work-in-progress of personal information and enable trusted experiences to drive
digital strategy and committed to several aspirational goals. mobile adoption. Scotiabank prides itself on maintaining the highest
Scotiabank's approach to digital is about getting the fundamentals standards across privacy and data security to ensure that we protect
right while also transforming experiences and the products we our customers.
offer through new innovations. Our digital targets speak to the
fundamentals of increasing digital sales, digital adoption and GN: For me, the major friction point with a debit card is the PIN. That
decreasing day-to-day branch transactions. is why I think the “Tap” technology has been so broadly accepted.
Thirdly, we are actively working with FinTechs and opening new This is where people are going with their phones: using the
innovation centres accelerate our innovation strategy. Our approach touch of their fingers or facial recognition to open and scan their
is to connect to the diverse global ecosystem of start-ups, venture phones over tap-enabled POS machines or, quite soon, at near-field
capitalists and incubation hubs to help drive global digital banking communication (NFC)-enabled ATMs. Very slick.
transformation. To further deepen innovation we have opened Consequently, the need for a physical card will wane in this
five “digital factories” in our primary markets: Canada, Mexico, space: as long as “tap” and phone security continues to prove to be
Chile, Peru and Colombia. They develop and deliver leading edge sufficient and the experience easy. In terms of manufacturing cards,
technological solutions to our customers. I’m seeing interesting security features embedded in cards such as
Lastly, we’re rewiring how we approach solving for customer randomly changing CVVs (card verification value), which are similar
needs. We are leveraging robust analytics, new approaches to to soft tokens.
customer research and design thinking to establish more relevant I’m sure other technology enhancements will come to improve
customer-focused solutions versus traditional banking models. security and hopefully to eliminate the need for a PIN. While these kinds
of cards are expensive to produce today they may not be in future.
GN: We are looking at options such as instant card issuance to
personalize debit and credit cards for clients, as well as expanding PB: What is your advice to merchants and sellers to help them
our standard card line to offer different designs. We are investigating manage these developments?
forms of client affinity and loyalty options for debit and other account BM: Taking a customer-centric proactive approach in payments
products to reward clients for using our products. is imperative. Embrace innovation and try to effectively integrate
Our app and full online banking platform overall (mobile and PC payments into simplifying your end to end customer experience,
based) are under review and targeted for considerable upgrades such as card on file and one-touch payments.
over the next year, with a deeper view on enhancing the client
experience. GN: Stay close to your merchant payments provider and talk to your
financial institution. Ask about the trends they see in payments
PB: Do you expect that non-card hardware (e.g. phones, and educate yourself on payments trends and technology and how
wearables) will replace the traditional payment/credit card these could impact your business. Stay current in emerging mobile
within 10 years? and app technology and how you can offer payment options for
BM: We will absolutely see changes. Plastic is merely the historically clients to improve their experience and be cost-effective for you as a
associated form factor and a software enabled future is shifting how merchant. Closely watch your competitors and other merchants and
we interact with payments. sellers to see what they are doing for payments.
The proliferation of non-card hardware is a first step in integrating Finally, don’t just view accepting online and card payments as a
payments into a customer’s daily life and allowing them to pay “necessary evil." But instead as a way you can differentiate your
how they want to pay. We are already seeing payment factors business and separate your client experience from the competition.

march/April 2018 PAYMENTSBUSINESS 15


Industry
Updates

Opportunity-rich payments
trends becoming reality
By Ryan Stewart
innovation, and issues such as security and standardized application

