Ja n/Feb 2019

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

Industry
Disruptors
❱ Four disruptive payments
trends to watch
❱ Financial inclusion
with voice banking
❱ Making payments
acceptance simpler
PM 4 0 0 5 0 8 0 3
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of
Contents
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January/February 2019
Industry Disruptors
Volume 10 Number 1

Editor-in-Chief
4 Four disruptive payments trends
Steve Lloyd to watch
steve@paymentsbusiness.ca
Editor
6 Cashless payments: there’s an app
Brendan Read for that
brendan@paymentsbusiness.ca
Publisher
7 Financial inclusion with
Mark Henry voice banking
mark@paymentsbusiness.ca
Contributors
8 Making payment acceptance simpler
Vincent Alimi; Edgar Barbosa;
10 There’s a new token in town
4
Alex Barrotti; Nicolas Beique;
Patrick Bermingham; Henrique
Godinho; Blair Jeffery; Patrick
11 Unifying mobile and payments cards
Léonard; David Morrison; Jason
Mugford; Thomas Rex; Justin
Schweisberger; André Stoorvogel Payments Modernization
Creative Direction
Jennifer O’Neill
13 The case for adopting ISO 20022
jennifer@paymentsbusiness.ca
Photographer
Gary Tannyan
B2B
President 14 Streamlining supply chain payments
Steve Lloyd
steve@paymentsbusiness.ca 15 Stopping revenue leakage
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January/February 2019 PAYMENTSBUSINESS 3

 Four disruptive
payments trends
to watch

4 PAYMENTSBUSINESS January/February 2019


By Jason Mugford
T
he global payments industry is due for an
overhaul. Last year was a record year for
investment in the global FinTech sector. More
capital was raised in the first half of 2018 than the record total in 20171
and the pace of change will continue to accelerate in 2019. You can
thank the revolution happening right now in the payments industry
to the innovative minds of agile disruptors, the heightened scrutiny of
regulators and the evolving expectations of corporate customers.
The competitive landscape of the payments industry is a good omen
of things to come. Financial institutions (FIs), payments processors,
acquirers and merchants all stand to benefit from disruption.
Here are the four disruptive trends that will benefit the payments
industry.
1. Out in the open: the new world of open APIs. The United
Kingdom (U.K.) and Europe are leading the charge when it
comes to open banking. The recent banking reforms in the U.K.
encourage competitiveness in the sector by levelling the playing
field. In Europe the second Payment Services Directive (PSD2)
came into effect January 13, 2018 and the countdown is on for
FIs to comply with external testing for PSD2 by March 14, 2019.
The buck does not stop there with the Regulatory Technical
Standards (RTS) coming into effect in September 2019 under
PSD2, where all European banks must comply by putting
in place open application programming interfaces (APIs) or
updating their existing ones. FIs must allow their customers
access to their banking data and give them the choice
to decide who can access their data through open APIs,
which is platform agnostic technology that allows software
companies to have access to information from one another.
APIs are not new, but they have generally been closed
integrations between two partners with limited availability given to
third parties. The FI segment in general will have better assurances
of whom they are dealing with as a result of open banking. Service
providers can reduce risk by being able to better assess credit and
fraud risk, open credit to customers that warrant it and provide
further products and services based on the information that open
banking and blockchain make available.
2. The shift towards real-time payments and blockchain. Speed,
transparency and accuracy are the key pain points experienced
by businesses when transacting overseas. The experience of a
seamless global payment transaction is still not a common one for
many corporate clients frustrated with FIs. Global B2B (business to
business) payments have some of the thinnest margins for service
providers at 0.1 per cent despite accounting for $125 trillion in
revenue, which is much higher than C2B (consumer to business)
payments, according to reported SWIFT and McKinsey research2.
Real-time payments (RTP) is a financial transaction system able
to send funds quicker for both businesses and consumers, and
it will eventually become the standard for payments delivery.
RTP can send funds immediately to the recipient and provides
instant confirmation to the sender. Faster payments allow
January/February 2019
Industry
Disruptors
payors to better manage their cash flow. There still remains
a major gap since the payor is asked to pre-fund their account
for such a service, so they are paying upfront for a payment
that happens in the future. To alleviate this gap, blockchain will
play a significant role as a solution to revolutionize payments.
One of the goals put forth by the Federal Reserve Bank’s Faster
Payments task force is to have near-instantaneous transactions
where any organization, with a U.S. bank account should be able
to use RTP by 2020. For third-party vendors, innovation without
compliance is only half the story as banks are looking for partners
that they can safely trust to deliver payments.
3. A silver bullet: the possibilities of RegTech. Regulatory
Technology (RegTech) is a vast universe populated by
technology companies working to automate anything from
risk management and transaction monitoring to compliance
and regulatory reporting. Deloitte reports 276 RegTech
companies currently using big data analytics and real-time
reporting to help businesses in the payments industry meet
the demands of both domestic and international regulations3.
From a technology perspective, there are exciting things
happening in the regulatory sector. Know your customer (KYC) is
usually the hardest part of the customer experience to improve.
But the increasing availability of open APIs and the greater access
to information through RegTech providers means there are less
painful ways to efficiently access the necessary information
required to onboard a customer and reduce risk.
4. The upper hand: payments apps reign in a nation of
smartphone users. In the era of the smartphone, payments apps
are a natural progression to the order of things. Consumers have
access to their banking online and open APIs will only increase the
popularity and capabilities of payments apps and digital wallets,
ultimately redefining how all of us experience mobile banking.
Accenture reports more consumers plan to use mobile wallets in
2020 and that nearly a quarter of consumers would give up their
mobile banking apps for digital wallets that holds their payments
information in one place 4. There is appetite for new mobile payments;
however, requirements between B2B and B2C mobile apps differ.
The focus for disruptors will be honing in on specific functions to
improve efficiency.
Technological changes are rapidly occurring, and the opportunities
to access information and services that have traditionally been limited
bode well for not only the customers but also for the providers that
service them.
Jason Mugford is the president and chief executive officer at AscendantFX,
(www.ascendantFX.com) a technology-based payments solutions provider.
1 FinTech Global, “2018 is already a record year for global FinTech investment”, blog, July 11,
2018.
2 “Cross-Border Payments Need More Than Bank-FinTech Collaboration”, PYMTS.com,
December 14, 2018.
3 Deloitte, “RegTech Universe”, Deloitte.com, January 15, 2019.
4 Accenture, “Driving the future of payment 10 mega trends”, report, 2017.
PAYMENTSBUSINESS 5
 Industry
disruptors
Cashless payments:
there’s an app for that
By David Morrison
F
aithful churchgoers in the Jarna-Vardinge
parish in Sweden no longer toss coins and
bills into the collection basket. Rather than
reach into their pockets for money, church attendees are apt to pull
out their iPhones to make donations. Sweden, whose citizens have
difficulty obtaining cash from institutions such as banks these days,
is frequently lauded as the country that’s leading the way towards
a completely cashless society. The country is scheduled to be totally
cashless by 20231.
But the trend is evident elsewhere around the world. In 2017 the
number of cash transactions in the United Kingdom dropped by a
staggering 15 per cent2. Economists in Australia predict that cash will
make up only two per cent of all payments in that country by 20223.
Going cashless has been happening here at home as well, echoed
by Payment Canada’s Canadian Payment Methods and Trends:
2018. Said the report: “Canadians are choosing to tap their
cards or phones at the POS (point of sale) in lieu of using cash,
and increasingly in lieu of chip-and-PIN, with 55 per cent growth
for both contactless volume and value since 2016.” The report also
found that cash use for “lower value lifestyle purchases like buses,
taxis and coffee is down by nearly 20 per cent since 2012.”4
Just like the Swedes, Canadians are experiencing the realities of a
cashless society in myriad ways on a daily basis. Just ask the office
workers in the tony Yonge and Bloor neighbourhood of downtown
Toronto who buy their take-out salads at a popular eatery called
Flock. That establishment went cashless in late 2017, requiring
hungry diners to put away their cash and tap their cards instead.
Cashless challenges
The growth of the cashless society has not been free of challenges.
There’s been a great deal of media coverage about hospitality
workers becoming one of the casualties of the cashless era. Like
how do you tip a valet at your hotel? How does a keynote speaker at
a convention tip the coat check attendant? Or, how does one avoid
the embarrassment of not having ready cash on hand when asked to
make a donation on the spot?
Who among us—especially in the last couple of years—hasn’t
stood, riddled with embarrassment, when realizing we don’t have
cash to stuff into a birthday envelope or chip in for a colleague’s
retirement gift?
Sharing money in the moment
It has been this growing need—and ultimate demand—for ways to
6 PAYMENTSBUSINESS
make on-the-spot micro payments easily and quickly that’s ushered
in the new forms of payment. Platforms such as FOOi, a mobile
application that facilitates peer-to-peer (P2P) and peer-to-business
(P2B) financial transactions, are disrupting the forms of payment
available to consumers. In the case of FOOi, which is essentially a
digital wallet that allows users to “share money in the moment,”
users aren’t required to share a lot of personal information.
The development of FOOi was originally spurred by the need to tip
hospitality workers when one doesn’t have cash. FOOi’s capability
to offer “cashless tipping” ensures they and others will continue to
get their gratuities: which constitutes a significant portion of their
incomes. The FOOi app now allows for P2P transfers, the ability to
make charitable donations and P2B payments. To make a payment,
the user finds the recipient’s account on the app, types in the amount
they wish to pay that person and hits “Give.”
Innovators are indeed disrupting the way consumers make
payments in Canada: with an array of benefits. Consider the
numerous challenges posed by the use of ready cash in traditional
payment scenarios. Not only can money be lost and/or misplaced,
handling cash is also costly and time-consuming.
Consider the workers at Flock restaurant in downtown Toronto who
no longer have to calculate change and handle paper money and coins,
amongst other duties. It’s all done by the payees with a few taps. (Think
back to the part-time retail job you had in university which required you
to count and recount cash in the till at the end of your shift).
The consumer also avoids lengthy waits in lineups for cash to be
counted and sorted. Plus, there’s the added benefit of having digital
records of all payment transactions, regardless of how small.
A Canadian radio announcer recently mused on a welcome job
loss in the cashless era: “Will pickpockets looking for ready cash
even exist in the cashless society where we won’t have $20 and $50
bills sticking out of our pockets in crowded malls and on trains?”
Consumers and innovators are still realizing the benefits of
cashless payments that don’t involve debit or credit cards or require
users to fill out cumbersome forms and share personal details. Take
gift cards, for instance. While statistics vary from country to country,
one source estimates that about $1 billion dollars worth of gift cards
(for clothes, music, groceries and sundry other consumer goods
categories) go unredeemed each year5.
Sometimes it’s a $100 clothing gift card that gets filed away and
forgotten about. Or you’ve presented someone with a gift card for
wine: and they don’t drink alcohol. That unused or unredeemed gift
Continued on page 12
January/February 2019

