Page 1

JUNE 2017 ISSUE

CANADIAN BANKER w www.rfigroup.com t twitter.com/RFiMediaGRB

President, Peoples Card Services

RFi GROUP INSIGHT

RFi GROUP INTERVIEW

SAVINGS & BORROWING

06 Prepare to prepay - The rise of prepaid cards in Canada

12 Gary Fearnall, Country Manager, Canda, OnDeck

17 Mastercard presents a biometric credit card


Welcome to the June edition of the Canadian Banker, a newsletter designed to give you an update on news and trends within the Canadian retail and commercial banking market, contextualized by RFi Group data. themed around the exciting opportunities in the prepaid market. We share insights from our research on how the market will progress, and interviewed Peter Read, President of People’s Card Services to hear his expertise on the topic. We also have an exclusive interview from Gary Fearnall, Country Manager of OnDeck, who gives his perspective on SME lending from a FinTech perspective, another exciting space to watch! Following on another great event last month, the Payments Canada Summit, in which we were also involved, our product news highlights some exciting news in the ever-changing payments world. I hope you enjoy the issue. Kind regards,

Cyrielle Chiron +1 416 644 8524 I cchiron@rfigroup.com


CONTENTS

JUNE 2017

10

06

12

14 17

20

23 RFi GROUP INSIGHT

ECONOMY & REGULATION

PAYMENTS & TECHNOLOGY

06 Prepare to prepay - The rise of prepaid cards in Canada

14 Details of new trade agreement announced

20 TD MySpend app nears a million users

RFi GROUP INTERVIEW

SAVINGS & BORROWING

TRANSACTIONS

10 Peter Read, Peoples Card Services 12 Gary Fearnall, OnDeck

17 Mastercard presents a biometric credit card

23 CWB and Payfirma announce partnership


RFi GROUP JUNE STA TEN SELECTED STATISTICS FROM DAILY STATS ON RFi GROUP WEBSITE (www.rďŹ group.com)

UK In the UK the average age of a first-time home buyer is

33 years-old

57% of UK consumers

6

would be very comfortable (8+/10) using a digital-only bank with no branch access

c t w

CANADA

41% of Canadian

consumers are open to trying biometric payments if made available to them

MEXICO

24% of consumers in

Mexico are planning to take up a credit card in the next 6 months

04 RFi MEDIA

INDIA

47% of urban banked

consumers in India have used biometrics in the course of managing the financial products or making purchases


ATISTICS HONG KONG

CHINA

64% of urban banked

23% of banked consumers

consumers in China consider the concept of a mobile wallet highly appealing

d

eir

in Hong-Kong consumers have used live chat services with a virtual assistant

#RFiGroupDailyStat

TAIWAN

20% of Taiwanese

banking customers find having a stable family life their most important financial goal

NZ

21% of Kiwis

would be likely to use biometric payments if they are available

AUSTRALIA Within a typical month in Australia, an average of

35% of credit card

purchases are made online CANADIAN BANKER 05


RFi GROUP INSIGHT

PREPARE TO PREPAY THE RISE OF PREPAID CARDS IN CANADA WORDS KALLIA MANIKA

P

repaid cards, including reloadable cards, closed loop (purchases from single company only) and open loop (purchases from anywhere card is accepted) cards, gift/ store cards, travel cards, and business prepaid cards, have been available in Canada for more than a decade. According to RFi Group data from the second half of 2016, 13% of Canadians have used a prepaid Visa or Mastercard in the last 12 months, up from 10% at the end of 2014. With prepaid card usage increasing, RFi Group set out to explore what is driving prepaid card usage and to better understand the opportunities prepaid cards represent for payment card providers.

The prepaid card market in Canada is relatively large, with approximately 236 million prepaid card transactions occurring in Canada in 2016, worth more than $18 billion. According to data from Payments Canada, the prepaid card market in Canada is relatively large, with approximately 236 million prepaid card transactions occurring in Canada in 2016, worth more than $18 billion. Furthermore, with RFi Group data showing that 13% of Canadians have used a Mastercard or Visa prepaid card in the last 12 months, approximately 3.8 million adult Canadians have used a prepaid card over this period.