T
he payments industry has been discussing the programming interfaces (APIs) can be answered effectively, our
potential opportunities of the Internet of Things government regulators and industry participants will start the
(IoT), open banking, increased security and conversation on how we can bring open banking here.
blockchain for the last few years. Now, in 2018 these
trends are no longer simply predictions, but are coming to life. Upping the security
As the industry takes on open banking and real-time payments, there
IoT propelling omni-channel will be parallel line of increasing security, while reducing friction with
Omni-channel has been a payments buzzword since at least 2011. 3D Secure 2.0 and Network Level Tokenization.
As consumers’ shopping habits have transformed across mobile, With 3D Secure 2.0, there will be an opportunity to leverage the
online, and in-store, the payment experience needs to be seamless. benefits of multi-level data validation without hindering the checkout
However, “going omni” is not easy; some of the largest brand names experience. 3D Secure 2.0 delivers ten times more data, according to
closed shop in 2017 after failing to bridge their channels. VISA, than previous versions, including information on device channels
IoT tightly ties these three channels together. A prime example of and payment history. This gives merchants and issuers greater contextual
how IoT could power omni-channel is Amazon Go. Consumers walk data that they can use to verify transactions. Also, 3D Secure 2.0 works
into the grocery stores, pick food off the shelves and get charged as with biometric authentication and one-time passwords, eliminating the
they walk out without checking out. While this level of sophistication need for long sign-up processes or static passwords.
may be out of reach currently to everyday merchants, IoT is here to Network Level Tokenization will hit its stride in 2018 as it protects
stay. Omni-channel solutions will only become simpler and more sensitive cardholders’ data at the card brand level. There is less
accessible moving forward. opportunity for fraudsters as card details need not be revealed,
swiped or entered in each checkout experience. Lost or stolen cards
Europe opens door to open banking are more efficiently identified and re-issued.
North America is a considerable way from embracing open banking.
But the industry is watching with anticipation as the European Union Blockchain
rolls out the Payment Service Directive (PSD)2. As European banks With media and consumers buzzing about cryptocurrency, it is
open access to data and payments, FinTechs are looking for their blockchain that will quietly be leading the way to revolutionizing
slices of the market. payments. There were several pilots in 2016-2017 that tested
The sheer power of opening this level of information can transform blockchain’s ability to send money in real time, increase security
the consumer experience by giving FinTech companies the data they and reduce transaction errors. This year it will bridge into the
need to create the next generation of payment solutions that are mainstream as FinTech players and financial institutions start to
built around optimizing customer experience based on this specific disrupt payments, authentication and due diligence checks by using
information. FinTech providers will be able to take this information blockchain technology.
and provide compelling, nimble solutions on finance, payments and Blockchain might still be a long way before consumers adopt
authentication. These new solutions will change consumer behavior it. However, merchants will welcome real-time payments and an
and will have rippling effects to our financial ecosystems. almost endless amount of other benefits to the financial value
PSD2 will empower European payment initiation services providers chain. Blockchain’s distributed network creates a trust chain that
to innovate payment solutions while account information service can’t be broken. We have a digital, auditable, history of truth that
providers will disrupt authentication services. Those businesses that no longer requires intermediaries. This brings speed, more access to
can link startup innovation with traditional financial and banking public data, and lower costs from everything from multi-currency
systems will win, with consumers riding the win along with them. payments to land title disputes that could now be auditable without
You can expect a more curated and personal consumer banking and legal headaches. You can control the data so it’s all public; semi
overall financial experience in the years to come. public/private or all private.
North America's regulators will have a close eye on PSD2 to see if it
is a successful model. If it proves to truly benefit consumers and drive Continued on page 20

16 PAYMENTSBUSINESS March/April 2018


industry
updates

CFIB: Making the


payments market work
for small businesses
By Dan Kelly
platform to help resolve problems and it has repeatedly shown its