Financial inclusion
with voice banking
By Henrique Godinho
W
hen Amazon’s Alexa made its Canadian
debut in November 2017, experts were
quick to speculate about what voice-
activated technology could bring to the banking industry.
What emerged was early experimentation towards the integration
of voice applications into general banking operations, like verbally
disseminating branch hours, locations and other general information
to customers through technology. Undeniably, this marked
significant progress towards a more innovative, technology-driven
banking industry. However, the sophistication of voice applications
at the time lacked the robust security and authentication features
that would arrive in Canada the following year.
Canada’s first-ever authenticated voice banking system launched on
August 14, 2018: a cutting-edge technology pioneered and launched
by Central 1, to address the prevalence of technology in our everyday
lives, and the changing face of today’s credit union member.
Combining machine learning, artificial intelligence (AI) and the
technological genius of popular virtual assistant Amazon Alexa,
the revolutionary voice banking system provides Canadian financial
institution and credit union members with a transformative digital
solution. One that adds convenience, connectivity and security to
their daily banking activities.
Central 1’s mobile banking and payments team followed best
practices in design thinking, customer experience and Lean
principles when developing the technology. Development was done
in conjunction with Point One Digital, a leading design agency
from San Francisco, Calif. that was instrumental in developing the
conversational user interface design strategy.
By simply using their voices, customers are able to conduct a
multitude of transactions with ease, including making payments,
sending money to vendors and transferring money between
accounts, among others. High-level authentication features have also
been purposefully integrated into the product in an effort to combat
any opportunities for security breaches or fraud, including OAuth,
the industry standard for Internet authentication and authorization.
Financial accessibility
However, an added purpose lies behind Central 1’s new digital tool.
Beyond making daily financial transactions more streamlined for
customers, the hope is that the voice banking system will operate
to improve financial inclusivity and access to financial education for
Canadians across the country.
Challenges of financial inclusivity and accessibility are felt by many
January/February 2019
Industry
Disruptors
Canadians today. Geographical boundaries and physical limitations
—such as motor skills challenges or visual impairment—are proven
factors that can hinder an individual’s access to the banking services
they require to be active members of the community. Bill C-81, the
Accessible Canada Act, now being considered by Parliament, aims
to remove barriers to Canadians. With the emergence of Central 1’s
voice banking system, therein lies tangible proof of the power of
innovative experiences to address those very challenges.
With remote capabilities and hands-free functionalities intact, no
Canadian will be bound by their physical location so long as they
have a device and Internet connection. In the same vein, the ability
to use simple voice commands to enact banking transactions will
empower those individuals that are confined by physical restraints.
Financial literacy and education
Unique to Central 1’s voice-activated banking system is its conversational
interface, which mimics human dialogue to provide assistance to
customers in the same way that a customer service representative
would at a branch. While the technology on its own is not new, the
potential for two-way interaction, as it stands in conjunction with a
digital banking tool, is the first of its kind in Canada.
The interactive nature of the platform lends itself to credit union
members as an opportunity for increased financial education and
literacy. Customers with questions regarding any aspect of their
financial lives—be it related to their financial institution’s services,
or more specifically about their personal finances—can simply use
their voices to prompt answers from Alexa. For instance, customers
can ask for investment planning advice and will be provided with
financial tips and recommendations they need. Customers are no
longer expected, let alone required, to make physical visits or pick
up the phones to interact with their local credit union. Financial
institutions can then fulfill their customers’ need for convenience
and efficiency in the services they use.
Central 1’s purposefully designed voice banking system is a rarity
in Canada and marks the disruptive power of FinTech innovation in
the banking industry. Through a digital solution that offers a balance
between convenience and security, the system is revolutionizing the
way credit union members bank.
The very nature of the system as a digital tool also has implications
for what the socioeconomic makeup of credit union members will
look like going forward. With Millennials and Generation Xers
being the primary adopters of digital technologies, the new voice
Continued on page 12
PAYMENTSBUSINESS 7
 Industry
disruptors
Making payments
acceptance
simpler
By Vincent Alimi
O
ver the past several years, the emergence
of new payment systems has made it
considerably easier and faster for businesses
and consumers to send and receive payments. Digital banking tools
have made it possible to transfer funds online or through mobile
banking apps directly to people you know, significantly improving
the overall payment experience.
Looking forward, the increasing demand for quick, convenient
and low-cost payment acceptance platforms, as well as the trend
toward providing a unified mobile experience, will narrow the gaps
between physical, digital, personal and commercial payments as we
advance towards a cashless society.
Privacy, security for cash-in-hand transactions
There remains, however, one unserved segment of the payment
landscape: cash-in-hand transactions.
Consisting of both payments to micro-merchants and peer-to-peer
(P2P) transactions, cash-in-hand payments can include anything from
service providers—like yoga teachers, gardeners and tutors getting
paid—to people selling belongings at garage sales or on Craigslist.
They can also include payments outside of buyer-seller transactions:
for example, collecting donations for charities or paying back debts
to friends and family.
The potential is there for digitizing these transactions. Though
declining albeit at a slower rate than in the past in Canada, cash
continues to be the most widely used payment means according to
Payments Canada, but by a slight margin1.
P2P payment solutions like Venmo, Zelle and Interac e-Transfer
are popular ways to send money to family and friends. However, the
downside with these methods is that they require contacts’ e-mail
addresses and/or mobile phone numbers to transfer funds. As a
result, they don’t meet all of consumers’ payment needs, specifically
where security is concerned. For some people, sacrificing a small
part of their privacy and contact details may seem like an acceptable
concession given the convenience offered by P2P payment services.
8 PAYMENTSBUSINESS
But what happens when they need to send money to a stranger
(stranger to stranger or S2S) or collect payment from a customer
without sharing personal information?
A simpler and secure answer
In response, Mobeewave has created a patented mobile-only “tap-
on-phone” solution enabling contactless payment acceptance on
smart devices such as cell phones and mobile wallets. The company’s
technology provides an in-person solution that addresses the challenge
of S2S payments. While the closed-loop approach of other payment
networks demands that both the payers and payees are connected on
the same social networks, use the same service or exchange contact
details, only the individuals receiving payments needs to have the
technology with Mobeewave’s innovative platform.
With Mobeewave, anyone can become a merchant and any phone
can become a terminal without any additional hardware or cost.
This technology is revolutionizing the way small businesses operate
as it allows merchants to collect payments from their customers
with just a tap of the payees’ credit cards or mobile wallets against
their smartphones. This proprietary technology presents great
opportunities for merchants to meet the growing expectations of
consumers with regards to ease of payment in today’s new mobile
age. For example, contract workers and freelancers—those in the
“gig economy”—depend on diversifying revenue streams and seek
payment systems as agile as their work requires them to be, with
more speed, efficiency and flexibility. Having access to a payment
acceptance tool that puts money in a person’s pocket almost
immediately allows workers in the gig economy greater financial
January/February 2019