06 RFi MEDIA


RFi GROUP INSIGHT

Delving into the drivers of prepaid card usage, outside of being gifted the card, the main driver of prepaid card usage is to make purchases online, followed by making purchases at a specific retailer, or avoiding using credit. The ability to use a card with the features of a credit card, without accessing credit, is a recurring theme for prepaid card usage. This highlights the fact that often prepaid cards are being used as alternatives to traditional payment cards, and credit cards in particular, as a result of consumers being unable to access traditional payment mechanisms or due to an aversion to, or difficultly in accessing credit. Opportunities in the prepaid card space will continue to develop in the future. According to RFi Group data, 51% of those who have used a Mastercard or Visa prepaid card said that they are likely to use one again in the next 12 months (4+/5). Additionally, among those who have not used a Mastercard or Visa prepaid card in the last 12 months, 18% said that they are likely to use one over the next six months. This means that around one in five Canadians consider themselves likely to use a prepaid card within the 6-12 months. In terms of drivers of future use, similar to drivers of past usage, those who intend to use a prepaid card in the next 12 months are intending to use a prepaid card to make purchases

In terms of drivers of future use, similar to drivers of past usage, those who intend to use a prepaid card in the next 12 months are intending to use a prepaid card to make purchases online (38%) or so that they can use their own funds instead of credit (29%). online (38%) or so that they can use their own funds instead of credit (29%). Giving the card as a gift is also a key driver, suggesting that prepaid cards have the potential to further replace cash gifts. Additionally, RFi Group data shows that one in four retail banking customers with children under the age of 18 would use a prepaid card in order to give to their children spending money. These results highlight the fact that prepaid cards give consumers a sense of control over their spending, this element of control is a key lever prepaid card providers can use to drive greater acquisition and usage of these cards.

YOU MENTIONED EARLIER YOU HAVE USED A PREPAID CARD DURING THE LAST 12 MONTHS. WHAT WERE THE MAIN REASONS FOR YOU TO USE A PREPAID CARD? Top 5 reasons 60% 50%

48%

40% 32%

30% 19%

20%

16% 12%

10% 0% It was given to me as a gift

For making purchases online

For making purchases at specific retailer

To be able to use my own funds and not credit

Because I couldn’t get a credit card

Source: RFi Group: Canada Payments Council H2 2016

CANADIAN BANKER 07


RFi GROUP INSIGHT

Given these drivers of usage, who can we expect to be the future users of prepaid cards? It appears that the opportunity in prepaid card usage lies largely with younger consumers, those who have recently migrated to Canada, and parents of young children. According to RFi Group, 26% of consumers between the aged of 25 and 44 who have not used a Mastercard or Visa prepaid card are likely to use one in the next 12 months, compared to only 15% of those aged over44. Meanwhile, the majority (58%) of those who have been in Canada for less than two years are likely use a prepaid card in the next 12 months, significantly higher than the average Canadian. The fact that intention to use prepaid cards is higher among these segments again highlights the role of prepaid cards play in serving as an alternative to traditional payment mechanisms, especially for those who are more likely to be underserved by financial providers when it comes to their payment needs.

It appears that the opportunity in prepaid card usage lies largely with younger consumers, those who have recently migrated to Canada, and parents of young children. Consumers with children under the age of 18 are also significantly more likely to use a Mastercard or Visa prepaid card in the future (37%) than those without children or with older children. For these consumers, the ability to give their children access to money while maintaining control of the amount they have available to spend is clearly appealing. Again, this comes back to prepaid cards serving the needs of a segment with less access to traditional payment mechanisms, in this case children, as well as offering an element of control to users. For banks and other providers there is an opportunity to build prepaid cards into existing childhood banking propositions. With childhood banking relationships often carried into adulthood this would enable providers to establish banking relationships early in the consumer lifecycle.

Consumers with children under the age of 18 are also significantly more likely to use a Mastercard or Visa prepaid card in the future (37%) than those without children or with older children.