I
am frequently asked about the payments worth in the years since its introduction. The Code also lessened the
industry’s relationship with Canada’s small damage caused by high exit penalties, split contracts, unplanned fee
business community. It is a story I’m only too increases, and opaque contracts and monthly statements.
happy to share, including many of the scars and The Code has been kept current with amendments to cover new
victories of over a decade of work. payments players and technologies like mobile payments. A few
A decade ago, Canadian merchants were somewhere between years later, the Code was joined by another voluntary approach: a
bewildered and angry when it came to electronic payments. While negotiated plan to reduce Visa and Mastercard interchange fees by
merchants had grumbled about the costs of accepting credit cards an average of 10 per cent. While this was welcome relief for firms
for many years, all hell broke loose when Canadian banks started of all sizes, the best part was a five-year commitment that average
mass-issuing premium credit cards in the mid-2000s. Cards like Visa rates would not go up, thereby allowing a degree of price certainty
Infinite and Mastercard World or World Elite (some before they even merchants hadn’t had for a decade.
had defined brand names) were being shipped out to Canadians, But where are we today? Are merchants finally armed with enough
most of whom simply believed they were getting replacement cards market power to negotiate prices and improve terms and conditions?
with a few extra points thrown in for good measure. While it is too soon to pop champagne and declare victory, I believe
Shortly thereafter, the phone lines at the Canadian Federation of there are strong signs the power balance has improved for the better.
Independent Business (CFIB) offices started ringing from merchants In 2017 my association signed a ground-breaking deal with
wondering why their take from their credit card sales appeared lighter Mastercard, which gives our 110,000 small business members access
every month. And after significant research and several surveys to to the same rates that some of the largest merchants in Canada pay.
determine the route causes, a major battle was brewing between When we looked at our transaction volume through our exclusive
merchants and consumers on one side and the card brands, issuing processing deal with Chase-Paymentech, we were surprised to find
banks and card processors on the other. that our small business members collectively process over $12 billion
Merchants told of us of deceptive practices used by some in the in electronic transactions, including over $3 billion in Mastercard
industry to trap them into terrible processing deals, with rising fees transactions alone. As a result, Mastercard interchange fees for our
and massive exit penalties. They said they had no way of knowing small firms dropped by an additional 12.5 per cent and Mastercard
which card would cost what amount and had zero power to do World transactions got a 22 per cent cut. Priceless!
anything about it even if they did figure it out. And serious threats And this was followed by a brand-new deal we just signed to reduce
were on the horizon for Interac Debit too, which is one of the few American Express fees for small firms by almost 50 per cent. Instead
low-cost, flat-fee forms of electronic payment that merchants and of paying 3 to 3.5 per cent to accept Amex, small firms using our new
consumers favoured. deal delivered by Chase will pay 1.8 per cent for many transactions.
As a result of these worries, merchants and their associations, This should help expand Amex acceptance among SMEs, creating
including the CFIB, started to push back. Meeting after meeting with more opportunities to use the card for Amex cardmembers.
payments industry leaders and the federal government started and So, after years of heavy lifting, I believe the market is beginning to
weren’t always a lot of fun. work for merchants of all sizes. Have all the problems been solved?
But something remarkable came out of it. A uniquely Canadian Certainly not. Some merchants continue to look enviously at some
approach—the Code of Conduct for the Credit and Debit Card markets where rates are regulated and lower than what is charged in
Industry—was adopted that began to change the marketplace for Canada. Many continue to report confusion over their contracts and
the better. With the Code—first proposed and drafted by the CFIB statements. An increasing number of chargebacks, where merchants
—merchants gained some power in their dealings with card brands,
banks and acquirers. The Code also provided a principles-based Continued on page 20

march/April 2018 PAYMENTSBUSINESS 17


Industry
Updates

Budget 2018:
more flexibility, possible progress
By Marc-Andre Pigeon
provincial financial entities.