control and enables them to thrive in the digital marketplace.
Mobeewave’s solution was developed to allow financial institutions
and network providers to offer clients a convenient, secure and
affordable method for digitizing cash transactions, enabling them
to reach otherwise unserved micro-, small- and medium-sized
businesses. As a result, the aforementioned vendors are able to open
up new verticals and increase revenue streams through value-added
services. Ultimately, Mobeewave’s solution allows banks to become
a payments platform provider, thus expanding their role within the
payments ecosystem.
How does it work?
Mobeewave’s patented solution enables secure acceptance of
payments of less than US$100. It harnesses smartphones’ near field
communication (NFC) capabilities and secure elements. For these
reasons Mobeewave is more secure than other mobile offerings,
which do not use the NFC and secure aspects of smartphones. It is a
faster way to be paid as the money goes directly into the merchants’
bank accounts in real time.
In line with payment industry security standards, Mobeewave is
licensed either as a white-label solution or as a software development
kit (SDK) to financial institutions and network providers around
the world. With no terminal costs and the added convenience of
How payments are made and managed payments is
undergoing an exciting evolution. Examples include:
• Contactless cards and mobile wallets
• Internet of Things
• Real-time payment rails
• Blockchain and cryptocurrencies
• ATM, cash and cheque modernization
But security and fraud risks also are rapidly evolving.
There are new techniques, tools, standards and regulations
to facilitate fast, intuitive, transparent and secure
transactions and processing.
Payments Business is a Lloydmedia, Inc publication.
Lloydmedia also publishes DM Magazine, Contact Management magazine
and Canadian Equipment Finance magazine.
January/February 2019
Industry
Disruptors
not having to license or purchase external hardware, it is a less
cumbersome alternative to traditional point-of-sale (POS) and mPOS
systems. With its patented technology, Mobeewave aims to shift the
payment industry from one based on hardware to a pure software
plane.
With deployments in Canada, along with Australia, India, Poland
and the United Arab Emirates (UAE), Mobeewave has worked with
financial institutions such as the National Bank of Canada and the
Commonwealth Bank of Australia. It has also formed partnerships
with payment companies such as Mastercard, Visa and Global
Payments, as well as technology manufacturers like Samsung.
Mobeewave’s technology is available through National Bank’s Easy
Pay App and is compatible with Visa and Mastercard credit cards,
Visa PayWave, Mastercard PayPass, Samsung Pay, Apple Pay and all
other HCE (host card emulation) mobile wallets.
Vincent Alimi is chief growth officer, Mobeewave (www.mobeewave.com). He has
been working in the area of payment and financial technology for more than 15 years.
Responsible for growth and innovation at Mobeewave, he is a specialist in mobile
ecosystems, mobile architecture, EMV, payment systems, mPOS architecture and
ecosystems and embedded applications, as well as contact, contactless and mobile
payment.
1 Michael Tompkins and Viktoria Galociova, “Canadian Payment Methods and Trends: 2018”,
Payments Canada, report, December 10, 2018.
Payments Business (www.paymentsbusiness.ca),
published by Lloydmedia, keeps track of these
trends and provides thought leadership from
industry experts.
For advertising and media partnerships contact
Mark Henry, Publisher
mark@paymentsbusiness.ca
905-201-6600 x223
For news and contributed articles contact
Brendan Read, Editor
brendan@paymentsbusiness.ca
905-201-6600, x227
PAYMENTSBUSINESS 9
 Industry
disruptors
There’s a new token in town
By André Stoorvogel
T
he way we pay is changing. Consumers are now
using their PCs, smartphones, wearables, cars and
even refrigerators to buy goods and services.
The size and value of the Canadian card-not-present (CNP)
market is therefore increasing as payment use cases across digital
commerce (e-commerce, m-commerce, Internet of Things) emerge
and mature.
The cost of convenience
This growth in adoption driven by convenience, however, has come
with a marked rise in fraud.
CNP fraud continues to surge worldwide and is set to hit USD
$7.2 billion by 20201. Recent research from Visa has found that CNP
fraud accounted for 78 per cent of all fraud perpetrated on Canadian
accounts. The report also highlighted that 74 per cent of fraud losses
at Canadian merchants are perpetrated in the CNP channel2.
Merchants must therefore contend with a growing threat
of compromised card-on-file databases and fraudulently-used
credentials.
More security = more false transaction declines
To combat this rise in CNP fraud, merchants and payment service
providers (PSPs) can deploy various technologies and techniques
such as 3-D Secure, validation services, historical data, real-time
monitoring and analytics and manual screening.
While all of these are valuable, and fraud prevention methods
and advances are undoubtedly being made to make these security
techniques more intelligent and improve risk decisioning, it is
apparent that there is work still to be done. Unnecessary false
transaction declines are outstripping the amount of actual fraud 13
times over in the U.S.3, meaning retailers are losing a total of $8.6
billion per year due to false declines compared to the $6.5 billion of
fraud they are actually preventing4.
Merchants, which are in a constant battle against cart abandonment,
must find an optimal balance between fraud prevention and their
abilities to effectively serve and sell to customers to ensure that
additional security measures do not lead to less revenue.
Introducing card-on-file network tokenization
The answer comes in the form of EMV network tokenization. It
describes the process whereby card networks such as Mastercard or
Visa replace a primary account number (PAN) with a unique payment
token that is restricted in its usage, for example, to a specific device,
merchant, transaction type or channel. It decreases the sensitivity of
the underlying payment credential.
With card-on-file network tokenization, the merchant only
stores payment tokens in their database rather than the actual card
10 PAYMENTSBUSINESS
numbers. This technique delivers various security benefits to the
digital commerce ecosystem by reducing the risks and mitigating
the impacts of malware, phishing attacks and data breaches. Better
fraud prevention will have a tangible impact on both consumers and
merchants. At the same time, it permits faster transactions with fewer
security-related “hiccups” when cards are accidentally declined.
Different tokenization types
Employing tokenization to reduce fraud is not a new concept in
e-commerce. Until now, however, it has been mostly limited to PCI
tokenization, which only tokenizes card data in the databases. In
contrast, network tokenization deploys tokenized data throughout
the transaction, meaning that the exposure of the original PAN is
reduced to a minimum, making fraud much less likely.
Network tokenization has the potential to lower false transaction
declines, as the merchant or PSP can rely on fraud scoring data from
the card network that are associated with the issued tokens. This can
potentially provide greater accuracy on the validity of transactions
than internal fraud management tools.
A further unique benefit of network tokenization is that it enables
consumer payment details to be instantly refreshed when a card is
lost, stolen or expires. This removes the need for a consumer to login
to an online shopping account to update their details or to miss out
on a subscription due to redundant card credentials. It also means
higher transaction approvals and increased revenues.
Finally, network tokenization is an opportunity for PSPs to
differentiate and generate new revenues in Canada’s extremely
competitive payments landscape by bringing forward new services
to support e-commerce and m-commerce tokenization.
Value for all
Crucially, network tokenization offers much more than simply
enhancing security. It can significantly increase convenience for
consumers and create efficiencies for merchants.
In Canada, where cash use is relatively low and card and mobile use
are very high, this brings huge value to the digital payments space,
so we can expect to see growing momentum for the technology in
the coming months and years.
André Stoorvogel is director, product marketing, payments at Rambus
(www.rambus.com). Rambus’ Token Gateway for E-Commerce solution is one of the
first to be qualified under the “Visa Ready” programme. This enables token requestors
like online merchants, payment service providers and acquirers globally to quickly and
securely connect to multiple network tokenization services such as the Visa Token
Service to tokenize card-on-file e-commerce transactions.
1 RSA, “3-D Secure: The Force for CNP Fraud Prevention Awakens”, report, January 2016.
2 Visa, “The Future of Payment Security in Canada”, report, October 14, 2017.
3 Al Pascual, Kyle Marchini and Aleia Van Dyke, “Overcoming False Positives: Saving the Sale
and the Customer Relationship”, white paper, Javelin Research, September 21, 2015.
4 Evan Bakker, “THE FALSE DECLINES REPORT: The $8.6 billion problem undermining
e-commerce merchants' fraud prevention strategies,” Business Insider UK, July 29, 2016.
January/February 2019

