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Mar/Apr 2018

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

The new Interac President and CEO Mark O'Connell leads company in a changing industry

❱ International payments ❱ Tapping customer

feedback at the POS

❱ Roundtable: payment cards developments

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TableKey of Contents theme

Cover story

March/April 2018 Volume 9 Number 2 Editor-in-Chief Steve Lloyd Editor Brendan Read Publisher Mark Henry Robert Fisher Contributors Stephen Grainger; Dan Kelly; Corinne MacMillan; Michael Morin; Georgina Nelson; Marc-Andre Pigeon; Ryan Stewart; Robert Vokes


Interac’s Mark O’Connell on the new Interac and industry trends


Strengthening international payments


Creative Direction Jennifer O’Neill

The growing transparency of international payments

Photographer Gary Tannyan


How Chinese payments preferences benefits businesses

President Steve Lloyd For subscription, circulation and change of address information, contact Publications Mail Agreement No. 40050803 Return undeliverable Canadian addresses to: Circulation Department 302-137 Main Street North Markham ON L3P 1Y2 t: 905.201.6600 f: 905.201.6601 Subscriptions available for $40.00 year or $60.00 two years. ©2018 Lloydmedia Inc. All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher. Printed in Canada. Reprint permission requests to use materials published in Payments Business should be directed to the publisher. Made possible with the support of the Ontario Media Development Corporation

VENDOR ROUNDTABLE 14 Payment cards developments INDUSTRY UPDATES 16 17 Opportunityrich payments trends becoming reality

CFIB: Making the payments market work for small businesses


Budget 2018: more flexibility, possible progress


Canada, be open to open banking


Industry Events

HARDWARE REPORT: POS & MPOS 22 Tapping customer feedback at the POS Next issue…

May/June Data Analytics • Payment Processors • Smartphones • Mobile march/April 2018



Cover story

Interac’s Mark O’Connell on the new Interac and industry trends By Brendan Read


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

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

PB: What are the top opportunities that you see for Interac over the next three years? How do you plan to capitalize on them?

Mark O’Connell is president and CEO of Interac Corp.



MOC: Here are three of our key growth focus areas: 1. Exploring new use-case opportunities for our technology For example, take the Interac e-Transfer. What started as a successful peer to peer (P2P) offering has evolved into a platform that can facilitate small and medium size business payments with the introduction of the Request Money and Autodeposit features. These good funds payments can be game changing to small businesses from an accounts receivable perspective. In the same way Interac killed the retail cheque a decade ago, we anticipate the end of business to business (B2B) and business to person (B2P) cheques as we make it easier to facilitate digital real-time payments through the platform. March/April 2018

Cover Story 2. Mobile and e-commerce Canada is lagging in this space as compared with other countries but is catching up, which means there is considerable opportunity as this industry grows. Groceries and quick service restaurants are mobile and e-commerce growth sectors. And Canadians’ financial transactions are increasingly migrating to mobile. In 2017 we saw 76 per cent of Interac e-Transfer transactions deposited using mobile devices. Canadians have their mobile devices with them at all times, and we want to make it easier than ever to send or request money from anyone in Canada while on the go. Currently, Interac Debit is supported in all the major mobile wallets from technology providers and financial institutions. Moving forward, we will focus on in-app payments by offering Canadians the ability to pay in-app using their own money and at a low cost to merchants. The Interac Token Service Provider (TSP) allows us to tokenize a bank account number and create a device account number, which is separate and unique to a mobile device. This allows a customer to make purchases using Interac Debit on their device without sharing or storing any financial information. For the merchant, this is a key benefit because it eliminates the need to secure any customer information they have access to. We are also exploring opportunities for this same technology beyond payments and into the digital identification and authorization space. By using the TSP to tokenize and create an identifier in the digital space, we can replace “make a payment” with activities like “signing a document” or “registering for government services”, using the same security architecture we’ve designed our processes and technology around for years.

Additionally, we are investing in resiliency and standards, while working in close collaboration with FinTech companies alongside of banks and regulators, in order to keep our security and fraud prevention strategies one step ahead. Security is innate in how we build our solutions and will continue to be moving forward, which is one reason why our fraud rates are among the lowest in the world. Developing a solution that delivers on customer experience without sacrificing the bank-grade security we’re known for—two concepts that are often at odds with each other—is our bread and butter.

3. International Another area of focus is strengthening our ability to help Canadians as they transact cross-border and internationally. While we are focused on the Canadian market, the change to our internal structure increases our flexibility to partner with international payment providers to facilitate seamless transaction experiences for Canadians abroad (editor's note: see U.S. chip debit card sidebar page 6). We’re also exploring international remittance solutions for popular corridors like India through a partnership with Toronto-based start-up Nanopay, for example.

MOC: We’re actually in the process of exploring a proof of concept using blockchain, and it has been a great opportunity for us as an organization to play around with the technology and learn how it works. This is our first step in understanding how we could use blockchain technology in payments at Interac and we’re really excited about what we’re learning so far.

PB: Conversely, outline the key challenges that Interac faces over the next three years. What strategies are you considering to resolve or manage them? MOC: As the digital economy grows, security should be at the forefront of business strategy, particularly as it relates to personal information. We strive to keep as little personal information as possible so as not to create a centralized collection of data. In fact, most of our transactions have no personally identifiable information. Protecting personal information in this digital economy is paramount. A lot of this comes down to systems’ abilities to authenticate users while protecting these credentials, which is something we feel our investment in the digital identity and authentication space can help address. march/April 2018

PB: Sometimes even the best technologies fail. Outline what happened with the e-Transfer outages last year. What steps have been taken to resolve the issues and prevent future incidents? MOC: Last year, we experienced a technical software issue that caused significant degradation to the e-Transfer service, which we made the difficult decision to take down to solve properly. This experience drove home how important the Interac e-Transfer service is to Canadians. They used the service over 660,000 times a day in 2017. Canadians rely on the service to pay their rent, their monthly bills and send funds to family members in need, and we take this seriously. We have and will continue to invest in added resiliency to our infrastructure, so that Canadians and Canadian businesses can rely on Interac e-Transfer to send or receive funds to anyone with an email address or mobile phone and a Canadian bank account.

PB: How you see blockchain and alternative currencies like Bitcoin? What roles do they have in the payments ecosystem? What plans, if any, do you have to utilize and manage them?

PB: Discuss the planned digital identity service and your role in developing it. MOC: Interac has been in the ID and authentication space for 35 years because we’ve always had to ensure that those individuals and organizations making payments and transferring funds—and those receiving them—are who they say they are. From PIN authentication to e-Transfer authentication through a customers online banking account to our ability to enable tokenized digital debit transactions on mobile, authentication technology has been built into all our solutions. This experience well positions Interac to offer a solution in the digital identity and authentication space. The same TSP that enables Interac to provision and process mobile transactions is the cornerstone of our strategy. By providing a layer of security through abstraction, the TSP divides a person’s identity from a sensitive detail like a bank account number by issuing a unique identifier as a proxy. That identifier is confirmed by the individual’s service provider and the transaction is allowed. That PAYMENTSBUSINESS


Cover Story same technology can be used to tokenize and create an identifier in the digital space, replacing “make a payment” with activities like “signing a document” or “registering for government services”.