T
he federal government’s Budget 2018 features The framework will anchor the consumer-facing side of payments
several initiatives that may achieve its stated transactions and is aimed primarily at activities by new and future FinTech
goal of “Strengthening and Modernizing companies. We advised the federal government that this new framework
Canada’s Financial Sector.” The Canadian Credit must be careful to avoid duplicating existing provincial market conduct
Union Association (CCUA) has helped shaped them through our rules that are already in place for the credit union system.
involvement in the second stage of consultations on the federal The federal government said it will continue its consultations on the
financial sector framework, pre-budget consultations and the federal proposed oversight framework. It has committed to introduce legislation
credit union caucus. to support these goals once their consultations are complete.
Second, the federal government is proposing a review of the
Bank terms flexibility Canadian Payments Act to ensure that Payments Canada is well-
Provincially-regulated, deposit-taking institutions, including credit positioned to fulfill its public policy objectives. The review will focus
unions, will be provided with the flexibility to use generic bank on Payments Canada membership and governance and will have
terms, subject to disclosure. We asked the federal government to important implications for how the credit union system engages in
review the Bank Act restrictions to find a reasonable solution so that the new payments infrastructure. CCUA expects the consultation
credit unions could continue to use terms like online banking that on this review to start late in the spring and has already initiated
Canadians easily understand to explain their financial activities. conversations with Payments Canada.
We initiated this advocacy effort after the federal Office of the Third, Budget 2018 proposes the introduction of a legislative
Superintendent of Financial Institutions (OSFI) issued an advisory that framework to address an unlikely failure of systemically important
adopted a very strict interpretation of the Bank Act provisions. We financial market infrastructure (FMI) used to facilitate the clearing,
were deeply concerned that it could have resulted in criminal charges settling or recording of payments, securities, derivatives and other
against credit union officers and directors for use of the terms financial transactions.
“bank,” “banker” or “banking” by their credit union. The CCUA The current infrastructure includes the Large-Value Transfer
estimated that strict adoption of Bank Act requirements would have System (LVTS), CDSX, the Canadian Derivatives Clearing Services
cost our sector upwards of $80 million. (CDCS), the CLS Bank and SwapClear. This new framework will be
in place in the case of an unlikely system failure. This proposal is not
Credit union disclosures directly relevant to credit unions but could have knock-on effects for
The federal government has signalled its desire to further engage the group and for other direct payment participants.
with our sector to ensure that consumers are aware of the type of
financial institution they are dealing with, whether a bank, a credit Open banking, consumer protection
union or a FinTech and by whom they are regulated. The government There is a proposal to review the merits of open banking to assess
is looking to introduce disclosure standards that can be adopted whether it would deliver positive results for Canadians while still
uniformly across the entire financial services industry and would maintaining consumer privacy, data security and financial stability.
note which entity provides deposit insurance. The CCUA advised the federal government to look at open banking.
We will be working with credit unions to minimize any additional A further notable commitment in Budget 2018 follows from
cost or red tape that flows from new disclosure requirements. the federal government’s work on a comprehensive review of the
consumer protection framework. The budget proposes to introduce
New retail payments oversight framework legislation that would strengthen the Financial Consumer Agency
Budget 2018 addresses three separate payments-related issues, two of Canada (FCAC)’s tools and mandate and continue to advance
of which will directly impact credit unions. consumers’ rights and interests when dealing with banks. The
The first issue relates to the federal government’s proposed retail government has promised to develop this legislation through
payments framework. For the first time, the federal government targeted consultations with stakeholders, including the provinces
said it would be extending prudential and market conduct oversight
regulations to provincially-regulated credit unions and other Continued on page 21

18 PAYMENTSBUSINESS March/April 2018


industry
updates

Canada, be open to open


banking
By Robert Vokes
and managing new revenue sources and services.