08 RFi MEDIA


RFi GROUP INSIGHT

The key barrier is that they do not have a need for one, largely driven by a preference for debit or credit cards. This shows the importance of targeting prepaid cards towards those who may struggle to access traditional banking products. For those that do not intend to use a prepaid card in the next 12 months, the key barrier is that they do not have a need for one, with this largely driven by a preference for debit or credit cards. This shows the importance of targeting prepaid cards towards those who may struggle to access traditional banking products and payment mechanisms. A key benefit of prepaid cards is that they don’t require a credit application, making them easier to access for young consumers as well

as for new residents in Canada, key target segments for this product. For these consumers, prepaid cards could play a role as a gateway product to a broader banking relationship. Prepaid cards could be offered to those who would otherwise struggle to qualify for credit products or current accounts, allowing card providers to capture banking relationships early, and potentially develop the relationship in the future as the customer ages or further integrates into Canadian society in the case of migrants. As can be seen, the prepaid card market represents an opportunity for both traditional and alternative card providers. To drive acquisition, prepaid card providers should focus on the key benefits of prepaid cards which set them apart from debit and credit cards; in particular, ease of access, low fees, online functionality, control over spend, and the ability for consumers to use their own funds. For traditional providers, prepaid cards could have long term benefits and lead to future cross sell opportunities. While the opportunities that prepaid cards represent are so far largely untapped it appears that the prepaid card market in Canada has a bright future.

CANADIAN BANKER 09


RFi GROUP INTERVIEW

S President, Peoples Card Services WORDS SARAH HOLLINSHEAD

10 RFi MEDIA

peak to your friends and family about prepaid, and you will find acknowledgment of the product tends to be split. Yet, RFi Group data shows that 13% of Canadians have used a Mastercard/Visa prepaid card in the last 12 months, meaning that approximately 3.8 million Canadian adults have used a prepaid card in that time. With these figures due to increase rapidly over the coming years, RFi Group’s Sarah Hollinshead sought to gain a better understanding of the offering from industry leader, Peter Read, president of Peoples Card Services, a subsidiary of Peoples Trust, part of the Peoples Group.


RFi GROUP INTERVIEW

Peter Read’s career has largely been in technology, driven by the notion of improving peoples’ lives through techinspired products and solutions. From a community benefit perspective, prepaid has a huge amount to offer, whether it is bettering financial health for Canadians, enhancing financial inclusion for the under-banked, or helping small businesses improve their efficiencies. Whilst Read admits that prepaid is not yet a universal phenomenon, he states that this is an industry at an inflection point of change. “Prepaid is one of the fastest-growing financial products in Canada. And it is set to grow three-fold in the next five years, from $3 billion to $9 billion. Although this sounds unrealistic, when looking at the $200 billion prepaid market in the U.S. (excluding $60 billion in US government prepaid), our population is 10 percent in comparison, so $20 billion should be our goal. Imagine if you cut this is in half to allow for different population types, that still equates to $10 billion, which is more than a three-fold increase.” Read believes a lack of education and awareness has largely been overcome, but there is further work to be done. He points to institutions such as the Canadian Prepaid Providers Organization (CPPO), in which Peoples Trust is a founding member, to be able to assist in further education of the masses. “Prepaid becomes universal when all use cases are part of everyday life for all. To get there, the industry needs to evolve, in step with consumer needs and with regulation. This is why the CPPO is in the right position to guide the rise of prepaid within the Canadian market.” So, what does the prepaid market seek to do? Read attempts to explain this in its simplest form. “In a nutshell, prepaid is part of the digital commerce revolution and in its basic state, is a cash and cheque replacement tool. It is a move away from credit, and could even be a replacement for a standard financial institution altogether.” Single-load products originated as

universally accepted payment or gift cards, but Read explains the plethora of use cases for the offering today.

the central system. It is a small part of society in Canada, but an important one.”

“These cards have now moved into being a payment vehicle. Businesses can reward their customers with a card to incentivise further purchases; companies can provide commissions/ bonuses/shift work payments to employees; exchange rates and budgets can be locked in before taking a trip abroad; better expense management for businesses limiting to certain merchant categories (only fuel/hotels etc.) insurance payouts; and gaming, the list goes on.”

Read speaks eloquently and passionately about many more benefits for prepaid, but this final one really adheres to the ‘superhero’ quality that Read alludes to; prepaid cards fighting crime!