PB: How you see open banking, including suggestions for a Canadian version of the EU’s PSD2? MOC: As the push towards payments modernization continues in Canada, I hope that the collaborative efforts that our country is known for will continue to be the name of the game. From our perspective, we want to see innovation in our banking infrastructure within the critical confines of the banking framework and regulatory standards. We create the scheme rules and technology that allows for the interoperable exchange of information not just with e-Transfer, but also with Inter-Member Network debit transactions and the Interac TSP. As the payment ecosystem evolves, Canadians’ security, privacy of data and trust will be the guiding principles, which is why banksponsored innovation will play a tremendous role. We see strategic partnerships as integral to responsible openness and we feel we’re well positioned in the middle of the Canadian payments industry to broker these. Here is an example. Our e-Transfer application programming interface (API) will be released publicly later this year. It will give nonfinancial institutions (FIs) access to core e-Transfer functionality while maintaining FI settlement and risk oversight. This experience will unlock tremendous innovation potential, as we’ve already seen through pilot programs with university hackathons and innovation hubs where we’ve allowed groups to use the API to achieve unique results.

PB: Do you think payments and marketing are converging and if so how does Interac see itself helping your clients use customers’ data? MOC: While data is becoming increasingly important, security needs to be at the forefront of everyone’s strategy, particularly as it relates to personal customer information. When it comes to data, Interac has strived to keep as little personal information as possible and most of our transactions have no personally identifiable information, which is a big benefit to merchants as they don’t need to worry about securing this data. As we look forward to offering in-app payments through proprietary mobile wallets, we’ll be able to offer merchants visibility into certain types of data like purchase and payment patterns, offering valuable trends at the macro level that relate directly back to their business.

PB: What are your predictions for the future? MOC: No one has a crystal ball to knows where the digital economy is going. We can predict and make projections, but the truth is we’re all waiting to see what will “win” with consumers in the future of payments. Our strategy is to be present in each area, from mobile wallets and wearables to the Internet of Things and blockchain technology, so we’re ready to help Canadians pay how they want, where they want, when the want, with their own money. 6


Interac to expand U.S. chip debit card Canadians visiting the U.S. will have more opportunities to pay with their chip-equipped Interac Debit cards. ICC Solutions and B2 Payment Solutions are respective cross-border debit certification providers that now support chip testing for U.S. merchants and acquirers and are validating Interac’s certifications results, in accordance with Interac’s U.S. specifications. “Millions of people cross the U.S. and Canadian border every year for leisure, work and other activities,” said Edwin Lam, director, international products at Interac. “We’ve seen an increased appetite amongst U.S. merchants to better serve their Canadian consumers when it comes to cross-border payments.” “Working with our preferred chip certification vendors will help us bridge the gap between our borders and to help merchants and acquirers on both sides to ensure that Interac-branded debit cards are working seamlessly at certified U.S. merchant locations in accordance with Interac’s U.S. specifications,” added Lam. “Working with ICC Solutions and B2 Payments Solutions will help us bring the Interac Debit service’s chip and pin payments to more merchants across the U.S., offering Canadians a more secure way to pay across the border.” “ICC Solutions is delighted to be selected as the preferred chip certification vendor for Interac in the U.S.,” said Derek Ross, head of sales and business development at ICC Solutions. “We welcome this new opportunity to partner with Interac Corp., having successfully worked together on chip projects during the migration to chip in Canada. Our proven expertise in the provision of chip test tools and services will enable merchants in the U.S. to experience an efficient Interac certification campaign.” “B2 is thrilled to be selected as a preferred chip certification vendor for Interac Corp.,” said Bruce Murray, president of B2. “We have worked with Interac for many years to ensure that acceptance terminals and Interac-branded debit cards are thoroughly tested and certified within Canada. We are happy to continue to partner with them as a preferred vendor to ensure that terminals will be fully supported and certified in the U.S. as well.” The B2 and ICC partnerships will further enable Interac to strengthen its relationships with U.S. networks, including NYCE. It will also encourage more American merchants to accept Interac Debit. Interac offers a lower cost option for U.S. merchants processing Canadian transactions when compared to credit. In turn, Interac Debit enables Canadians to know instantly what funds they have available when making purchases in the U.S. The greater convenience of Interac Debit will also encourage more Canadians to minimize their use of cash when visiting the U.S. “The Canada–U.S. corridors are strategically important for U.S. merchants and acquirers, and we have an opportunity to facilitate seamless cross-border transaction experiences for Canadians by strengthening relationships with new and existing payment providers,” said Mark O’Connell, president and CEO, Interac Corp. “Together, we can build efficient payment solutions that consider the nuanced compliance and regulatory requirements of both countries.”

March/April 2018

international Payments

Strengthening international payments

By Stephen Grainger


nternational trade is a major component of most businesses’ revenues. However, cross-border payment systems have historically failed to keep pace with modern standards. Corporate treasurers sending international payments have likened the process to a black hole: they had no view over when payments are received by the beneficiaries or the total costs involved. Businesses are demanding faster settlement, greater transparency and operational efficiency. Yet a lack of certainty over transaction costs and foreign exchange (FX) fees, and friction in payments processing are holding businesses back from reaching their potential, particularly those that make multiple daily cross-border transfers. 8


Payments Canada and industry actions There has been a recent drive globally amongst banks, infrastructure providers, start-up FinTechs and regulators to meet these demands and respond to the issues. They are upgrading their payment infrastructures, strengthening security and introducing cutting-edge technologies. Canada is a great example of a country that is leading the charge on this front. Payments Canada is overseeing a multi-year modernization programme to improve the security, speed and efficiency of its payments infrastructure. The implementation of a new credit risk model, completed on March 12, 2018, marked a major milestone in this journey. But industry participants are also playing their part to address March/April 2018

International payments historical issues. SWIFT took a significant step in this regard with the launch of SWIFT gpi, a pioneering initiative that sets the new standard for cross-border payments. Developed in collaboration with more than 150 banks, the service allows global banks to credit nearly 50 per cent of payments to end beneficiaries within 30 minutes, and almost all payments within 24 hours. For corporations in countries such as Canada and the U.S., which have harmonized cross-border payments, foreign exchange and compliance regulations, payments now often reach the beneficiaries’ accounts within seconds. These near real-time payments greatly increase customer convenience, help companies grow their international business, improve supplier relationships and achieve greater treasury efficiencies. This is particularly welcome news for Canadian businesses; in 2017, Canada exported almost USD $300 billion worth of goods and imported more than USD $280 billion1. The ability to receive even a small proportion of this value within seconds or minutes can transform a corporation’s cash flow and trade cycle. In fact, tens of thousands of SWIFT gpi payments are being sent between Canada and the U.S. per month and this figure is growing.