O
pen banking is a swiftly moving force in
the financial services ecosystem, sweeping How financial institutions can respond
through Europe and expanding globally, While open banking brings obvious opportunities to non-bank retailers,
including Canada. the banking sector also has its own opportunities. For instance, banks
In the 2018 budget the federal government announced a review can use this platform to offer plug-and-play financial products to third
of the merits of open banking, with the goal being to determine parties, through FinTech companies and including retailers, ultimately
whether it would deliver positive results for Canadians. expanding their ecosystem and reach to new customers.
As it takes hold, open banking will revolutionize the way banking Research suggests that the global banking sector is already up to
and business are done, for individuals, corporations, retailers the task of meeting the open banking challenge.
and for the financial institutions themselves. The changes will be A recent study by Accenture found that 99 out of 100 payments
vast and profound: think of the way Uber and Lyft have changed executives at large European, Asia Pacific and North American
transportation, Netflix has altered TV viewing habits and Amazon banks said their institutions plan to make major investments in open
has changed retailing. banking initiatives by 2020.
The survey also found that nearly two-thirds (63 per cent) of banks
The Revised Payments Service Directive (PSD2) impacts in North America believe that launching open banking is critical to
The push toward open banking is being driven by regulatory changes competing with new entrants, such as FinTechs and tech giants.
in the European Union (EU)(which includes the United Kingdom Industry executives believe open banking will help their institutions
at this time). A new EU regulation, the Revised Payments Service remain relevant.
Directive (PSD2) took effect in January 2018. It lets consumers share In fact, North American executives are more bullish on open
their financial data securely with banks as well as third parties. banking than their counterparts in Europe, where the changes are
PSD2 requires European banks, with their customers’ permission, well underway due to PSD2. In Europe, half (51 per cent) of those
to make their account information available to other companies, surveyed said that open banking is critically important. They, in turn,
organizations and institutions without going directly through the are looking at open banking more intensely than bankers in the Asia
banks. This access makes it easier for consumers to transfer funds, Pacific region, where two-fifths (40 per cent) see it as key.
compare products and manage their accounts and finances. Under Nevertheless, Accenture’s survey shows that move toward
PSD2 third parties can initiate payments and other transactions open banking is worldwide. Globally, half (52 per cent) of all bank
directly with customers’ permission. executives surveyed believe that they will need to implement open
Many experts believe that the full effects of open banking won’t banking to compete with traditional competitors that have invested
be felt until 2020. But by then the impact is likely to be one of those in digital transformation—that is, to keep up with each other.
changes that leave people wondering how they managed to shop
and pay before open banking was here. The account and transaction Open banking challenges
data that PSD2 requires Europe’s banks to share transits through The arrival of open banking is a huge business challenge for the financial
application programming interfaces (APIs); making these APIs sector, with major risks as well as unprecedented opportunities. Nearly
available to others is what makes the system open. two-thirds (65 per cent) of respondents to the Accenture survey said
The relationship between banks and retailers can change through they see open banking more as an opportunity than a threat.
using these APIs, and ultimately, between banks and their customers. One of the major risks to be managed is data security. This concern
For example, once retailers form relationships with Payment Initiation is one reason why Canada is taking a more cautious approach to
Service Provider (PISPs), or become PISPs in their own right, they regulatory change than Europe.
will have access to the APIs. They may then offer inducements for In the federal budget tabled in February 2018, Ottawa announced
direct, instant payments: which has the potential to completely it was launching a review, “to assess whether open banking would
displace credit cards from transactions, thereby reducing credit deliver positive results for Canadians with the highest regards for
card transaction fees. With the reductions to such traditional fees, consumer privacy, data security and financial stability.”
financial institutions will have to be nimble and creative in seeking The other challenge for the financial sector will be how to stay ahead