GPRs, general reloadable prepaid products, have another long impressive list of use cases centred around the day-to-day management of funds, from loading paycheques, paying bills and managing spend. “It is the instant movement of money in a very frictionless fashion that is really evolving the prepaid market.” The increased use of this money management and payment product can tie in with the decrease in credit card usage amongst Canadians, argues Read. With the federal government highlighting the levels of personal debt in the country, it seems the population has responded, and prepaid offers a great alternative solution in this environment; especially for the biggest debt averters, millennials. Like other cards, prepaid options can be linked with mobile banking and mobile payments, allowing for security and convenience measures as well, which Read explains is attractive for millennial consumers. Read highlights the integral role that prepaid plays in ensuring financial inclusion as another key benefit. “Those who feel left out of society with little access to banking are able to be included in the digital commerce world through a prepaid card. Governments can also use this tool for segments of the population who do/will not use a bank account, but need payments from

“No matter what we do, the biggest message coming through is antimoney laundering and anti- terrorist financing, and we have to work closely with regulators and law enforcement to ensure we are curtailing any criminal activity. Regulation is key, but we need not over-regulate and scare businesses away from using prepaid, as this would in turn encourage illegal industries back into cash. With everything traceable and reportable through prepaid and digital commerce, we are in a much better position to enforce the law and control crime.” As a displacement for cash and cheques, prepaid puts people in a much more secure position against theft, without the complications of a debit/credit card. Cash is in fact one of the inputs that loads directly into prepaid. When assessing the likelihood that cash would be eliminated altogether, Read is cautious. “I don’t think cash is going to disappear completely for easily another 10 years. Until all society and all businesses move entirely to digital commerce, there will still be need for cash. It will get thinner and thinner, and far less easy to use.” The financial services have never been more of an exciting place to work, and under the ‘fintech’ umbrella, payments are certainly a fast-evolving space. Within that lies the prepaid market, a long-existing product, but one about to accelerate in the Canadian market, watch this space!

Follow @RFiMediaGRB on Twitter to keep up to date with the latest interviews and news at RFi Group.

CANADIAN BANKER 11


RFi GROUP INTERVIEW

E

stablished over ten years ago in the United States, OnDeck Capital provides fast and reliable funding to small businesses powered by its digital platform. Although, well engrained into the US ecosystem, OnDeck only entered the Canadian market in 2014, and sits within the fast growing Canadian fintech landscape. Sarah Hollinshead sat down with Country Manager, Gary Fearnall, to understand the path of this ‘alternative’ lender and the opportunities and challenges that lie ahead.

Country Manager, Canada, OnDeck WORDS SARAH HOLLINSHEAD

12 RFi MEDIA

Fearnall describes himself as an avid listmaker, rewarding himself for the small tasks to ensure he does not take the big achievements for granted. There are a lot of items ticked off Fearnall’s list already in the short time they have been active in the Canadian market. Since making its first loan in July 2014, OnDeck has lent over $100 million as of the end of 2016.


RFi GROUP INTERVIEW

To progress further however, Fearnall believes that regulation needs to mature in order to stimulate wider innovation within financial services. Looking at the progression in other developed markets, Fearnall points to more open data as a tool to develop Canada’s fintech ecosystem. “What I would like to see is a more open data approach to the Canadian FinTech universe. This would be the biggest enabler of growth in the market. From a holistic and altruistic paradigm, I also think it is important that certain companies do not own customer data simply because they acquire it, it is the customer’s data, they should decide who can see or apply it.” Fearnall admits that there are a lot of movements towards opening up the system from the federal government and industry association, with the introduction of fintech sandboxes, yet there needs to be quicker development to avoid Canada being left behind in a global context. “If the mandate does not support freeing data, there is a chance the Canadian fintech industry will get choked off a little bit. As other countries progress, our global economic standpoint could be reduced. Our small businesses that have the potential to grow, will not.” Having the power to make wider impacts on the economic situation in Canada is what drives Fearnall in his position at OnDeck. “A study we did in the US showed a 3 to 1 impact of the capital we had lent in terms of job growth and economic growth. Giving small businesses access to capital results in growth, where otherwise businesses would stand still or fail. Neither are a good outcome as I believe there some amazing companies being built in Canada and we have to collectively help them to grow.” Prior to OnDeck, Fearnall worked for some of Canada’s largest companies, including the Globe and Mail, Bell Media and most recently LinkedIn. Having

witnessed the digitization of the media, and as a master in market development, Fearnall approaches the OnDeck challenge with a unique perspective. “I come to the OnDeck role with the sense of team building, how to think about application, and how to solve a problem. In this case, it is small business lending and access to capital. Our product is appealing to a niche segment, we are still trying to figure out how to offer more relevant products and build our awareness.” One of the surprising factors involved in growing a fintech company in Canada is that, Canadian banks are quite wellliked. In stark contrast to the United States, Fearnall has had to think about particular ways to penetrate a market where trust and love is invested in the big bank brands.