Addressing payments tracking Ask any business that makes or receives cross-border payments about the challenges they face, and a lack of transparency and traceability are likely to be high on their list. When they send payments, they want to know what is happening with it and when it has been received. Historically, there has not been a payments-tracking mechanism that allows treasurers to track when a payment has been received by the seller or supplier, as each bank can only guarantee and share information on its own leg of the payment. Given the levels of trade flow that takes place between Canada and the U.S. the inability to track payments has long been a source of concern for businesses in these countries. A faster, more transparent and consistent cross-border payment process would lead to better customer relationships. The SWIFT gpi Tracker allows banks to follow the status of a payment in realtime and provide that information to their corporate client. The technology is analogous to tracking the delivery of a parcel from a warehouse to a customer, with the additional benefit of knowing that it has been opened and inspected. The tracking service is cloudbased and accessible via application programming interfaces (APIs), offering banks efficient and cost-effective connectivity which they can integrate into their corporate offerings. A real-time view of payments means Canadian banks can provide businesses with improved cash management services. Companies can be informed immediately when payments are received via automatic status updates from their banks, which helps them optimize their cash flow. In turn, banks receive fewer queries and have told us their enquiry-related costs are reduced by as much as 50 per cent when they use SWIFT gpi. This is a major service improvement to end-users and a considerable cost saving for the industry.

march/April 2018

Encouraging innovation and competition It is important to have a choice when sending cross-border payments and banks are increasingly collaborating with third parties to share ideas, best practices, policies and technologies to find new and innovative solutions. They are working with their clients, their internal product, technology and operations teams and with specialist FinTech firms. By working closely with our customers to address their clients’ requirements, SWIFT has seen a surge in both gpi adoption rates and number of transactions. SWIFT gpi traffic already accounts for nearly 10 per cent of total SWIFT cross border payments and over USD $100 billion is being transacted daily across more than 220 international corridors. In addition, more than 50 payment market infrastructures, including Payments Canada, are enabling gpi payments. It is this collaborative approach and willingness to work together that has enabled us to innovate, evolve and meet the needs of our customers for over 40 years. Stephen Grainger is managing director, head of North America for SWIFT. SWIFT is a global member-owned cooperative and a leading provider of secure financial messaging services, SWIFT’s messaging platform, products and services connect more than 11,000 banking and securities organizations, market infrastructures and corporate customers in more than 200 countries and territories. 1



international Payments

The growing transparency of international payments By Corinne MacMillan


e live in the Information Age. Billions of bytes of data are created every day and the answers to almost all of our questions are right at our fingertips. However, business payments, especially cross-border business payments haven’t kept up. Once a payment is sent it is still difficult for sender to track their status. Most information is one directional on the current payment rails. This lack of visibility during the payment journey to its destination makes it difficult to identify where the problems are when they arise.

International payments issues When errors happen, investigations are opened to try to find what went wrong. But if there isn’t enough data available to be analyzed, finding where the problems started becomes that much harder. For the senders, it can be frustrating getting their payment providers to provide the necessary information in a reliable and timely fashion, leading to painful and time-consuming exercises. International payments are even more complex, as they generally entail foreign exchange conversions while the payments can hop between many intermediaries along their journeys. Consequently, when errors occur there are more institutions involved where the problems could have started. International payments also tend to be more expensive, as the intermediaries typically charge fees for allowing them to travel through their systems. These fees sometimes are taken from the payments, causing the amounts to be less than expected when they reach their destinations. And the more stops that payments make increases the amount of time that the payees wait to receive them. With so many hands in the pot, the speed and accuracy of international payments are severely affected. These experiences understandably leave the senders and receivers frustrated. But allowing payments to be more visible and reducing the number of intermediaries in the flow of funds, payments can become more efficient.

Enabling efficient payments The payments industry is working to close this information gap. New technology is making it possible for payments to be more transparent. They are creating a more data rich environment for senders and receivers. Payment providers are uncovering new value by leveraging faster payment rails and strengthening the communication to and from the rails. They are using application programming interfaces (APIs) to improve the speed of delivery and make the flow of funds more transparent. One driver behind these technology advances is the rise of the 10


FinTech firms. These companies are building new systems with APIdriven architectures, which allows systems to communicate more seamlessly with each other. With all this data and a drive to provide their clients with exceptional user experiences, FinTech businesses are finding that they can offer more payment visibility for their clients in user-friendly interfaces. Blockchain technology is another technology driver. Let’s put aside the discussion of cryptocurrencies that blockchain has been very publicly linked to. For those who aren’t familiar with blockchain and how it works, it is comparable to a document that has been shared across a computer network. This network is designed to update regularly, with those computers included in the network all receiving the same updates. For payment providers blockchain typically reduces the number of intermediaries in the flow of funds, as the senders and receivers typically have direct relationships on the chains. This environment can then result in improved speed of delivery and accuracy of payments amount upon receipt.

Suitable payment providers are key Equally critical in facilitating international payments is partnering with the right payment provider. There are several factors that should be considered: • To avoid problems with speed, hidden fees and a lack of visibility, ask for as much information as possible about the providers’ systems. For example: does the provider have multiple channels to intake payment requests, including a user-friendly interface which highlights key information, such as value dates and bank holidays in the destination countries? • It is also important to see if there’s a module that provides the ability to track the payment with real-time status updates as it travels on its journey, and which payment rail it is traveling down. By ensuring these standards are met, organizations can feel confident when choosing a payments provider. Organizations face daily challenges. But their payments system, particularly for international payments should not be one of them. As the payments industry catches up in terms of information flow, aided by new technologies like blockchain and new payment rails, the ease and speed of international payments will only increase. The future of international payments lies with the firms that can provide the most transparency. Corinne MacMillan is chief technology officer, Cambridge Global Payments

March/April 2018

International payments

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

march/April 2018

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international Payments

How Chinese payments preferences benefits businesses By Michael Morin


y first trip to China was in March 2003. As a newcomer I had very few reference points to build from. But I ended up staying in China for over 10 years and got to know the country very well. And as a result, I have seen how China’s payments system have changed to where, like the country itself, it is leading the way with innovations that other nations are following. One of my earliest memories (apart from eating a scorpion kebab), was accessing my funds in Canada through Interac. It was such an undertaking that there was only one spot where I lived, in Beijing, near Jianguomen in the city centre. I cycled for 50 minutes to get there every Sunday. It also happened to be the location of the only Starbucks that I knew of. I remember learning to look for the Interac sign at every ATM. I would eye to find another one where I could withdraw conveniently. I still remember that feeling of relief when I saw a familiar symbol from back home. But by the time Interac became prolific in China, I had my own bank account and banked the same way as anyone else. 12