march/April 2018 PAYMENTSBUSINESS 19


Industry
Updates

in the marketplace as API-based services multiply exponentially. Our Change comes with uncertainty, but the evolution of the banking
research shows that even ahead of the new European regulation, the and payments system with open banking is becoming clearer. With
number of banking APIs that third parties can connect to has jumped payments modernization comes the opportunity for the Canadian
from barely double digits a decade ago to more than 1,500 last year. banking system to prepare for and design its own course for open
APIs are expected to grow tenfold now that PSD2 is here. Accenture banking. It is time to think through that future.
estimates that by 2020, seven per cent of the total banking revenue
pool will be associated with open banking activities. Robert Vokes is managing director and head of Financial Services Canada Bob has over
30 years of financial services industry experience spanning banking, insurance, wealth
Banks will need to compensate for the loss of revenues from transaction
and capital markets as well as several FinTech providers. Bob joined Accenture in 2015
fees by offering new services both to retailers and individual customers. to lead the Financial Services team in Canada. Prior to joining Accenture, Bob held
For example, they can offer online, mobile-based loans, mechanisms for leadership positions at Novantas, FMCG, Gartner and Mitchell Madison Group. He
was also a co-founder of Zeborg, a procurement analytics firm acquired by Emptoris in
mobile payment with credit card loyalty points, even age ID checks for
2003. Bob began his career at McKinsey & Co. Bob is a graduate of the Massachusetts
purchases such as alcohol or, soon in Canada, cannabis. Institute of Technology with a bachelor’s degree in computer science.

Navigating open banking


With their strong reputation for prudence and financial probity,
banks have strong brand equity. They will need to deploy this to
Opportunity-rich payments trends
derive revenues from partners who pay to offer products and services becoming reality
on the banks’ own platforms, or on behalf of the banks. Continued from page 16
Open banking also means an opportunity for banks to concentrate
on their core product competencies—deposits, credit and mortgages Looking forward
—while redefining the customer relationship and experience. Payment trends tend to take a long time to come to fruition with all
This shift may imply leaving some specialities to niche providers the regulation hoops and tremendous effort on merchants. However,
or closer collaborations with non-banks to ensure a truly remarkable we are seeing that starting to change in 2018. This is the year of the
customer experience that is associated with the banks. The successful merchant, where trends become real opportunities for everyone.
players in this new open era will broaden their ecosystems and play
a much greater part in the financial and non-financial transactions Ryan Stewart is chief commercial officer for Bambora North America, an Ingenico
company, where he leads the sales, marketing and product teams. He is passionate
of their customer base.
about the dynamic payments space and focuses on delivering a simple, elegant
To navigate this more competitive market, banks will need to payments experience to merchants and software providers globally. Ryan has
learn. Here’s what their payments executives should be looking for: launched numerous disruptive payments products in Canada, the U.S. and Europe,
from online, to in-app, mPOS and merchant online onboarding automation.
• Banks will need to decide how to compete or collaborate with
non-banks that can replicate some traditional banking services
using APIs, while preserving and monetizing their own trust and
customer relationships. At the same time, they’ll need to continually
build their mobile presence and offerings through APIs;
CFIB: Making the payments market
• In Canada, the financial sector will need to meet payments work for small businesses
modernization goals and faster payment implementation dates. Continued from page 17
Adding open banking capabilities to the mix will challenge internal
technology and business process staff; end up on the hook for fraudulent transactions, even when they
• The United States is driving the sector toward faster payment take every realistic precaution, are causing anxiety. And merchants
dates through directives and industry initiative rather than set being stuck with the bill for processing fees on sales taxes they remit
regulations. Canada will need to keep up, and it’s likely that to government remain an unfair burden.
our financial institutions will need help from agile, experienced But a lot has changed for the better. Had someone asked me a
development firms from our technology sector; decade ago whether I would be fighting or working cooperatively with
• Payments Canada will need to monitor the change closely and card giants on deals to lower fees for small business owners, I would
make sure that the payment system incorporates these changes have put money on the boxing gloves. I’m proud of what has been
while preserving its safety and soundness. Financial institutions achieved in Canada so far and look forward to what comes next.
will need to be adaptable: as open as possible to open banking if
you will; and Dan Kelly is president and CEO of the Canadian Federation of Independent Business
(CFIB). With over 110,000 members, the CFIB is Canada’s largest non-profit
• FinTechs will need to be more than just nimble. Open banking
organization devoted to creating and supporting an environment where businesses
is bigger than a technology change. It will require a deep can succeed. The CFIB advocates for small business with politicians and decision-
understanding of payment rules and standards and the need for makers across Canada. As a non-partisan organization, it influences public policy
based on its members’ views, ensuring that they have a chance to affect the laws and
data security, along with the ability to spot potential banking and
policies that affect their businesses.
non-bank partners.