I would like to see a more open data approach to the Canadian fintech universe. One of the strategies is through partnerships, which has worked well with JP Morgan in the United States and Commonwealth Bank in Australia. They recently announced partnerships with Wave and Lightspeed in Canada, and are actively seeking further opportunities with Canadian companies. “Banks may not want to lend money at this end of the market as it is costly and risky, and that is where we can come in. We can also act as finance partner for companies selling products of larger value.” The OnDeck model includes thousands of data points and evaluates them algorithmically, from cash flow and bank statements, as well as an understanding of the industry, the seasonality of the business, annual revenue etc. Whilst their evaluation model is automated, OnDeck insists on an agent interaction with every loan, to advise upon the

business and how much money they really need to borrow. “The previous experience has been so slow and difficult that consumers are used to thinking ‘if I am to get a loan, I may as well get as much as I can.’ It is far better to advise on a lower figure, but this is only possible with a fast experience like OnDeck.” To apply for a loan from OnDeck, small business owners must have a 600-personal credit score, over $100,000 in annual revenue and have been operational for over a year. With lots of momentum in this industry, and with more and more players within the eco-system, education for small business owners is more pertinent than ever. OnDeck Canada is one of the founding members of the Canadian Lenders Association (CLA), which hopes to guide the industry along this journey. “The CLA will help to create a narrative around a variety of offers and a consolidated view of that. We are doing lots of research into how to support small business growth. Price comparison options are coming into place and more useful tools are on their way.” As the industry evolves, the term “alternative lenders” should hopefully become obsolete. Fearnall looks back on his experience in the media world to assess the future. “For a long time, anything outside of broadcast, print or radio was known as ‘new media.’ It seems crazy now, but it lasted for a while. The same thing will happen with lending. My sense is that there is an acceleration of change on all fronts in our world. In the next 5 to 10 years we will see that shift as people become more informed.” At the forefront of this revolution, OnDeck is in a great position to better the experiences of small business owners. However, it seems the whole industry, including regulators, need to come together to make real change happen.

CANADIAN BANKER 13


ECONOMY & REGULATION

Economy & Regulation WORDS ELIA ORELLANA

Details of new trade agreement announced

T

he full details of the Canadian Free Trade Agreement (CFTA) have been announced, with the new agreement to take effect from 1st July.

The CFTA is an interprovincial trade deal that will involve all provinces, territories and the federal government. It is the result of a two-year negotiation to replace previous regulation to facilitate trade within the country. It is hoped that the deal will break down current barriers hindering businesses by ‘streamlining’ regulations across provinces. However, the CFTA will have an ‘opt-out clause’, designed to preserve province sovereignty, which may lead to continuing inconsistencies. Officials from local and federal government are positive that the move will have many economic benefits for Canada, with Canada’s Economic Development Minister, Navdeep Bains, pointing to studies from the Bank of Canada which have found that the new regulations could save the economy billions by facilitating trade for businesses. The agreement will also ensure that Canadian business can compete on an equal footing with foreign businesses when tendering for government contracts, with European business soon to be allowed to tender for large government projects thanks to the Comprehensive Economic and Trade Agreement (CETA), also set to take effect from July 1st.

1 in 5 businesses were more worried about regulatory change than they had been in 2015, which should be reduced by these business-friendly developments.

GIVEN THE CURRENT ECONOMIC CONDITIONS HOW WORRIED ARE YOU ABOUT THE FOLLOWING - WITH REGARDS TO YOUR BUSINESS - COMPARED TO A YEAR AGO? Regulatory changes 100%

6% 16%

80%

Much less worried Somewhat less worried

60% 63%

40%

Somewhat more worried

20%

The announcement of this deal could help improve business sentiment. RFi Group SME Banking Council data from the second half of 2016 shows that 1 in 5 businesses were more worried about regulatory change than they had been in 2015, which should be reduced by these business-friendly developments.

14 RFi MEDIA

Neither more worried nor less worried

Much more worried 9%

0%

7%

H2 2016 Source: RFi Group Canada SME Banking Council – 16H2


ECONOMY & REGULATION

Housing driving economic growth Gross Domestic Product (GDP) growth stalled in February, showing 0% growth, with new figures from Statistics Canada revealing that Canada relied heavily on its housing boom. Statistics Canada data showed that goodsproducing industries saw a downturn in February, declining by 0.3%, while housing related industries including construction, finance, insurance and real estate all saw gains of between 0.5-0.7%, preventing the economy from contracting. The slowdown was in line with economist expectations following strong performance at the end of 2016 and in January 2017. Despite performing as expected overall, the uneven industry performance has raised concerns that

Canada is too dependent on housing for growth, with David Madani of Capital Economics noting that the Bank of Canada is unlikely to raise rates until Canada’s economic growth is more balanced.