Unifying mobile and
payments cards
By Thomas Rex
C
anada has embraced the mobile revolution.
With smartphone penetration at 72.1 per
cent (the global average is just 32 per cent)1,
it’s also one of the few countries globally to accept the three major
“OEM Pay” platforms: Android Pay, Apple Pay and Samsung Pay.
Offering convenience, “cool” and a range of value-added services in
consumers’ hands, it’s unsurprising that many Canadian banks are
adopting a mobile-first strategy2.
This trend has seen some claim that the card is dead—or at least,
dying—but banks should take care not to narrow their fields of vision
too far. Customers like flexibility and options in their financial lives.
Despite the growth of mobile payments, cards continue to
dominate Canada’s payments landscape3 and contactless card
payments have seen rapid adoption, making the country one of the
leading markets for them.
But the humble payment card must not stand still. Instead it must
evolve to meet the demand for the same seamless and, importantly,
secure contactless user experience that mobile provides. This is why
mobile and cards must work together.
Contactless card concerns
Canadians prioritize speed and efficiency when it comes to
payments 4. Contactless cards can match the speed and convenience
of mobile, but a crucial piece of the puzzle has been missing, namely
strong authentication to minimize fraud.
Signatures are insecure, PINs are limited and consequently, and
understandably, many consumers are still hesitant about using
contactless. A recent study found that 55 per cent of Canadians not
utilizing the contactless feature on their cards said they were not
comfortable tapping”5.
Biometrics offers a way forward. Consumers are already familiar
with biometric authentication from the mobile world as a means
of adding security without compromising usability. Indeed, 85 per
cent of Canadians are very interested in biometrics to verify identities
to make payments6. Far from killing cards, the use of biometrics in
mobile payments has paved the way for a logical evolution of the
contactless card.
Introducing the biometric payment card
Biometric technology is the key to combatting these security concerns
without compromising on the user experience (UX). Biometric
smart payment cards would have ultra-thin fingerprint sensors;
users can simply place their fingers on them when they tap, which
January/February 2019
Industry
Disruptors
authenticates transactions in under a second. As all biometric data is
stored securely in the cards’ secure elements, all sensitive biometric
data remains encrypted in possession of the users and cannot be
accessed should the cards be lost or stolen.
In short, consumers can have all the speed and convenience of
contactless payments with the added confidence and security of
biometrics.
Cards and mobile: a win-win
Many banks and retailers are seeing mobile as central to their
strategy to improve customer experience and satisfaction. But
crucially, they need not to overlook cards now that biometrics can
unify the authentication experience.
Unlike with mobile pay platforms and wallets, biometric smart
card users can enjoy the same seamless UX at any contactless
terminal, regardless of the country, point of sale (POS) infrastructure,
smartphone model or battery level. As the cards’ fingerprint sensors
are powered by the payment terminals, just like contactless cards,
there are no batteries to recharge or upgrades to make to the
existing terminal infrastructure.
Payment schemes ensure cards entering the system will work
securely and in-line with international and domestic requirements,
including EMV and ISO standards. As such, a biometric payment
card issued by a bank in one country can be used to make payments
safely in another. Banks will be able to know who is paying and
consumers can have confidence that their money is safe.
With improved security, banks are also given the confidence to scrap
the payment caps, thereby offering even more flexibility and freedom
for “tap and go” payments. This will in turn increase both spend and
throughput for retailers, as well as bringing increased loyalty and trust
to banks through fraud reduction. Everyone’s a winner.
There’s no “one size fits all”
If the evolution of payments has taught us anything, it’s that trust
and convenience drive adoption. However, the fact remains that there
is no “winner” when it comes to payments. Consumers demand
options and flexibility, choosing different methods of payment
depending on the type of purchase. Banks must meet this need.
Mobile payments and adjacent services will undoubtedly form a big
part of Canadian banking strategies but neglecting the payment card
would be short sighted. By taking the Canadians’ love of contactless
and adding the security of biometrics, the biometric smart card can
offer the perfect partner to work in tandem with mobile.
And just think of how these technologies could combine in the
PAYMENTSBUSINESS 11
 Industry
disruptors
future. What if the location services within your banking app were
used to confirm that your smartphone was within 10 metres of a
shop where your card was used?
Biometric smartcards are the natural next step for the Canadian
market. They add trust to contactless without compromising
experience while giving banks the confidence to scrap that niggling
payment cap. What’s more, when combined with mobile, it creates
a consistent, trusted customer UX to payments.
This balance of choice with familiarity, security and convenience,
is met perfectly by biometrics. Secure payments, at your fingertips.
Watch this space, Canada!
Thomas Rex is senior vice president of smart cards for Fingerprint Cards AB
(www.fingerprints.com). He has 30 years’ experience in the telecoms and mobile
industries. Fingerprint Cards’ solutions are found in hundreds of millions of devices
and applications and are used billions of times every day.
1 Newzoo, “Global Mobile Market Report”, report, September 11, 2018.
2 TSYS, “2018 Canadian Consumer Payment Study”, study, November 27, 2018.
3 Michael Tompkins and Viktoria Galociova, “Canadian Payment Methods and Trends: 2018”,
Payments Canada, report, December 10, 2018.
4 “Canadian Payment Methods and Trends”, Ibid.
5 “2018 Canadian Consumer Payment Study”, Ibid.
6 Mike Lloyd, “Most Canadians interested in biometrics replacing passwords: survey”, News
1130, January 10, 2018.
THE NEW $10 BILL
Now in circulation
bankofcanada.ca/vertical10
#vertical10
12 PAYMENTSBUSINESS
Cashless payments: there’s an app
for that
Continued from page 6
money could become a thing of the past with the newer forms of
digital payments.
Rather than presenting someone with a brand-specific gift card
on their birthday, university graduation or wedding day, simply
transferring a sum of money to their FOOi account presents a
seamless, hassle-free and instant alternative. Chances are that the
recipient will actually use the well-intended gift of money that you’ve
transferred into their digital wallet.
There has been some concern that the poor and “unbanked”
(those who, for various reasons, aren’t able to establish credit and
debit cards) will have a difficult time in the impending cashless society.
Trend-watchers cite the inability of certain members of society to
afford iPhones and other digital devices as a challenge. But it should
be noted that cashless payments forms, such as FOOi, can actually
help the unbanked who can’t qualify for credit cards. Once they’re
set up on such digital payment systems—which doesn’t require a
lengthy approval process—they’re free to join the cashless society
just like everyone else.
Stay tuned as disruptors in the payments industry give traditional
financial institutions a run for their money: in a good way.
David Morrison has been immersed in the financial services industry in Canada for the
last three decades. As principal of Morrison Financial, (www.morrisonfinancial.com)
a company he founded in 1987, the Toronto-based executive has 30 years of experience
in private capital markets. His observations of the evolving cashless society and changing
trends in P2P and P2B banking prompted him to launch, with business executive David
Cynamon, FOOi, a digital payments application for mobile that enables Canadians to
make instant P2P and P2B payments.
1 “Going Cashless: What Can We Learn from Sweden’s Experience?”, Knowledge@Wharton,
interview, August 31, 2018.
2 Oliver Wade, “Cashless payments overtake cash transactions”, MoneyAge, January 9, 2019.
3 Westpac Banking Corporation, “Australian smartphone users predict the nation will be cash
free by 2022”, press release, September 21, 2015.
4 Michael Tompkins and Viktoria Galociova, “Canadian Payment Methods and Trends: 2018”,
Payments Canada, report, December 10, 2018.
5 Kari Paul, “$1 billion in gift cards go unused every year—here’s how to avoid that”,
MarketWatch, January 1, 2018.
Financial inclusion with voice
banking
Continued from page 7
banking system caters to their desire for immediacy and digital-
friendly services. It also begs the question: will the industry see an
uptick in credit union members stemming from those particular
demographics?
More generally, the system is inherently inclusive of a broader
user base, which drives home the importance of design thinking in
product design, and the impact of technology in spearheading social
inclusion and bringing remote communities together.
Henrique Godinho is vice president, digital platforms, Central 1 (www.central1.com).
January/February 2019