20 PAYMENTSBUSINESS March/April 2018


2018 Industry
events

Budget 2018: more flexibility, April June 5-8


Internet Retailer
possible progress April 29-May 1
Canadian Credit Union
IRCE Conference + Exhibition
2018
Continued from page 18 Association Chicago, IL
2018 National Conference for irce.com
Canada's Credit Unions
Toronto, ON June 13-15
and territories. ccua.com FEI Canada
The CCUA will continue to advocate for differentiated treatment 2018 Annual Conference
April 29-May 2 Halifax, ON
based on the credit unions’ cooperative structure. We are engaging NACHA feicanada.org/2017/Annual/
credit unions on the framework for a voluntary code, one that Payments 2018 Conference
will include the disclosure elements referenced in the banking San Diego, CA
payments.nacha.org June 18-20
terminology fix but also serve to inform our engagement with the
CUCA
FCAC and provincial market conduct regulators. April 30-May 2 National Credit Union Treasury
ACT Canada and Finance Forum 2018
Cardware 2018 Toronto, ON
Additional security measures Niagara Falls, ON www.cuca.com
The federal government announced a plan to protect against cardware.ca
cyberattacks. It proposes investments of $508 million over five years, August
and $109 million per year thereafter, to fund a new National Cyber May
August 16
Security Strategy with three principal goals: May 8 FinTech Canada
• Ensure secure and resilient Canadian systems; Canadian Prepaid Providers FinTech Canada Conference 2018
Organization Toronto, ON
• Build an innovative and adaptive cyber ecosystem; and Prepaid Symposium 2018 www.fintechcanada.com
• Support effective leadership and collaboration between different Toronto, ON
levels of Canadian government and partners around the world. cppo.ca August 21-22
The Prepaid Press
May 8-11 tppEXPO’18
Modernizing regulations Finovate Las Vegas, NV
Budget 2018 also commits to “Modernizing Canada’s Regulatory FinovateSpring 2018 prepaidpressexpo.com
San Jose, CA
Frameworks.” The federal government wants to help shepherd spring2018.finovate.com September
regulations that accommodate emerging technologies and business
models. May 9-11 September (TBA)
Payments Canada NAPCP
Although the financial sector, specifically credit unions, do 2018 Payments Summit Commercial Card and Payment
not figure in these commitments, it will be an important area of Toronto, ON Conference 2018
engagement for the CCUA. We will continue to advocate for more payments.ca Toronto, ON
effective and appropriately calibrated regulatory approaches that do napcp.org
May 14-17
not create unnecessary costs and inhibit growth in our sector. Reed Expositions September (TBA)
CNP Expo & Conference 2018 Western States Acquirers
Marc-Andre Pigeon is assistant vice president, government relations at the Canadian
Orlando, FL Association
Credit Union Association (CCUA). The CCUA is the national trade association for
www.cnpexpo.com 2018 Conference
Canada’s credit unions, member caisses populaires and regional Centrals. Rancho Mirage, CA
May 15-17 westernstatesacquirers.com
WB Research
eTail Canada 2018 September 25-26
Toronto, ON InsuranceNexus
etailcanada.wbresearch.com 4th Annual Insurance Analytics
Canada Summit
May 29-30 Toronto, ON
To send press announcements, Retail Council of Canada events.insurancenexus.com/canada
please direct them to STORE 2018
Toronto, ON
Brendan Read, Editor, storeconference.ca
at brendan@paymentsbusiness.ca
June Visit us online
June 5-7
Canadian Venture Capital
& Private Equity Association
Invest Canada Conference 2018
Calgary, AB
.ca
www.cvca.ca

march/April 2018 PAYMENTSBUSINESS 21


Hardware
Report: POS

Tapping customer feedback


at the POS
By Georgina Nelson
serves as the perfect channel for merchants consumer wants to shop, whether in store