Housing related industries including construction, finance, insurance and real estate all saw gains of between 0.5-0.7%, preventing the economy from contracting. Despite the February slowdown, analysts from Statistics Canada believe the economy is still on track to achieve 4.2% annualized growth in the first quarter, thanks to the 0.6% growth seen in January.

CANADIAN BANKER 15


ECONOMY & REGULATION

Canadian fintech sector falling short of full potential Competition Bureau Canada (CBC) has called for collaboration between regulators and industry leaders to help drive growth in the fintech sector. The call for collaboration came following the findings of a CBCs workshop held in February which aimed to determine how Canada can “improve its competitive environment and foster innovation in this new industry.” The workshop hosted around 130 fintech leaders and other industry players who discussed key challenges within the sector. The main barriers to performance cited were lack of consumer trust in alternative financial institutions, consumer complacency, global growth barriers, banking and data restrictions, and regulation that is both too complex and inflexible to keep up with the pace of technology.

16 RFi MEDIA

The Bureau is positive that regulation can adapt to meet the needs of the fintech sector and help it reach its full potential, with John Pecman stating that “Canadian regulators are paying attention: they are engaged and ready to collaborate.” The Bureau is positive that regulation can adapt to meet the needs of the fintech sector and help it reach its full potential, with John Pecman, Commissioner of the competition stating that “Canadian regulators are paying attention: they are engaged and ready to collaborate.” The Commissioner also advised that “the right regulatory approach is about striking a balance between innovation, resilience and consumer protection.”


SAVINGS & BORROWING

Savings & Borrowing WORDS GEORGINA GALVAN & KALLIA MANIKA

Mastercard presents a biometric credit card

M

astercard has announced a new credit card that will include a biometric fingerprint scanner.

The new technology is designed to improve security and convenience for customers, with users able to authorise payments using the fingerprint scan, rather than PIN and signature, reducing both the risk of fraud and inconvenience for consumers who will no longer need to memorise their card PIN numbers.

The new technology is designed to improve security and convenience for customers, with users able to authorise payments using the fingerprint scan, rather than PIN and signature, reducing both the risk of fraud and inconvenience. The new card is expected to be launched in Canada late this year, with trials currently underway in South Africa. When taking out a new credit card, users will have their fingerprint details scanned and digitally stored on the card. To ensure privacy and security, the details stored on the card would be destroyed if the card is cancelled or if someone else attempts to use the card. The new card is compatible with any EMV terminal able to read a credit card chip, meaning merchants will not need to acquire any extra equipment or software to be able to accept the new card, although it will not initially have contactless capabilities.

Image source: Engadget

CANADIAN BANKER 17


SAVINGS & BORROWING

Spending on credit and debit cards increased in the first quarter of 2017 Canadian spending on credit and debit cards increased by 3.46% in the first quarter of 2017, compared to the same period 2016, according to credit and debit card transaction processing specialist Moneris. The figures came from the MonerisMetric Quarterly Report which looks at sales volumes compared with last year’s sales volumes. According to the report, in the first quarter of 2017, 64.8% of cards transactions were made using a credit card, while 35.2% were made with a debit card. The regions which experienced the biggest increases in card use were Quebec and New Brunswick, seeing increases of 5.49% and 4.59% respectively. On the other hand, Alberta and Newfoundland saw decreased card spending, falling 0.75% and 1.68% respectively. MoneyMetric expects spending rates to continue rising at a steady, although more modest, rate in the future. Supporting this trend, RFi Group research from the Canada Payments Council shows that there has been a significant increase in both credit as well as debit card use in Canada. Specifically, credit card use rose significantly from 59% in H2 2015 to 62% in H2 2016, while debit cards followed a similar pattern rising from 45% to 50% in the same time period.