The case for adopting
ISO 20022
By Edgar Barbosa
B
usinesses that are looking to keep up with the
information demands of this transformative
age need to evolve their payments capabilities.
The ability to capture and consume greater volumes of more detailed
data can provide companies with the leverage they need to create
differentiation in the market.
ISO 20022 is the global standard governing payment messaging
structures and is considered an essential component to a modern
payments infrastructure. It introduces a greater range of required
and optional data fields to enhance remittance information and
allows for transmission of user defined fields including links.
ISO 20022 provides the necessary standards to create a common
messaging format and also allows for adaptation to meet specific
requirements for Canada.
So far, ISO 20022 has been adopted in more than 30 countries
around the world. Countries with regulation mandating the use of
the standard have embraced it faster than others.
In Canada, Payments Canada's payments modernization initiative
includes the implementation of ISO 20022 as the foundation for
payment messaging across all modernized payments systems.
Payments Canada intends to leave as little open to interpretation
as possible in order to drive a consistent adoption of the standard.
The first instance of the rollout is expected to be the inclusion of the
messaging standard in the launch of the real-time rail, expected to
go live in 2020.
The benefits of implementing this global standard are substantial.
For example, the requirement for specific mandatory defined data
fields could help increase interoperability both domestically and
internationally. The incorporation of optional user-defined fields can
help increase the level of automation and value-add offerings that
businesses can bring to market. There are also material efficiency
gains that Canadian businesses can unlock by implementing ISO
20022. Here are several of them.
Productivity improvement. The availability of greater and more
detailed remittance information can help simplify business processes
to improve productivity. For example, it can reduce the need for time-
consuming payment investigations and time spent capturing detailed
bank account information from customers and suppliers. The increase
in automation would also enable a re-alignment of skills to meet
the new demands of technology changes and increased customer
expectations. Finally, augmented data and visibility can allow
companies to better manage their liquidity requirements, enabling
January/February 2019
Payments
Modernization
more efficient cash management and forecasting processes.
Interoperability across geographies. Improved payment
standards alignment across jurisdictions can increase the efficiency
of international payments. As remittance information becomes
standardized, the need for requisite processes for international
payments diminishes, reducing the dependency on high-cost
intermediaries. It also has the potential to benefit companies with
a multinational presence by expediting international payments that
today are subject to long delays.
Enhanced analytics capabilities. Richer remittance data can
facilitate the use of payments-related data to contextualize and
personalize customer interactions, enhancing customer loyalty and
satisfaction. It may also allow companies to identify competitive
advantages from business partnerships to better meet customer
needs. A potential use case would be including a link to an
employee’s paystub within the payroll remittance, allowing viewing
of detailed payroll information when an employee checks their
personal account balance.
Mitigation of operational risk. As companies consume, store and
process larger amounts of payments data, they gain greater visibility
into their supply chains. This can help identify concentration risk or
vendors that may be under hardship. It may also open the door to
better matching cash outlays to needs faster, helping optimize the
company’s investments.
Canadian companies are at different stages in their payments
modernization journey. Some haven’t begun planning for this
transformation, while others have significantly developed their
payments capabilities. Many companies with global footprints have
already established projects to enable implementation of ISO 20022
in their payment processes. As companies ramp up their efforts in
this area, there are some key points to consider:
• The interpretation of the standard needs to be consistent.
Lessons learned from implementations in other jurisdictions
highlight that there is both a dependency and a requirement to
align with partner financial institutions in order to understand their
interpretation of the ISO 20022 standard. Some companies with
operations in Europe indicate that variability in bank file formats
persists, despite the adoption of ISO 20022;
Continued on page 17
PAYMENTSBUSINESS 13
 B2B
Streamlining supply
chain payments
By Patrick Bermingham
A
surprising number of organizations across
Canada still rely on traditional payments
methods and paper invoicing to pay their
suppliers. As recently as 2017, cheques were the most commonly
used payment method for both enterprise-scale corporations and
SMBs (small to medium businesses), with 70 per cent of SMBs writing
cheques to pay business expenses that year1.
While this approach has some advantages, the stretching of
standard payment terms—particularly in embattled sectors like
construction—is causing suppliers considerable pain. In Canada, the
average invoice-to-cash turnaround time is approximately 54 days2.
At first glance, this looks like the odds are stacked against suppliers.
In truth, however, the traditional model doesn’t really benefit buyers
either. The high volume of human and capital resources required
to set up and maintain administration-heavy supply chain finance
processes means buyers often struggle to onboard new suppliers.
This “process overhead” can be so cumbersome that many buyers
become resistant to change, opting instead to limit their supplier
choices to a small number of partners, meaning they end up doing
business with only a tiny fraction of the overall market.
Thankfully, digital payments integration and the popularization of
B2B card payments in the supply chain is enabling dramatic change.
Here, buyers, acquirers and suppliers can all plug into independent
stakeholder-agnostic payments platforms that offer simplicity and
efficiency as fundamentals, by handling the invoicing, payment and
reconciliation “heavy lifting” on their behalf.
Card payments and processing
Card payments enable large parts of the payments process to be
automated and streamlined, reducing administrative headaches
for procurement teams and suppliers alike. For example, Level 3
purchasing cards utilize bespoke electronic card management
information systems. These systems receive invoices electronically,
cost-allocate and then reconcile them, all without human input.
This creates significant process efficiencies by freeing up internal
resources at either end. The most recent data available from North
America (Canada and the U.S. shows that in 2014, only 24 per cent
of all invoices were sent electronically. Furthermore, this is only
expected to grow to 38 per cent by 20243. Partially due to a lack of
government action in the two countries, this predicted adoption rate
is notably slower than Europe’s: where several countries are currently
in the process of mandating e-invoicing.
Best of breed B2B payment processing platforms also provide
14 PAYMENTSBUSINESS
detailed e-mail remittances and portals accessible to buyers and
suppliers 24/7. These portals include information about past and
incoming payments and calculators that allow stakeholders to input
their data to show the cost of payments and savings offered, thus
removing any uncertainty and complexity from the equation.
Onboarding
Stakeholder-agnostic payments platforms circumvent the process
overhead for buyers by providing fully managed end-to-end supplier
onboarding services, including bespoke microsites with detailed
instructions and tailored correspondence for buyers to share with
their suppliers. This ensures that merchants can be onboarded quickly.
It also creates an established business network of connected buyers
and suppliers, further simplifying card issuance and acceptance and
giving buyers access to a wide range of qualified merchants.
In this way the digital transformation of supply chain payments
is creating new value, fundamentally changing the way buyers and
merchants find, evaluate and interface with one another.
Establishing partner-of-choice status
Suppliers that are connected to a well populated platform can also
position themselves favourably to buyers. What was once merely
transactional has now become a tool to enable the harmonization
of commercial engagement, which is in turn enabling stronger and
deeper partnerships.
Payments integration is playing an increasingly influential role in
supplier selection, evidenced by the sharp rise in tender documents
that enquire about supplier acceptance of card payments, and even
whether they accept Level 3 purchasing cards specifically. Suppliers that
can answer in the affirmative can position themselves more favourably
in tenders with any buying client operating a card program.
Joining an established business network is also beneficial for
suppliers as it opens them up to other buyers and issuers in the
network. Plus, as card acceptors, they automatically become
part of the network of the card schemes they partner with (Visa
or Mastercard, for example). Since the card schemes publish lists
of accepting suppliers, buyers use these to identify suppliers on
the same network as them, thereby increasing merchant visibility
amongst their target customers and driving business growth.
Faster, integrated payments
Ultimately, digital payment integration technologies go beyond
Continued on page 17
January/February 2019