W
hile the primary to offer a convenient way for customers or online. When all customer feedback
function of a to tell them what they’re doing right (or is collected in the same dashboard,
point-of-sale wrong) with little to no inconvenience. merchants can efficiently correlate it.
(POS) system is to receive Yes, one question per customer may Not only does this ensure the feedback
payments, POS technology now has the sound almost too simple at first. But the received is representative of the whole,
potential to do so much more. In fact, POS data adds up, especially when merchants but it also helps retailers make data-driven
systems, like the Poynt smart terminal, can rotate through a variety of questions business decisions that benefit all shopping
can hold the key to improving business and continuously change the type of data environments.
operations through obtaining customer they receive from customers.
feedback: because of the direct interaction TruRating’s research shows that when Act on the data
customers have with the terminals. asking one question as customers pay and Collecting near real-time customer feedback
Customer feedback is vital to business providing an easy and frictionless way for at the point of purchase allows merchants to
growth. In fact, more than 90 per cent immediate feedback, merchants can obtain make executive decisions more efficiently.
of U.S. business executives agree that an average of 88 per cent response rate, It is of little use to find out customers were
customer feedback is critical to their bottom versus the 1-2 per cent response rate that highly dissatisfied with the staff’s service
line, according to a study conducted by other customer feedback solutions see. long after they’ve left the store. With robust
HundredX. All that data provides merchants with the customer feedback solutions integrated
Connecting with customers at the POS chance to not only gauge their performance with POS terminals, merchants can analyze
puts the power back in the business’s hands. but strategically improve it according to the data and act on the results to rectify
It helps them understand their customers’ verified customer feedback. problems.
needs and it provides access to valuable It is with this data that merchants can truly
insights to make better business decisions. Rotating the questions improve their businesses. By understanding
Here are a few best practices on gathering Rotating the questions asked means that how their customers think about their
genuine customer feedback directly at the repeat customers aren’t getting prompted shopping experience, retailers can adjust
point of purchase. with the same questions on every visit. This their strategies accordingly and increase
gives merchants the ability to target specific positive scores over time. For example, if
Keeping it simple areas, such as customer service, product a retailer is receiving poor service ratings
It’s no secret that customers have busy lives. selection, layout and price, according to during the evenings, managers can rethink
They don’t have time to fill out lengthy their business needs. their approach and train their evening staff
surveys in-store, through pop-ups that Merchants can ask customers: “How in order to improve customer satisfaction.
interrupt the purchase process or via follow- would you rate the service?”, “Did you find In conclusion, customer feedback provides
up emails when buying online. With this in everything you were looking for?” and “Were retailers with the knowledge to boost their
mind, how can merchants gather customer you satisfied with the staff’s knowledge bottom lines and adapt their stores to the
feedback in a way that’s both convenient of the products?” The answers provide needs of their customers. These insights will
and accurate? retailers with the ability to understand how help them to keep pace in the digital age.
The key is simplicity. Instead of asking a their businesses are holding up in the eyes
slew of lengthy questions, merchants can of their customers. Georgina Nelson is the CEO and founder of TruRating,
a customer feedback solution. Headquartered in the
gather far more data by asking one short
U.K., TruRating has operations across Canada, the U.S.
question at the point of payment, thereby Go omni-channel and Australia. With a background in law and an eye
guaranteeing that the respondents are In an omni-channel world, it is important for the consumer, Georgina saw the need for reliable,
validated customer reviews that would better serve
genuine customers and that the shopping for merchants to use customer feedback
businesses, thus launching TruRating in 2014.
experiences are fresh in their minds. The POS solutions that can integrate everywhere a

22 PAYMENTSBUSINESS March/April 2018


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