WHICH OF THE FOLLOWING PAYMENT METHODS DO YOU USE REGULARLY (I.E. IN AN AVERAGE MONTH)? H2 2015

H2 2016

80% 60%

59%

62% 45%

50%

40% 20% 0% Credit cards

Debit cards

Source: RFi Group Canada Payments Council H2 2016

18 RFi MEDIA


SAVINGS & BORROWING

New Nordstrom MBNA Rewards credit card Department store Nordstrom is launching a new MBNA Visa credit card in Canada in an attempt to increase sales by offering loyalty rewards incentives to cardholders.

“We look at (the data) rigorously and frequently and see what incremental sales we get from customers who have our cards,” said Steven Mattics. “We think that plays to our advantage.”

According to Nordstrom, the main driver behind this program is to boost sales, with Steven Mattics, President of Nordstrom’s credit division, stating that shoppers who are members of the rewards program tend to spend more at the department than those that are not members thanks to the stores ability to use rewards data to tailor offers to the shoppers buying habits.

Consumers who pay with their new credit card will earn 2 points per dollar spent at Nordstrom and one point per dollar spent elsewhere. Cardholders will also be the first to access the department store’s sales in July and will be able to take advantage of the bonus point events of the retailer.

CANADIAN BANKER 19


PAYMENTS & TECHNOLOGY

Payments & Technology WORDS ELLA TAUTZ-DAVIS & MANISHA NOBEEN

TD MySpend app nears a million users

T

he mobile money management app for both iPhone and Android, TD MySpend, has had almost 1,000,000 Canadians sign up since the app launched in April 2016. A companion to the TD banking app, TD MySpend links directly to a customer’s TD bank account or credit card account, meaning no manual input is required by the user. The app then tracks spending behaviour, and provides a ‘traffic light’ insights meter, which updates in real-time, on whether a user is above, at, or below their usual spending habits. The feature is particularly popular in helping customers track spending from their chequing and savings account.

Frequent TD MySpend users, defined as those using the app 1 to 5 times a month, are spending 8% less each month, compared to those using the app at least once a month. Around half of TD MySpend users have signed up for instant notifications, receiving an alert every time a transaction is made, along with digital virtual receipts. These features make it much easier for users to track their spending habits, and allow consumers to gain more control over their personal finances as a result. Interestingly, frequent TD MySpend users, defined as those using the app 1 to 5 times a month, are spending 8% less each month, compared to those using the app at least once a month, suggesting TD’s traffic light system may be beneficial in helping consumers budget their everyday spend.

20 RFi MEDIA


PAYMENTS & TECHNOLOGY

Use of Interac e-Transfer achieves record levels 2016 saw a record number of payments made on the digital money platform, Interac e-Transfer. Consumers and businesses in Canada made a total of 158 million transfers throughout the year, worth over $63 billion, compared to 105 million in the previous year. Consistent with this data, RFi Group research from the Canada Payments Council also shows that there has been a significant increase in Interac e-Transfer usage in the last 12 months, up from 27% to 30%, while the proportion who claim to use the service regularly each month also increased from 9% to 12%. Interac e-Transfer allows direct money transfers between two bank accounts and is accessed through a participating bank’s online or mobile banking app. Over 250 financial institutions offer access to the service. The service is available 24/7 and is one of the fastest options for money transfers, with money instantly removed from the sender’s account, and transfer notifications sent to the user in real-time. The recipient of the payment simply needs a bank account in Canada, along with an email address or mobile phone number, meaning no personal financial information is required. New capabilities are to be introduced to the service later this year, including options to request payments, schedule future or recurring payments, and auto deposits that won’t require answering a security question, with these new features likely to drive Interac usage higher in the future.

INTERAC E-TRANSFER USAGE IN THE LAST 12 MONTHS VS REGULAR USAGE IN AN AVERAGE MONTH H2 2015

H2 2016

50% 40% 30%

30% 27%

20% 12% 9%

10% 0% Usage

Regular usage

Source: RFi Group Canada Payments Council H2 2016

CANADIAN BANKER 21


PAYMENTS & TECHNOLOGY

Image source: HonkMobile

Honk makes parking easy The city of London, Ontario, has launched a new app, HonkMobile, that helps users park in the city by helping them find parking and make payments. The app gives users access to 3,100 parking spots across the city in streets and city-operated lots. Users will be able to pay for the spot through the app, meaning they no longer need to display a parking ticket or use coin-operated meters, although they will still be available. HonkMobile charges 25c every time the service is used. According to Michael Back, the designer of the app, HonkMobile will also feature a merchant program which will allow merchants to: “offer incentives to customers to come into their stores, have promo codes and pay for their parking�. London is not the first city to roll out the service, following other Ontario municipalities including Grand Bend, St. Catharines and Oshawa.