Stopping revenue leakage
By Justin Schweisberger
C
anada’s ongoing transition to a new payments
infrastructure that provides full remittance
data for electronic transactions will be a huge
boon for businesses, accelerating the migration from cheques,
reducing manual reconciliation and streamlining the supply chain
and collections.
All of which is great news for CFOs and payment executives at
B2B companies, because it means they can turn their attention to
another area where new efficiencies are ripe for the picking: revenue
leakage.
Revenue leakage is money that’s lost when businesses fail to
capitalize on the full value of their current, contracted commercial
relationships. Every quarter, B2B companies lose up to five per cent
of their revenue due to errors and process gaps that prevent account
managers from accessing important information like renewal events,
potential price increases and customer contract obligations1. In large
organizations, the losses can easily run into the tens of millions of
dollars every year.
Nearly all B2B companies experience some amount of revenue
leakage. The chief cause of the income drain is an inability to see
and act on the right information at the right time.
B2B relationships are often highly negotiated, with numerous
customer-specific requirements encased in the dense legalese of
contracts, where they are hard to extract or automate. Customer
data is scattered across a jumble of systems including contract
repositories, customer relationship management (CRM) platforms
and quote-to-cash tools. As a result, it’s difficult to get unified
pictures of the relationships. At many businesses, a history of
multiple acquisitions and ever-expanding product lines add to the
complexity, thereby increasing the chance of revenue gaps and the
size of the potential loss.
The good news: a well-targeted revenue project can deliver
results quickly. And because this is money that’s already in the system
or on your radar it has little associated cost of goods and services:
and can deliver a disproportionate impact to the bottom line.
Where to find revenue leaks
At my company, Pramata, we’ve identified seven areas where
revenue leaks are most likely to occur, based on more than a
decade of helping companies maximize the value of their customer
relationships.
1. Renewal management. Contract renewals are the perfect
moment to expand the relationships and renegotiate unfavourable
terms. But understanding the attributes of customers that are most
likely to renew and those at risk often means sorting through years
of historical documentation. Even simple but crucial data points,
such as contract renewal dates, can be difficult to determine
January/February 2019
B2B
without a hunt through multiple systems and documents. Result:
excess churn.
2. Contracted pricing variables. Contracts often include provisions
that allow the vendor to raise prices, for example based on
increases in the Consumer Price Index over multi-year agreements.
But tracking and managing these mechanisms consistently is a
challenge. Sales teams may not even know they exist. Discounts
can be problematic too; companies may miss their expiration
dates and fail to deactivate them on time. Result: missed revenue
growth.
3. Sales process productivity. The information that sales teams
need to hone their pitches is located in multiple places and not
readily accessible. It’s often out-of-date, inaccurate or incomplete.
Sales reps spend too long pulling the intelligence together and, in
the meantime, find themselves outflanked by competitors. Result:
fewer deals processed.
4. Entitlement and billing reconciliation. Companies aren’t
always sure which products customers have purchased or
what permissions and authorizations they’re entitled to. For
subscriptions or services, they strain to compare actual usage to
contract. Result: overcharged or undercharged customers.
5. Service obligations. Negotiated service inclusions and exclusions
vary so widely that it’s hard to know what should or shouldn’t
be billed. Warranties, specific maintenance commitments for
products you’re sunsetting, even special invoicing obligations…
it’s a long list, and most B2Bs struggle to manage it. Result:
unnecessary service penalties.
6. Expansion opportunities. It’s hard to identify white-space
opportunities when you’re not sure what customers already own.
Upsell and cross-sell opportunities evaporate when companies
lack insight into customers’ previous buying patterns. Result:
suboptimal expansion offers.
7. Deferred revenue. Right-of-return agreements complicate
revenue recognition. Payment terms are too variable and often
too long. Result: delayed revenue.
Fixing revenue holes in three steps
Every business is different but knowing where revenue leaks are
most likely to happen gives you a head start on freeing up trapped
customer value. I recommend these tried-and-true steps for your
revenue recovery initiative:
Step 1. Find the gaps. Identify the revenue leakage zones that most
likely apply to your business. If you’re a pharmaceuticals distributor,
for example, you may have complex rebate structures and minimum
purchase commitments that affect billing, so take a close look at
contracted pricing variables. Mature high-tech firms often confront
Continued on page 17
PAYMENTSBUSINESS 15
 B2b
STP for SMBs By Blair Jeffery
T
he growing acceptance of virtual cards,
sometimes referred to as v-cards, by small
to mid-sized businesses (SMBs) is increasing
exponentially as billers embrace the improved security and
convenience of this digital payment method over paper cheques.
But for most SMBs, including business to business (B2B) companies,
the manual work of processing and reconciling the payments
remains a challenge. While there are automated reconciliation and
straight-through processing (STP) solutions for large businesses,
SMBs continue to be underserved due to their smaller and less
frequent invoices.
Things appear to be changing, however, as FinTechs realize
the commercial value of serving this massive market of potential
customers.
What is STP?
So, what exactly is STP? STP is a method used within the payment
ecosystem to speed up the processing times of the key components
of remittance and settlement. Its objective is to streamline payments,
so that once a transaction is initiated, all activities associated with
the payment processing are automated from start-to-finish without
manual intervention.
STP, then, allows buyers and billers to electronically share
information for quicker, more secure and effective transaction
processing. When businesses adopt STP solutions, errors are reduced
as accounts receivable employees are freed up from manually
entering information and verifying whether a transaction has fully
processed.
According to the Association for Financial Professionals, 47 per
cent of organizations currently use STP to manage some of their
payments and 44 per cent use STP to manage some receivables1.
These are typically large businesses for whom sophisticated end-to-
end payment cycle management solutions that automate manual
tasks have been developed by third parties. In some cases, the
businesses themselves have the resources and scale to develop their
own solutions, such as proprietary payment portals.
Realizing v-card potential
Virtual cards (v-cards) offer a number of benefits that have led
to their increased adoption by SMBs. In addition to the speed of
payment, virtual cards greatly reduce the risk of fraud and identity
theft through their one-time use and by protecting the customer’s
personal and financial details. The resulting increase in v-card has
necessitated more sophisticated solutions, such as STP, which allows
billers to eliminate the manual tasks associated with reconciling
cheque payments since all payment and invoice details are received
electronically.
16 PAYMENTSBUSINESS
Vecteezy.com
However, to realize the full potential of STP using v-cards
the payment industry must continue to broaden the reach of
its networks so that more SMBs are capable of accepting v-card
payments. Breaking down traditional v-card acceptance barriers—
like delivering payments via the SMBs’ preferred delivery methods,
such as web, IVR, phone agents, e-mail and secure fax—are key to
increasing SMB acceptance rates.
In order to serve SMBs, and capture the opportunities, FinTechs
must be creative and flexible in their approach to developing new
tools and systems for this market. They must provide solutions that
address these businesses’ key challenges, such as simplified user
interfaces, minimized authentication processes and the ability to
facilitate the downloading of remittance information to commercially
available products like QuickBooks and Xero.
Modernizing with STP is win-win
FinTechs collaborating to develop STP solutions for SMBs is a tide
that lifts all boats. Not only will suppliers benefit from the efficiency
and cost savings of automation, but other players in the ecosystem
who deliver payments will also benefit through an increase in
electronically delivered payments, generating revenue and improved
service for their clients.
Other players in the payment ecosystem can profit from improved
adoption of STP solutions by SMBs. Accounts payable solutions
providers, processors and corporate payables departments at mid- to
large banks can often have as much as 70-plus per cent of payments
that cannot be delivered via v-cards. This is due to billers’ inabilities
to accommodate the manual reconciliation of other relevant
information, leaving them to rely on the same old costly and archaic
delivery methods. By improving STP processes for SMBs, these players
will greatly expand their reach of serviceable suppliers, resulting in
higher revenues and better service for the clients they serve.
Blair Jeffery is chief operating officer for Noventis, Inc. (www.noventispayments.com).
Blair has over 18 years of payments industry experience with a strong focus on B2B
payments.
1 Association for Financial Professionals, “2016 AFP Electronic Payments Survey”, report,
September 2016.
January/February 2019

The case for adopting ISO 20022
Continued from page 13
• Global companies may have different regional priorities for
ISO 20022 implementation. Global companies often need to
rank their project spend across geographies to meet budgetary
goals. They often prioritize projects stemming from regulatory
change. For many companies in Canada, building the case for
change for ISO 20022 adoption will require them to compete for
global funding;
• Benefit realization may be constrained by the pace of
adoption. While cheque usage continues to decrease in Canada
a large proportion of businesses still require cheque payments.
This is largely due to the detailed remittance information that
accompanies cheques required by the recipients’ processes. The
ability to transfer more remittance information can accelerate
migration to electronic payments. This may require re-work of
internal processes to accommodate new data and will continue
to depend on the adoption of the standard across the company’s
value chain; and
• Cost of processing incremental data needs to be factored
into the case for change. Organizations may need to update
their infrastructure to accommodate the increased volume of
data and to take advantage of the richer information provided
through the ISO 20022 format. That may include retrofitting
legacy technology stacks to produce the data required to enable
ISO 20022 messaging. It may also include the need to undertake
data governance and storage revisions.
Despite the complexity of implementation, businesses in Canada
have an opportunity to unlock significant benefits through adoption
of ISO 20022, regardless of how much they have been able to
advance their payments capabilities in recent years. Productivity
improvements from greater automation and the ability to better
manage operational risk can positively impact the bottom line. But
the journey to realize those benefits needs to be well understood.
Each organization will face unique challenges in enabling their
technology stack to leverage and monetize the large amount of
payments data that can be exchanged in an ISO 20022 enabled
infrastructure. The effort is well worth it.
Edgar Barbosa is payments leader at EY Canada. For more information on financial
services trends, visit www.ey.com/ca/financialservices.
Streamlining supply chain payments
Continued from page 14
improving efficiencies and reducing costs: they create opportunity.
Payments Canada has taken steps to modernize the national
payment infrastructure by working to provide a real-time rail back-
end by 2020. However, there are many more opportunities open
January/February 2019
B2B
to businesses. All parties benefit from the added value accessed
through the smart application of flexible technologies that bring
buyers, suppliers, issuers and acquirers closer together.
And, perhaps most importantly, no one needs ever write another
invoice again.
Patrick Bermingham is CEO at Adflex (www.adflex.co.uk). He has over 20 years’
experience in the payments industry, overseeing the growth and development
of Adflex as a premier B2B payments service provider. Prior to Adflex, Patrick was
specialized in enterprise resource planning (ERP) system design and development
primary targeting mail order and national distribution sectors.
1 Michael Tompkins and Viktoria Galociova, “Canadian Payment Methods and Trends: 2018”,
Payments Canada, report, December 10, 2018.
2 Atradius Collections, “Payment Practices Barometer Americas 2018”, June 2018.
3 Federal Reserve Bank of Minneapolis, “U.S. Adoption of Electronic Invoicing: Challenges and
Opportunities”, report, June 30, 2016.
Stopping revenue leakage
Continued from page 15
challenges around entitlements, for example in monitoring user
licenses and software licenses.
If no one particular area stands out consider renewal management
for contracts coming up in, say, the next quarter. This leakage
zone offers the opportunity for a holistic review of the customer
relationships; it’s often one of the quickest routes to revenue
recovery.
Step 2. Choose your customer focus. Not all customer relationships
are created equal and some will provide more fertile ground for
revenue initiatives than others. Look for those relationships that can
produce the most rapid revenue gains. Perhaps your top 20 most
heavily negotiated contracts provide plenty of examples of the
leakage zones you identified in Step 1. Or perhaps a broader band of
mid-level accounts are constricted by product or pricing structures
that are hard to manage. You’re looking for a quick win that shows
the tangible financial value from eliminating a source of revenue
leakage.
Step 3. Repeat and sustain. With a quick win under your belt, it’s
time to look around for other leaks to fix. You’ll want to create a
long-term strategy to ensure that preventing and eliminating revenue
leakage becomes embedded in your organization’s DNA.
With a carefully targeted, repeatable revenue recovery programme,
finance leaders can ensure that revenue delivery becomes every bit
as efficient as the payments pipeline. And that can only improve
B2B organizations’ customer relationships as well as their financial
performance.
Justin Schweisberger is the chief product officer at Pramata (www.pramata.com),
which helps B2B enterprises digitize their commercial relationships to eliminate
revenue leakage. Prior to joining, he managed merger and acquisition (M&A) activities
for the Husch Blackwell law firm.
1 Steve Van der Steen and Ludwig Bollaerts, “A powerful and effective answer to revenue
leakage?”, EY, 2017.
PAYMENTSBUSINESS 17
 Restaurants
foodservice