From cash to cashless China has had an interesting path from creating paper money to cashless payments, mostly skipping credit. When I first arrived, everything was paid in cash. With the advent of smartphones, I started seeing more and more apps and that was when WeChat was created. WeChat became an all-in-one lifestyle app. People could “go dutch” with it, they could book doctors’ appointments with it, they could call each other, chat, send photos and share moments. Meanwhile Alipay had always been in payments and continued with its own app for payments across China. The last time I was in China, in 2016, everything was paid by Alipay

I have seen how China’s payments system have changed to where it is leading the way with innovations that other nations are following. March/April 2018

International payments

Arch Rivals

WeChat Pay is taking market share from Alipay 74.92%






63.41% 55.40%



50% 40% 30% 20%





23.03% 32.10%


10% 0% 2015Q1



2015Q4 Alipay

Source: Analysys

or WeChat Pay, apps that enable consumers to scan quick response (QR) codes to make payments. WeChat reported that has over 902 million users while Alipay has over 520 million users, according to data reported by

Chinese systems arrive in Canada In 2017, I discovered that these methods of payment were coming to Canada and my excitement was palpable. I begged for a chance to work with those bringing this technology to Canada. I had seen how convenient and prevalent these payment methods had become in China. To top it off 2018 is the Canada-China Year of Tourism. Chinese families travelled more, had more disposable income than ever before and they had a thirst for high quality items. There are more Chinese families sending their children to study in Canada. There are also many entire families that are relocating permanently here. Canadian merchants can now attract their new Chinese customers by understanding their payment preferences. The value of thirdparty payments is expected to be over [USD] $12 trillion (RMB 81.6 trillion) according to Forbes.1 Competition is healthy. Visa versus Mastercard, Coke versus Pepsi and Alipay versus WeChat Pay. Accounting for 91 per cent of the third-party payment landscape, reports the Financial Times, both Alipay and WeChat Pay are looking to expand throughout Canada to continue serving their end users, but also to establish their footprints in North America. march/April 2018




WeChat Pay OTT Pay Inc. is looking to the future of payments, but also at how to make the customer experience convenient, secure and enjoyable through intuitive, smart and safe payments, currency exchanges and other financial products that we are licensed to offer our clients. We offer the services in English, French, Cantonese and Mandarin. In early 2017, OTT partnered with the payment giants with the intent of continuing to provide convenience to its customers. By providing newly arriving people a familiar way to pay for their goods, we believe that we are helping merchants attract a new market to their locations in a very welcoming way. OTT has always been about integrating newcomers to Canada. Canadian merchants benefit from the brand recognition of payment systems used in the tourists’ home country and the merchant benefits from the extra business. As a result, leading brands including the CN Tower, Ripley’s Aquarium, the InterContinental Hotel Montréal, Oxford Properties, Cadillac-Fairview and over 1,500 other merchants are partnering with OTT Pay. The markets are sending a clear signal of what is to come and the importance of being ready for it, but also the opportunity to tap into a new blue ocean. Michael Morin is public relations manager for OTT Pay, Inc. OTT Pay is a member of the OTT Group of companies that strive to make life less complicated by offering payment services, recommendations to their customers and inclusive participation in the new economy. OTT Pay Inc. is a proud partner of Toronto Tourism, Tourisme Montréal and Kingston Tourism, helping them to win Chinese tourism and long-term Chinese consumers. 1 , November 29, 2017



Vendor roundtable

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

Brett Mooney, senior vice president, credit cards and unsecured lending, Scotiabank.

Greg Noga, senior assistant vice president, sales and marketing, Canadian Western Bank.

By Brendan Read


hat are the key changes, trends and challenges being faced in the card industry? Payments Business discussed them with Brett Mooney, senior vice president, credit cards and unsecured lending, Scotiabank and Greg Noga, senior assistant vice president, sales and marketing, Canadian Western Bank. Our conversation looked at developments such as digital commerce, open banking, mobile, new lending options, personalized cards and non-card payments hardware and methods.

Payments Business (PB): What are the top changes that you seeing in the card industry? Brett Mooney (BM): We are seeing many changes to payment form factors. As regulations change and with ever-increasing digital innovation, there are more options than ever before. Digital commerce and open banking, such as the European Union PSD2 and application programming interfaces (APIs) continue to open new opportunities for consumers to experience payments. These include tokenization, mobile in-app and P2P [peer to peer] payments and card on file solutions which could help simplify and enrich their lives. We are also seeing a major evolution in lending patterns, given the lower technology costs of entering the payments industry and the role of non-traditional lenders. There are new lending options, including installment loans, deferred payments, point of sale (POS) lending, P2P and social/marketplace lending which could result in 14


Greg Noga (GN): We see people move to mobile means of payments, such as mobile wallets and branded payment apps, like the Starbucks app. We also are seeing increasing consumer use of stored value i.e. pre-paid cards. They also are using credit cards for smaller transactions that they had predominantly debited. We have also seen increasing requests from consumers for individualized or branded debit cards, like there is in the credit card industry. We would expect to see loyalty and affinity programs become more prevalent for debit cards to mirror credit cards.

PB: What are the driving factors? BM: The needs of customers are evolving, and we as an industry need to evolve in how we continue to meet their needs. They are looking for payment mechanisms that integrate with their daily lives, centered on frictionless experiences and more robust personal financial management tools. Customers are increasingly looking to have their payment solutions incorporated into an overall picture of their financial health and for financial services organizations to help support their financial goals. Both technology and software are also key drivers. These drivers continue to shape everything that we as consumers do in our dayto-day lives. We have always and will continue to look at ways to help customers become better off as they seek to simplify their experiences and payment needs. GN: Client experience. Starbucks has made their app a “cool� experience and younger generations are drawn to great experiences, particularly on their phones. Phones are now easier to access with fingerprint or facial recognition. Consequently, there is less reliance on passcodes. Credit card use for smaller payments gives consumers more opportunities to earn reward points and some of the more interesting rewards programs use gamification to enhance the experience. Branded and individualized cards allow consumers to feel unique March/April 2018

Vendor Roundtable and/or affiliated with their favourite brands and more emotionally invested in them.

built into everyday objects like jewellery for example and a shift to instant issuance of credentials for immediate use and tokenization advancements.