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The app gives users access to 3,100 parking spots across the city in streets and city-operated lots. Users will be able to pay for the spot through the app, meaning they no longer need to display a parking ticket or use coin-operated meters, although they will still be available.


SME & COMMERCIAL

SME & Commercial WORDS GEORGINA GALVAN & KALLIA MANIKA

CWB and Payfirma announce partnership

T

he Canadian Western Bank (CWB) and Payfirma have announced a new partnership that will allow CWB to offer Payfirma’s products.

CWB currently offers business and personal banking services through 42 branches across Canada and Canadian Direct Financial (CDF) for internet banking services, while Payfirma is a fintech firm specialising in providing payments technology for credit unions, banks and financial institutions.

The alliance will allow CWB to offer a white label version of Payfirma’s PayHQ, a payments technology platform that offers a fully integrated, omnichannel merchant services platform. The alliance will allow CWB to offer a white label version of Payfirma’s PayHQ, a payments technology platform that offers a fully integrated, omni-channel merchant services platform. CWB expects PayHQ will have a positive impact on its merchant clients by broadening and deepening client relationships.

CWB expects PayHQ will have a positive impact on its merchant clients by broadening and deepening client relationships. Image source: Payfirma (top & mid), Canadian Western Bank (bottom)

CANADIAN BANKER 23


SME & COMMERCIAL

BDC announces $280 million support for SMEs The Business Development Bank of Canada (BDC), an investment bank which focusses on SME’s, has announced a $280 million financing package to support SMEs in all four Atlantic provinces (New Brunswick, Prince Edward Island, Nova Scotia, and Newfoundland & Labrador) over the next two years. The increased lending has been announced to support the Atlantic Growth Strategy, which is an effort designed to promote growth in Atlantic Canada. The decision to increase lending was also influenced by a BDC study that found 31% of Canadian SMEs are having difficulty obtaining finance.

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The increased lending has been announced to support the Atlantic Growth Strategy...also influenced by a BDC study that found 31% of Canadian SMEs are having difficulty obtaining finance. Targeted industries will include information and communication technology (ICT), agri-food, ocean technology and tourism, with these industries to see a $100 million increase in lending. BDC will target businesses exploring growth opportunities, including acquisitions and investment in export strategies.


SME & COMMERCIAL

CIBC sees strength in SMEs, but room to improve According to a CIBC Capital Markets report, Canadian SMEs created 42% of all new jobs in Canada between 2010 and 2016, but there are still areas where SMEs need more support to reach their true potential. The number of new jobs created between 2010 and 2016 represented a 30% increase in job creation from the 2000 to 2010 period. This growth has been driven by SMEs with more than 5 employees, with Benjamin Tal, Deputy Chief Economist at CICB saying: “Beyond the threshold of five employees, there is a clear positive correlation between size and growth, with larger firms within the SME spectrum seeing progressively stronger growth recently”. RFi Group SME Banking Council research suggests the strong hiring performance of SMEs will continue, with 2 in 5 SMEs looking to expand their business in 2017. Despite this strong performance, CIBC also identified some key areas where SMEs could use additional support. One of these was in providing financing to younger entrepreneurs. According to the report, only 15% of small business owners are between the ages of 25 and 39, an age group that makes up 25% of the population, in comparison to 47% between the ages of 50 and 64, which also makes up 25% of the total population, with Tal putting this down to difficulties faced by young business owners accessing financing. Another area where SMEs have an opportunity to expand is through exporting. Currently, only 10% of SMEs export, with 90% of those only exporting to the US. Increasing access to services that will enable SMEs to export could therefore be valuable to supporting the SME market in Canada.

WHICH OF THE FOLLOWING BEST DESCRIBES YOUR BUSINESS’ GOAL OVER THE NEXT 12 MONTHS?

We are looking to expand

25% 41%

We are looking to consolidate We are looking to contract

11% 23%

We are just hoping to survive

Only 15% of small business owners are between the ages of 25 and 39, an age group that makes up 25% of the population, in comparison to 47% between the ages of 50 and 64, which also makes up 25% of the total population.

Source: RFi Group Canada SME Banking & Payments Council H2 2016

CANADIAN BANKER 25


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Canadian Banker - June 2017 Edition  

An RFi Group publication

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