Pleasing restaurants’
payments
palates
By Alex Barrotti

H
istorically, the restaurant
industry has been slow
to adopt technology. The
paper pad and pencil have been the standard
for hundreds of years in restaurants and are still
used by many smaller food establishments.
However, with the advent of tablet-
based point of sale (POS) solutions that offer
low upfront cost hardware and monthly
subscriptions, restaurants of all sizes are
finding it possible to embrace the advantages
technology can offer. This includes payment
processing. Even roadside food vendors,
tiny food shacks and food trucks now find it
essential to provide their patrons with the
multiple payment options, besides cash, that
only payment processors can offer.
The explosion of online ordering and
delivery apps—with no clear market leader
or consolidation yet in sight—are other
technological advancements that restaurant
operators are finding that provide an edge in
highly competitive markets.
Yes, all restaurateurs don’t 100 per cent buy
into the maxim: “If you are not on Yelp or Grub
Hub, your customers will go someplace else.”
But most restaurants that are not currently
active with an online ordering marketplace are
at least exploring their options to make sure
they do not get left behind competitors that do
have a presence.
At the same time, besides their core business
of serving great food in an inviting environment,

18 PAYMENTSBUSINESS January/February 2019


restaurant owners are challenged to navigate technology. They are
finding that entering orders and payments from multiple marketplaces
can be time-consuming and error-ridden without the right tools in
place. Owners are also having to learn how and when to be engaged
on which social platforms and ways to create loyalty rather than
accepting business from one-off customers who only buy the best
deals and which mobile wallets or payment types to accept.
While each of these technologies can increase market reach and
operation efficiencies, each has fees that chip away at the bottom
line and can cut margins to unprofitable levels when implemented
with a shotgun approach. But determining the best mix of these tools
can be daunting even for the largest operations and experienced
technologists, never mind the smaller operations with fewer
personnel and capital resources.
In good part due to these complexities, industry-targeted mobile
or tablet-based POS solutions have emerged as the hub of restaurant
operations and payment processing. They are designed to mirror the
way restaurants actually operate, integrating ordering, payment
processing, deliveries, online marketplaces, loyalty and operations
into a single efficient access point that is easy to manage by restaurant
operators. These tools can fit the budget and functionality needed
by virtually any size restaurant, from start-ups, small cafes, roadside
shacks and food trucks to established multi-unit operations that
are upgrading. They can also generate reports of the multiple costs
affecting profitability that help the restaurant operator make better
business decisions.
Determining the best mix of these
tools can be daunting even for the
largest operations and experienced
technologists.
The industry’s payments processing order
One of the most important commitments restaurant owners realize
very rapidly that must be made is the types of payments they will
offer customers and the best way to process them. It may surprise
some, but at TouchBistro we often get calls from new restaurant
owners who want to be up and running on their POS in just a few
days. About half of the nearly 500 restaurants that start using
TouchBistro each month do not already have a payment processor
and ask for recommendations.
During onboarding, we standardly ask the restaurant operators
what is important to them in a payment processor. The top
asks are:
• Instant approval to accept payments;
• Transparent and competitive fees;
• Accept all forms of payment (the more technically-savvy ask about
near field communications (NFC) and mobile wallets;
January/February 2019
Restaurants
foodservice
• Security, namely EMV/PCI compliant (when they understand what
this means);
• Reasonably priced payment devices that can be used mobile or
stationary; and
• Able to accept payment information from the POS or online
marketplaces directly without having to rekey the price into the
payment device and have it fully integrated into their accounting
system.
The small print that allows payment
processors to increase the rates...
results in serious discontent amongst
restaurateurs.
We have found restaurant operators are extremely displeased when
they realize the “free” payment processing equipment they were
given ends up costing considerably more from back-end fees over
the term of the contract they locked into than the hardware would
have cost if they purchased it up front.
Understandably the lowest rate is desired by most restaurant
owners. The flat rate pricing model, while inviting due to its simplicity
to food establishments that are new to payment processing, inevitably
becomes less popular as the restaurant operators realize this model
is generally the most expensive. The hidden fees, complicated
calculations and statements and misleading advertised lowest
qualified discount rate all leave restaurant owners disgruntled with
Interchange differential and tiered pricing models - and searching
for alternatives.
The small print that allows payment processors to increase the
rates during the term of the contract at any given time, needless
to say, results in serious discontent amongst restaurateurs who are
generally already working on very tight margins.
Working with restaurants
Payment processors, just like online marketplaces, will need to
be sensitive to these issues as restaurant owners become more
knowledgeable about what is available from vendors and how
the offerings affect their bottom lines. Some consolidation and
attrition of these companies that serve the restaurant segment
are unavoidable long term. Those left standing will be the ones
that understand the nuances of the food service industry and are
committed to partnering with hard working restaurateurs to help
them flourish.
Alex Barrotti is CEO and founder, TouchBistro (www.touchbistro.com). He is a
successful serial entrepreneur who has emerged as a visionary in the advanced
technologies that help retail and hospitality businesses expand. As of today,
TouchBistro has helped over 15,000 restaurants in more than 100 countries to increase
sales, improve the customer experience and make better business decisions.
PAYMENTSBUSINESS 19
 Atms/abms
Cash is
dead:
long
live
cash!
By Patrick Léonard
T
echnology exerts an oversized impact on our
world, and in the last 20 years every sector
has been disrupted. Processes that have been
altered to embrace change now face a cycle of constant upheaval
in an effort to keep pace with the latest tech trends, which are
adopted quickly and abandoned just as fast as the newest apps and
tech take hold.
Few industries have embraced these changes as quickly and
successfully as the personal finance sector. Credit unions and
their big banking competitors have collectively invested billions of
dollars over the past two decades to take advantage of the process
improvements and significant cost savings to be gained from the
digital revolution.
But there have been casualties. And one of them is the almighty
dollar.
Canadians are world-renowned for their willingness to adopt new
technology, so much so that several of our major city centres have
become hotbeds for innovation and technology.
And with the evolution of the financial technology (FinTech) sector,
Canadians have proven themselves eager to tap, swipe or click their
20 PAYMENTSBUSINESS
way through purchases.
Didn’t you know fishing for a bill in your pocket to pay for a pack
of gum is just so…analogue?
That’s a compelling narrative for the progressive FinTech sector,
but it’s far from the whole story. And the story of cash use in Canada
is far from its final chapter.
Cash facts
According to a 2012 report from the Bank of Canada, The Changing
Landscape for Retail Payments in Canada and the Implications for
the Demand for Cash, cash accounted for more than 80 per cent
of the volume and about half of the value of all point-of-sale (POS)
transactions in Canada in the 1990s. In 2011, these shares dropped
to below 50 per cent in volume and less than 20% in value.
By the time 2017 rolled around, cash use had stabilized. In the
Bank of Canada’s August 2017 review, cash use rebounded back
to 51 per cent of the volume of POS transactions. And while it still
represented the smallest value share at 24 per cent of the value of
all POS transactions, it was clear cash money had found its groove
again. The data suggested consumers preferred to use cash for
small-value transactions.
January/February 2019
 ATMs/abms