PB: How are you responding? BM: Firstly, we are pivoting to become a technology-focused entity that provides financial services. This change and transformation is permeating all levels, products and markets in which we operate. Technology will remain a key part of our business strategy, with a focus on the increased use of mobile, data, analytics and artificial intelligence (AI). We are committed to building a sound operating model that will consistently deliver great end-to-end solutions for all our customers. Secondly, we are investing significantly in digital. At last year's Digital Investor Day, we committed to becoming a digital leader in the financial services industry. We articulated our work-in-progress digital strategy and committed to several aspirational goals. Scotiabank's approach to digital is about getting the fundamentals right while also transforming experiences and the products we offer through new innovations. Our digital targets speak to the fundamentals of increasing digital sales, digital adoption and decreasing day-to-day branch transactions. Thirdly, we are actively working with FinTechs and opening new innovation centres accelerate our innovation strategy. Our approach is to connect to the diverse global ecosystem of start-ups, venture capitalists and incubation hubs to help drive global digital banking transformation. To further deepen innovation we have opened five “digital factories” in our primary markets: Canada, Mexico, Chile, Peru and Colombia. They develop and deliver leading edge technological solutions to our customers. Lastly, we’re rewiring how we approach solving for customer needs. We are leveraging robust analytics, new approaches to customer research and design thinking to establish more relevant customer-focused solutions versus traditional banking models. GN: We are looking at options such as instant card issuance to personalize debit and credit cards for clients, as well as expanding our standard card line to offer different designs. We are investigating forms of client affinity and loyalty options for debit and other account products to reward clients for using our products. Our app and full online banking platform overall (mobile and PC based) are under review and targeted for considerable upgrades over the next year, with a deeper view on enhancing the client experience.

PB: Do you expect that non-card hardware (e.g. phones, wearables) will replace the traditional payment/credit card within 10 years? BM: We will absolutely see changes. Plastic is merely the historically associated form factor and a software enabled future is shifting how we interact with payments. The proliferation of non-card hardware is a first step in integrating payments into a customer’s daily life and allowing them to pay how they want to pay. We are already seeing payment factors march/April 2018

GN: “Replace” is a strong word. But, yes, I do believe phones and wearables will make considerable inroads into the payments space and phones in particular, in the nearer term.

PB: Do you see any changes in the security features impacting the way cards are manufactured? BM: With the integration of payments into non-card-based products, the shift to digital and biometrics will change how consumers interact with payment mechanisms. It will become increasingly more important to determine how payment providers address the security of personal information and enable trusted experiences to drive mobile adoption. Scotiabank prides itself on maintaining the highest standards across privacy and data security to ensure that we protect our customers. GN: For me, the major friction point with a debit card is the PIN. That is why I think the “Tap” technology has been so broadly accepted. This is where people are going with their phones: using the touch of their fingers or facial recognition to open and scan their phones over tap-enabled POS machines or, quite soon, at near-field communication (NFC)-enabled ATMs. Very slick. Consequently, the need for a physical card will wane in this space: as long as “tap” and phone security continues to prove to be sufficient and the experience easy. In terms of manufacturing cards, I’m seeing interesting security features embedded in cards such as randomly changing CVVs (card verification value), which are similar to soft tokens. I’m sure other technology enhancements will come to improve security and hopefully to eliminate the need for a PIN. While these kinds of cards are expensive to produce today they may not be in future.

PB: What is your advice to merchants and sellers to help them manage these developments? BM: Taking a customer-centric proactive approach in payments is imperative. Embrace innovation and try to effectively integrate payments into simplifying your end to end customer experience, such as card on file and one-touch payments. GN: Stay close to your merchant payments provider and talk to your financial institution. Ask about the trends they see in payments and educate yourself on payments trends and technology and how these could impact your business. Stay current in emerging mobile and app technology and how you can offer payment options for clients to improve their experience and be cost-effective for you as a merchant. Closely watch your competitors and other merchants and sellers to see what they are doing for payments. Finally, don’t just view accepting online and card payments as a “necessary evil." But instead as a way you can differentiate your business and separate your client experience from the competition. PAYMENTSBUSINESS


Industry Updates

Opportunity-rich payments trends becoming reality By Ryan Stewart


he payments industry has been discussing the potential opportunities of the Internet of Things (IoT), open banking, increased security and blockchain for the last few years. Now, in 2018 these trends are no longer simply predictions, but are coming to life.

IoT propelling omni-channel Omni-channel has been a payments buzzword since at least 2011. As consumers’ shopping habits have transformed across mobile, online, and in-store, the payment experience needs to be seamless. However, “going omni” is not easy; some of the largest brand names closed shop in 2017 after failing to bridge their channels. IoT tightly ties these three channels together. A prime example of how IoT could power omni-channel is Amazon Go. Consumers walk into the grocery stores, pick food off the shelves and get charged as they walk out without checking out. While this level of sophistication may be out of reach currently to everyday merchants, IoT is here to stay. Omni-channel solutions will only become simpler and more accessible moving forward.

Europe opens door to open banking North America is a considerable way from embracing open banking. But the industry is watching with anticipation as the European Union rolls out the Payment Service Directive (PSD)2. As European banks open access to data and payments, FinTechs are looking for their slices of the market. The sheer power of opening this level of information can transform the consumer experience by giving FinTech companies the data they need to create the next generation of payment solutions that are built around optimizing customer experience based on this specific information. FinTech providers will be able to take this information and provide compelling, nimble solutions on finance, payments and authentication. These new solutions will change consumer behavior and will have rippling effects to our financial ecosystems. PSD2 will empower European payment initiation services providers to innovate payment solutions while account information service providers will disrupt authentication services. Those businesses that can link startup innovation with traditional financial and banking systems will win, with consumers riding the win along with them. You can expect a more curated and personal consumer banking and overall financial experience in the years to come. North America's regulators will have a close eye on PSD2 to see if it is a successful model. If it proves to truly benefit consumers and drive 16


innovation, and issues such as security and standardized application programming interfaces (APIs) can be answered effectively, our government regulators and industry participants will start the conversation on how we can bring open banking here.

Upping the security As the industry takes on open banking and real-time payments, there will be parallel line of increasing security, while reducing friction with 3D Secure 2.0 and Network Level Tokenization. With 3D Secure 2.0, there will be an opportunity to leverage the benefits of multi-level data validation without hindering the checkout experience. 3D Secure 2.0 delivers ten times more data, according to VISA, than previous versions, including information on device channels and payment history. This gives merchants and issuers greater contextual data that they can use to verify transactions. Also, 3D Secure 2.0 works with biometric authentication and one-time passwords, eliminating the need for long sign-up processes or static passwords. Network Level Tokenization will hit its stride in 2018 as it protects sensitive cardholders’ data at the card brand level. There is less opportunity for fraudsters as card details need not be revealed, swiped or entered in each checkout experience. Lost or stolen cards are more efficiently identified and re-issued.

Blockchain With media and consumers buzzing about cryptocurrency, it is blockchain that will quietly be leading the way to revolutionizing payments. There were several pilots in 2016-2017 that tested blockchain’s ability to send money in real time, increase security and reduce transaction errors. This year it will bridge into the mainstream as FinTech players and financial institutions start to disrupt payments, authentication and due diligence checks by using blockchain technology. Blockchain might still be a long way before consumers adopt it. However, merchants will welcome real-time payments and an almost endless amount of other benefits to the financial value chain. Blockchain’s distributed network creates a trust chain that can’t be broken. We have a digital, auditable, history of truth that no longer requires intermediaries. This brings speed, more access to public data, and lower costs from everything from multi-currency payments to land title disputes that could now be auditable without legal headaches. You can control the data so it’s all public; semi public/private or all private. Continued on page 20 March/April 2018

industry updates

CFIB: Making the payments market work for small businesses By Dan Kelly


am frequently asked about the payments industry’s relationship with Canada’s small business community. It is a story I’m only too happy to share, including many of the scars and victories of over a decade of work. A decade ago, Canadian merchants were somewhere between bewildered and angry when it came to electronic payments. While merchants had grumbled about the costs of accepting credit cards for many years, all hell broke loose when Canadian banks started mass-issuing premium credit cards in the mid-2000s. Cards like Visa Infinite and Mastercard World or World Elite (some before they even had defined brand names) were being shipped out to Canadians, most of whom simply believed they were getting replacement cards with a few extra points thrown in for good measure. Shortly thereafter, the phone lines at the Canadian Federation of Independent Business (CFIB) offices started ringing from merchants wondering why their take from their credit card sales appeared lighter every month. And after significant research and several surveys to determine the route causes, a major battle was brewing between merchants and consumers on one side and the card brands, issuing banks and card processors on the other. Merchants told of us of deceptive practices used by some in the industry to trap them into terrible processing deals, with rising fees and massive exit penalties. They said they had no way of knowing which card would cost what amount and had zero power to do anything about it even if they did figure it out. And serious threats were on the horizon for Interac Debit too, which is one of the few low-cost, flat-fee forms of electronic payment that merchants and consumers favoured. As a result of these worries, merchants and their associations, including the CFIB, started to push back. Meeting after meeting with payments industry leaders and the federal government started and weren’t always a lot of fun. But something remarkable came out of it. A uniquely Canadian approach—the Code of Conduct for the Credit and Debit Card Industry—was adopted that began to change the marketplace for the better. With the Code—first proposed and drafted by the CFIB —merchants gained some power in their dealings with card brands, banks and acquirers. The Code also provided a principles-based march/April 2018

platform to help resolve problems and it has repeatedly shown its worth in the years since its introduction. The Code also lessened the damage caused by high exit penalties, split contracts, unplanned fee increases, and opaque contracts and monthly statements. The Code has been kept current with amendments to cover new payments players and technologies like mobile payments. A few years later, the Code was joined by another voluntary approach: a negotiated plan to reduce Visa and Mastercard interchange fees by an average of 10 per cent. While this was welcome relief for firms of all sizes, the best part was a five-year commitment that average rates would not go up, thereby allowing a degree of price certainty merchants hadn’t had for a decade. But where are we today? Are merchants finally armed with enough market power to negotiate prices and improve terms and conditions? While it is too soon to pop champagne and declare victory, I believe there are strong signs the power balance has improved for the better. In 2017 my association signed a ground-breaking deal with Mastercard, which gives our 110,000 small business members access to the same rates that some of the largest merchants in Canada pay. When we looked at our transaction volume through our exclusive processing deal with Chase-Paymentech, we were surprised to find that our small business members collectively process over $12 billion in electronic transactions, including over $3 billion in Mastercard transactions alone. As a result, Mastercard interchange fees for our small firms dropped by an additional 12.5 per cent and Mastercard World transactions got a 22 per cent cut. Priceless! And this was followed by a brand-new deal we just signed to reduce American Express fees for small firms by almost 50 per cent. Instead of paying 3 to 3.5 per cent to accept Amex, small firms using our new deal delivered by Chase will pay 1.8 per cent for many transactions. This should help expand Amex acceptance among SMEs, creating more opportunities to use the card for Amex cardmembers. So, after years of heavy lifting, I believe the market is beginning to work for merchants of all sizes. Have all the problems been solved? Certainly not. Some merchants continue to look enviously at some markets where rates are regulated and lower than what is charged in Canada. Many continue to report confusion over their contracts and statements. An increasing number of chargebacks, where merchants Continued on page 20 PAYMENTSBUSINESS


Industry Updates

Budget 2018:

more flexibility, possible progress By Marc-Andre Pigeon


he federal government’s Budget 2018 features several initiatives that may achieve its stated goal of “Strengthening and Modernizing Canada’s Financial Sector.” The Canadian Credit Union Association (CCUA) has helped shaped them through our involvement in the second stage of consultations on the federal financial sector framework, pre-budget consultations and the federal credit union caucus.

Bank terms flexibility Provincially-regulated, deposit-taking institutions, including credit unions, will be provided with the flexibility to use generic bank terms, subject to disclosure. We asked the federal government to review the Bank Act restrictions to find a reasonable solution so that credit unions could continue to use terms like online banking that Canadians easily understand to explain their financial activities. We initiated this advocacy effort after the federal Office of the Superintendent of Financial Institutions (OSFI) issued an advisory that adopted a very strict interpretation of the Bank Act provisions. We were deeply concerned that it could have resulted in criminal charges against credit union officers and directors for use of the terms “bank,” “banker” or “banking” by their credit union. The CCUA estimated that strict adoption of Bank Act requirements would have cost our sector upwards of $80 million.

Credit union disclosures The federal government has signalled its desire to further engage with our sector to ensure that consumers are aware of the type of financial institution they are dealing with, whether a bank, a credit union or a FinTech and by whom they are regulated. The government is looking to introduce disclosure standards that can be adopted uniformly across the entire financial services industry and would note which entity provides deposit insurance. We will be working with credit unions to minimize any additional cost or red tape that flows from new disclosure requirements.

New retail payments oversight framework Budget 2018 addresses three separate payments-related issues, two of which will directly impact credit unions. The first issue relates to the federal government’s proposed retail payments framework. For the first time, the federal government said it would be extending prudential and market conduct oversight regulations to provincially-regulated credit unions and other 18


provincial financial entities. The framework will anchor the consumer-facing side of payments transactions and is aimed primarily at activities by new and future FinTech companies. We advised the federal government that this new framework must be careful to avoid duplicating existing provincial market conduct rules that are already in place for the credit union system. The federal government said it will continue its consultations on the proposed oversight framework. It has committed to introduce legislation to support these goals once their consultations are complete. Second, the federal government is proposing a review of the Canadian Payments Act to ensure that Payments Canada is wellpositioned to fulfill its public policy objectives. The review will focus on Payments Canada membership and governance and will have important implications for how the credit union system engages in the new payments infrastructure. CCUA expects the consultation on this review to start late in the spring and has already initiated conversations with Payments Canada. Third, Budget 2018 proposes the introduction of a legislative framework to address an unlikely failure of systemically important financial market infrastructure (FMI) used to facilitate the clearing, settling or recording of payments, securities, derivatives and other financial transactions. The current infrastructure includes the Large-Value Transfer System (LVTS), CDSX, the Canadian Derivatives Clearing Services (CDCS), the CLS Bank and SwapClear. This new framework will be in place in the case of an unlikely system failure. This proposal is not directly relevant to credit unions but could have knock-on effects for the group and for other direct payment participants.