Compared with data from 2009, cash holdings on hand increased of Bank of America’s locations in the U.S. The deal saw GardaWorld
from an average $70 to $84. The measurement jumped again in take on 1,000 Bank of America vault employees; it now runs more
2017 to $105. These increases were focused around those with than 250 secure cash processing operations in North America2.
middle-class incomes and concentrated largely in the Atlantic region When a company of this size and stature is looking to significantly
and Ontario, generally in the 55–75 age group1. boost rather than reduce its exposure to cash, it’s a good sign that
But that’s not all. Despite the number of withdrawals decreasing, cash use will remain strong. But for Gonthier, there are other reasons
the amount withdrawn remained relatively unchanged, while the he thinks cash will withstand the test of time.
average value of cash holdings increased. This indicates a reduction “We must never forget that there are millions of Canadians that
in the turnover of paper money, but by no means is it disappearing. live from paycheck to paycheck and will likely never be able to get
Dan Kelly, president and CEO of the Canadian Federation of credit cards,” said Gonthier. “These people have little money in their
Independent Business, agreed with this assessment. bank account. Without cash you’re actually making life harder for
“Cash is an important part of the lower-income Canadians.”
Canadian retail service sector and I believe It’s not just the working poor or
that will continue for a long time. As long Cash in your pocket: underprivileged who depend on the cash
as consumers choose to use it, merchants On average, Canadians held in their pocket for monthly budgeting.
will be keen to accept it,” said Kelly. He The wave of Millennials currently trying
added that many small businesses in the $105 in cash in 2017. to enter the workforce by stringing
retail and hospitality sectors prefer it, together multiple temporary “gigs” have
“because it lowers their overall cost of Breakdown by region: a similar need for cash on hand to keep
payments, especially relative to credit their budget tight. Lastly, there are many
cards.” • Atlantic region: $79 communities of new Canadians who come
Kelly pointed out that many merchants from countries with cultural attachments
among his organization’s membership • Quebec: $98 to cash use. Members of these cultures
prefer a cash sale. “They have the money eschew many of the high-tech POS
in hand, they know the money is there and • Ontario: $99 choices and opt for cash transactions at
there’s the confidence and flexibility of every opportunity.
having cash on hand,” he said. He added • Prairies: $91 People in these circumstances exist in no
that cash lends confidence because it’s a small number. According to a 2016 report
secure transaction that ensures privacy • B.C.: $165 from ACORN Canada, a national advocacy
and is relatively low cost when compared group for low and moderate-income
to other forms of payment. Source: 2017 Methods of Payment survey, Bank of Canada Canadians, about one million Canadians
“Of all the various form factors and are “unbanked,” having no relationship
flavours of payment that are out there, the with a mainstream financial institution
merchant universe really follows the consumer in terms of payment such as a credit union or bank. On top of that, ACORN says 15 per
method, rather than lead [the consumer],” said Kelly. “We are many cent—close to five million Canadians—are underbanked3. These
years away from phasing out cash.” people may have an account, but have a very limited relationship
with mainstream financial institutions, making access to cash money
Counting on cash a necessity of life.
Its not just small business that keeps the cash flowing. There are some For any credit union or big banking branch planning its cash
large international companies looking at cash money—moving it as management strategy for the next few years, it’s easy to see how
well as counting it—as a growing segment in the services sector. the narrative of cash money being phased out can influence your
Based in Montreal, Que., GardaWorld is a privately-owned planning. But considering all the segments of our population that
global security company that focuses on security services and cash depend on it, the small businesses that count on it, and the major
solutions. corporations betting on it, expect cash money to remain in circulation
“As far as GardaWorld is concerned, it's a growing business,“ said for a long time to come.
Stephane Gonthier, CEO of cash services at GardaWorld. “I actually
see this business growing in the coming years at a double-digit Patrick Léonard is the General Manager for Cummins Allison Canada. Contact him at
pleonard@cumminsallison.ca.
annual growth rate.”
GardaWorld’s global cash services business processes about US$8 1 Ben Fung, Kim P. Huynh and Gerald Stuber, “The Use of Cash in Canada”, Bank of Canada
billion in cash each day, and has been on an acquisition and investment Review, spring 2015.
2 Nathalie de Champlain, “GardaWorld signs cash vault outsourcing partnership with one of
surge, buying up the cash processing operations of competitors and the US’ leading banks”, press release, December 18, 2013.
even some of the world’s biggest banks. In 2014, it signed a 12-year, 3 ACORN Canada, “It’s Expensive to be Poor: How Canadian Banks Failing Low-income
Communities”, backgrounder, May 2016.
US$1.4 billion deal to manage the cash and cheque processing for 32

January/February 2019 PAYMENTSBUSINESS 21

 Credit unions
Selecting the best processors
By Nicolas Beique
C
redit unions build their
customer base and
strengthen customer
retention around their unique (non-profit,
member owned, operated and focused)
business structures and offerings. When their
business customers ask them about which
suppliers they should get payment processing
services from, it’s important that the credit
unions have the appropriate partnerships in
place to meet their customers’ expectations.
Here are several factors that credit unions
should examine when evaluating processors.
1. Revenue share. The first concern that
a credit union may have when selecting
a payment processor might be what the
revenue share is going to look like. After
all, having a favourable revenue share with
their processor will allow the credit union
to give more back to their customers.
However, revenue share should be just
one of the factors that are considered.
Even if the revenue share agreement with
the payment processor seems favourable,
if they are not delivering on processing
rates and fees, customer service and
functionality (as discussed next), the
credit union may find that the referrals
they send to the processor do not result
in long lasting relationships. Seeing as
revenue earned is directly related to the
length of the relationship, it does not
matter how generous the revenue share
is if the payment processor is unable to
sign up and retain merchants.
2. Strategic value alignment. A partnership
with a payment processor should help the
institution build long-lasting relationships
with its clients and improve retention by
providing another avenue for meeting
their financial needs. However, the
partnership will only result in increased
retention if it is strategically aligned and
both the credit union and the payment
processor share the same values.
Credit unions have invested significant
time and resources to build organizations
22 PAYMENTSBUSINESS
that are focused on loyalty, honesty and
friendliness. If the payment provider they
partner with does not mirror these core
values, then the credit union’s customers
will be set up for a disappointing
experience. A poor experience with the
payment processor may not only damage
how the customer sees the payment
provider but also how they view the
credit union who referred them.
3. Fees and pricing. When a credit union
looks to find a payment processor that
will uphold the values their business
is built around, they should note the
top attributes that attracted customers
to their business in the first place and
match them to a payment processor who
has the same emphasis on delivering
similar value. An easy place to start is
with fees and rates. Credit unions can
attract members because of their lower
fees and low account minimums and
higher interest rates for savings products.
Customers enjoy banking at credit unions
because they feel like their money is
going further. When a credit union is
evaluating the best payment processor for
their business, it’s important to consider
the processing rates and any applicable
fees that the processor may charge their
members. Selecting a payment processor
that offers transparent pricing, does not
charge unnecessary additional fees and
which provides flexible low-cost options
for hardware and software helps ensure
that the credit union’s customers will not
be spending more than necessary on
their payment processing.
4. Strong customer service. Because
credit union customers have a say in the
organization’s decisions and credit unions
themselves are not worried about making
profits, they typically have more local and
smaller customer bases, and can take
more of a customer-focused approach
compared to the larger publicly traded
financial institutions. Customers likely
choose to bank with a credit union because
January/February 2019
they prefer this personalized approach to
doing business and they appreciate being
able to deal with a real person at their
local branch when they have questions.
This expectation of helpful and friendly
customer service, is another attribute
for which credit unions should evaluate
their payment processors. Check how a
processor offers customer service before
starting a partnership. Can customers
reach out online? Over the phone? How
about in-person? Or maybe a combination
of these methods to get assistance? Read
industry and customer reviews to see what
people say about their experiences with
the processor. Get to know your potential
processor to make sure they’re offering
service in line with your expectations, and
those of your customers.
5. Functionality. Finally, consider the
functionality and software that a payment
processor can offer a credit union and
how they approach innovation. Just
because a customer is looking for low
rates and great customer service doesn’t
mean they want the bare minimum in
of functionality. Choosing a payment
processor that offers more than their
customers are expecting gives the credit
union the opportunity to surprise and
delight them by referring them to a
partner which is going to help empower
their business.
By focusing on finding payment processors
who have values aligned with that of their
own business, credit unions can increase
their customer satisfaction and retention
while maintaining a consistently positive
customer experience. Choosing the right
processing partner will allow credit unions to
deliver a worthy customer experience at the
same time as increasing deposit frequency
and growing revenue that can ultimately be
returned to their members.
Nicolas Beique is founder and CEO, Helcim
(www.helcim.com).
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