Open banking, consumer protection There is a proposal to review the merits of open banking to assess whether it would deliver positive results for Canadians while still maintaining consumer privacy, data security and financial stability. The CCUA advised the federal government to look at open banking. A further notable commitment in Budget 2018 follows from the federal government’s work on a comprehensive review of the consumer protection framework. The budget proposes to introduce legislation that would strengthen the Financial Consumer Agency of Canada (FCAC)’s tools and mandate and continue to advance consumers’ rights and interests when dealing with banks. The government has promised to develop this legislation through targeted consultations with stakeholders, including the provinces Continued on page 21 March/April 2018

industry updates

Canada, be open to open banking By Robert Vokes

and managing new revenue sources and services.


pen banking is a swiftly moving force in the financial services ecosystem, sweeping through Europe and expanding globally, including Canada. In the 2018 budget the federal government announced a review of the merits of open banking, with the goal being to determine whether it would deliver positive results for Canadians. As it takes hold, open banking will revolutionize the way banking and business are done, for individuals, corporations, retailers and for the financial institutions themselves. The changes will be vast and profound: think of the way Uber and Lyft have changed transportation, Netflix has altered TV viewing habits and Amazon has changed retailing.

The Revised Payments Service Directive (PSD2) impacts The push toward open banking is being driven by regulatory changes in the European Union (EU)(which includes the United Kingdom at this time). A new EU regulation, the Revised Payments Service Directive (PSD2) took effect in January 2018. It lets consumers share their financial data securely with banks as well as third parties. PSD2 requires European banks, with their customers’ permission, to make their account information available to other companies, organizations and institutions without going directly through the banks. This access makes it easier for consumers to transfer funds, compare products and manage their accounts and finances. Under PSD2 third parties can initiate payments and other transactions directly with customers’ permission. Many experts believe that the full effects of open banking won’t be felt until 2020. But by then the impact is likely to be one of those changes that leave people wondering how they managed to shop and pay before open banking was here. The account and transaction data that PSD2 requires Europe’s banks to share transits through application programming interfaces (APIs); making these APIs available to others is what makes the system open. The relationship between banks and retailers can change through using these APIs, and ultimately, between banks and their customers. For example, once retailers form relationships with Payment Initiation Service Provider (PISPs), or become PISPs in their own right, they will have access to the APIs. They may then offer inducements for direct, instant payments: which has the potential to completely displace credit cards from transactions, thereby reducing credit card transaction fees. With the reductions to such traditional fees, financial institutions will have to be nimble and creative in seeking march/April 2018

How financial institutions can respond While open banking brings obvious opportunities to non-bank retailers, the banking sector also has its own opportunities. For instance, banks can use this platform to offer plug-and-play financial products to third parties, through FinTech companies and including retailers, ultimately expanding their ecosystem and reach to new customers. Research suggests that the global banking sector is already up to the task of meeting the open banking challenge. A recent study by Accenture found that 99 out of 100 payments executives at large European, Asia Pacific and North American banks said their institutions plan to make major investments in open banking initiatives by 2020. The survey also found that nearly two-thirds (63 per cent) of banks in North America believe that launching open banking is critical to competing with new entrants, such as FinTechs and tech giants. Industry executives believe open banking will help their institutions remain relevant. In fact, North American executives are more bullish on open banking than their counterparts in Europe, where the changes are well underway due to PSD2. In Europe, half (51 per cent) of those surveyed said that open banking is critically important. They, in turn, are looking at open banking more intensely than bankers in the Asia Pacific region, where two-fifths (40 per cent) see it as key. Nevertheless, Accenture’s survey shows that move toward open banking is worldwide. Globally, half (52 per cent) of all bank executives surveyed believe that they will need to implement open banking to compete with traditional competitors that have invested in digital transformation—that is, to keep up with each other.

Open banking challenges The arrival of open banking is a huge business challenge for the financial sector, with major risks as well as unprecedented opportunities. Nearly two-thirds (65 per cent) of respondents to the Accenture survey said they see open banking more as an opportunity than a threat. One of the major risks to be managed is data security. This concern is one reason why Canada is taking a more cautious approach to regulatory change than Europe. In the federal budget tabled in February 2018, Ottawa announced it was launching a review, “to assess whether open banking would deliver positive results for Canadians with the highest regards for consumer privacy, data security and financial stability.” The other challenge for the financial sector will be how to stay ahead PAYMENTSBUSINESS


Industry Updates in the marketplace as API-based services multiply exponentially. Our research shows that even ahead of the new European regulation, the number of banking APIs that third parties can connect to has jumped from barely double digits a decade ago to more than 1,500 last year. APIs are expected to grow tenfold now that PSD2 is here. Accenture estimates that by 2020, seven per cent of the total banking revenue pool will be associated with open banking activities. Banks will need to compensate for the loss of revenues from transaction fees by offering new services both to retailers and individual customers. For example, they can offer online, mobile-based loans, mechanisms for mobile payment with credit card loyalty points, even age ID checks for purchases such as alcohol or, soon in Canada, cannabis.

Change comes with uncertainty, but the evolution of the banking and payments system with open banking is becoming clearer. With payments modernization comes the opportunity for the Canadian banking system to prepare for and design its own course for open banking. It is time to think through that future. Robert Vokes is managing director and head of Financial Services Canada Bob has over 30 years of financial services industry experience spanning banking, insurance, wealth and capital markets as well as several FinTech providers. Bob joined Accenture in 2015 to lead the Financial Services team in Canada. Prior to joining Accenture, Bob held leadership positions at Novantas, FMCG, Gartner and Mitchell Madison Group. He was also a co-founder of Zeborg, a procurement analytics firm acquired by Emptoris in 2003. Bob began his career at McKinsey & Co. Bob is a graduate of the Massachusetts Institute of Technology with a bachelor’s degree in computer science.

Navigating open banking With their strong reputation for prudence and financial probity, banks have strong brand equity. They will need to deploy this to derive revenues from partners who pay to offer products and services on the banks’ own platforms, or on behalf of the banks. Open banking also means an opportunity for banks to concentrate on their core product competencies—deposits, credit and mortgages —while redefining the customer relationship and experience. This shift may imply leaving some specialities to niche providers or closer collaborations with non-banks to ensure a truly remarkable customer experience that is associated with the banks. The successful players in this new open era will broaden their ecosystems and play a much greater part in the financial and non-financial transactions of their customer base. To navigate this more competitive market, banks will need to learn. Here’s what their payments executives should be looking for: • Banks will need to decide how to compete or collaborate with non-banks that can replicate some traditional banking services using APIs, while preserving and monetizing their own trust and customer relationships. At the same time, they’ll need to continually build their mobile presence and offerings through APIs; • In Canada, the financial sector will need to meet payments modernization goals and faster payment implementation dates. Adding open banking capabilities to the mix will challenge internal technology and business process staff; • The United States is driving the sector toward faster payment dates through directives and industry initiative rather than set regulations. Canada will need to keep up, and it’s likely that our financial institutions will need help from agile, experienced development firms from our technology sector; • Payments Canada will need to monitor the change closely and make sure that the payment system incorporates these changes while preserving its safety and soundness. Financial institutions will need to be adaptable: as open as possible to open banking if you will; and • FinTechs will need to be more than just nimble. Open banking is bigger than a technology change. It will require a deep understanding of payment rules and standards and the need for data security, along with the ability to spot potential banking and non-bank partners. 20


Opportunity-rich payments trends becoming reality Continued from page 16

Looking forward Payment trends tend to take a long time to come to fruition with all the regulation hoops and tremendous effort on merchants. However, we are seeing that starting to change in 2018. This is the year of the merchant, where trends become real opportunities for everyone. Ryan Stewart is chief commercial officer for Bambora North America, an Ingenico company, where he leads the sales, marketing and product teams. He is passionate about the dynamic payments space and focuses on delivering a simple, elegant payments experience to merchants and software providers globally. Ryan has launched numerous disruptive payments products in Canada, the U.S. and Europe, from online, to in-app, mPOS and merchant online onboarding automation.

CFIB: Making the payments market work for small businesses Continued from page 17

end up on the hook for fraudulent transactions, even when they take every realistic precaution, are causing anxiety. And merchants being stuck with the bill for processing fees on sales taxes they remit to government remain an unfair burden. But a lot has changed for the better. Had someone asked me a decade ago whether I would be fighting or working cooperatively with card giants on deals to lower fees for small business owners, I would have put money on the boxing gloves. I’m proud of what has been achieved in Canada so far and look forward to what comes next. Dan Kelly is president and CEO of the Canadian Federation of Independent Business (CFIB). With over 110,000 members, the CFIB is Canada’s largest non-profit organization devoted to creating and supporting an environment where businesses can succeed. The CFIB advocates for small business with politicians and decisionmakers across Canada. As a non-partisan organization, it influences public policy based on its members’ views, ensuring that they have a chance to affect the laws and policies that affect their businesses.

March/April 2018

2018 Industry events

Budget 2018: more flexibility, possible progress Continued from page 18

and territories. The CCUA will continue to advocate for differentiated treatment based on the credit unions’ cooperative structure. We are engaging credit unions on the framework for a voluntary code, one that will include the disclosure elements referenced in the banking terminology fix but also serve to inform our engagement with the FCAC and provincial market conduct regulators.

Additional security measures The federal government announced a plan to protect against cyberattacks. It proposes investments of $508 million over five years, and $109 million per year thereafter, to fund a new National Cyber Security Strategy with three principal goals: • Ensure secure and resilient Canadian systems; • Build an innovative and adaptive cyber ecosystem; and • Support effective leadership and collaboration between different levels of Canadian government and partners around the world.

Modernizing regulations Budget 2018 also commits to “Modernizing Canada’s Regulatory Frameworks.” The federal government wants to help shepherd regulations that accommodate emerging technologies and business models. Although the financial sector, specifically credit unions, do not figure in these commitments, it will be an important area of engagement for the CCUA. We will continue to advocate for more effective and appropriately calibrated regulatory approaches that do not create unnecessary costs and inhibit growth in our sector. Marc-Andre Pigeon is assistant vice president, government relations at the Canadian Credit Union Association (CCUA). The CCUA is the national trade association for Canada’s credit unions, member caisses populaires and regional Centrals.

To send press announcements, please direct them to Brendan Read, Editor, at

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Hardware Report: POS

Tapping customer feedback at the POS By Georgina Nelson


hile the primary function of a point-of-sale (POS) system is to receive payments, POS technology now has the potential to do so much more. In fact, POS systems, like the Poynt smart terminal, can hold the key to improving business operations through obtaining customer feedback: because of the direct interaction customers have with the terminals. Customer feedback is vital to business growth. In fact, more than 90 per cent of U.S. business executives agree that customer feedback is critical to their bottom line, according to a study conducted by HundredX. Connecting with customers at the POS puts the power back in the business’s hands. It helps them understand their customers’ needs and it provides access to valuable insights to make better business decisions. Here are a few best practices on gathering genuine customer feedback directly at the point of purchase.

Keeping it simple It’s no secret that customers have busy lives. They don’t have time to fill out lengthy surveys in-store, through pop-ups that interrupt the purchase process or via followup emails when buying online. With this in mind, how can merchants gather customer feedback in a way that’s both convenient and accurate? The key is simplicity. Instead of asking a slew of lengthy questions, merchants can gather far more data by asking one short question at the point of payment, thereby guaranteeing that the respondents are genuine customers and that the shopping experiences are fresh in their minds. The POS 22


serves as the perfect channel for merchants to offer a convenient way for customers to tell them what they’re doing right (or wrong) with little to no inconvenience. Yes, one question per customer may sound almost too simple at first. But the data adds up, especially when merchants can rotate through a variety of questions and continuously change the type of data they receive from customers. TruRating’s research shows that when asking one question as customers pay and providing an easy and frictionless way for immediate feedback, merchants can obtain an average of 88 per cent response rate, versus the 1-2 per cent response rate that other customer feedback solutions see. All that data provides merchants with the chance to not only gauge their performance but strategically improve it according to verified customer feedback.

Rotating the questions Rotating the questions asked means that repeat customers aren’t getting prompted with the same questions on every visit. This gives merchants the ability to target specific areas, such as customer service, product selection, layout and price, according to their business needs. Merchants can ask customers: “How would you rate the service?”, “Did you find everything you were looking for?” and “Were you satisfied with the staff’s knowledge of the products?” The answers provide retailers with the ability to understand how their businesses are holding up in the eyes of their customers.

Go omni-channel In an omni-channel world, it is important for merchants to use customer feedback solutions that can integrate everywhere a

consumer wants to shop, whether in store or online. When all customer feedback is collected in the same dashboard, merchants can efficiently correlate it. Not only does this ensure the feedback received is representative of the whole, but it also helps retailers make data-driven business decisions that benefit all shopping environments.

Act on the data Collecting near real-time customer feedback at the point of purchase allows merchants to make executive decisions more efficiently. It is of little use to find out customers were highly dissatisfied with the staff’s service long after they’ve left the store. With robust customer feedback solutions integrated with POS terminals, merchants can analyze the data and act on the results to rectify problems. It is with this data that merchants can truly improve their businesses. By understanding how their customers think about their shopping experience, retailers can adjust their strategies accordingly and increase positive scores over time. For example, if a retailer is receiving poor service ratings during the evenings, managers can rethink their approach and train their evening staff in order to improve customer satisfaction. In conclusion, customer feedback provides retailers with the knowledge to boost their bottom lines and adapt their stores to the needs of their customers. These insights will help them to keep pace in the digital age. Georgina Nelson is the CEO and founder of TruRating, a customer feedback solution. Headquartered in the U.K., TruRating has operations across Canada, the U.S. and Australia. With a background in law and an eye for the consumer, Georgina saw the need for reliable, validated customer reviews that would better serve businesses, thus launching TruRating in 2014.

March/April 2018

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