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May/Jun 2017

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

Data analytics Fixing payment problems and finding new opportunities by leveraging good data ❱ Busting recurring revenue myths

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❱ Embracing an

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TableKey of Contents theme

May/June 2017 Volume 8 Number 3

Data analytics


The clock is ticking on IFRS 9

Editor-in-Chief Steve Lloyd

Will your organization make the deadline?

Managing Editor Sarah O’Connor


Publisher Mark Henry Contributors Scott Blum, Kevin Deveau, Debbie Gamble, Gord Jaimeson, Jennifer Lee, Samuel Mulligan, Brendan O’Brien, Mike Poyser, Gino Riola Creative Direction Jennifer O’Neill Photographer Gary Tannyan 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. ©2017 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


Win the path to purchase through analytics and artificial intelligence

Busting recurring revenue myths


How Aeroplan enriches transactional data to better understand customers


Fighting fraud is an everyday (and everybody) job

14 Travel, transportation Travel in the sharing economy and hospitality Events & entertainment


Industry updates


Pay channel report Next issue…

July/August may/June 2017

Changing how cashless payments are accepted at events

A trusted, secure payments system that’s driving innovation


Industry news


2017 industry events


Embracing an omnichannel approach

Security, fraud & privacy • Acquirers • B2B • Points & rewards PAYMENTSBUSINESS


Data Analytics

Win the path to purchase through analytics and artificial intelligence

By Jennifer Lee


is shaping up to be the year that artificial intelligence (AI) goes mainstream, impacting an ever larger share of our daily life and transforming just about every business and industry, including retail. Combined with the power of big data analytics, AI opens up new possibilities for retailers to understand consumers at the individual level and to differentiate themselves from their competitors by creating a truly personalized, omnichannel shopping experience for each of their consumers. Getting that consumer experience right is critical. Even retailers who have shifted to discount understand that competing on price alone is no longer enough and that driving experience is the new battleground in the fight to attract and keep consumers. The key 4


is making that experience relevant to each individual. That means retailers must understand each consumer’s path to purchase and completely personalize the journey. That path to purchase has changed dramatically in recent years, as digital technologies have enabled consumers to interact with retailers and brands across more touch points than ever before, and for longer periods of time. While some consumers still shop the old way—enter a store, look around, make a purchase and leave— many more, especially younger tech-savvy consumers, engage with retailers over several days through the pre-purchase, purchase and post-purchase phases. And they do that across multiple platforms, including company-owned websites, mobile apps, third-party marketplaces (such as Amazon) in-store and via social media platforms where they share information and discuss products and the consumer experience with their friends. MAy/June 2017

Data Analytics Fortunately, retailers have never had more access to data about their consumers or more ways to get their message to them and measure responses at each of those touch points. But having all that data is useless unless you can sort through it all to gain meaningful insights and then be able to act on those insights in a timely manner that resonates with a particular consumer. Artificial intelligence is a key tool to help retailers aggregate data from all of their touch points, understand and digest that data, and communicate with individual consumers in the most effective way via the most appropriate channel. This is particularly important as we move away from simply segmenting consumers by demographics towards segmentation based on social values, and as more consumers acquire Internet-connected devices that become part of the path to purchase for a growing array of products and services. These new paths to purchase have many places where consumers can come on or drop off. Retailers who want to keep consumers on a path to purchase from them rather than from a competitor need to recognize that each path is as different as each consumer and design their omnichannel offering to be flexible enough to allow each consumer a personalized journey to the same end point. That means a compelling, seamless experience that includes both traditional and digital commerce and allows consumers to move from one channel to another, leave for a while and pick up where they left off on whichever channel they want when they come back.

All retailers need to constantly refine, learn and adapt by continually monitoring their consumers along the complete path to purchase. Here’s one example of how that might work. A consumer sees a print ad or receives one via email or a social media platform. Curious, she goes online while commuting to work and checks out the retailer’s website for more information, then searches on Google for product reviews and consumer testimonials. Her interest piqued, she does a price check during her lunch hour via the retailer’s mobile app and compares that with offers available from some competitors’ sites and Amazon. A few days later, she visits a store to see the product for herself, then does another price comparison using her smartphone. Before making her final decision, she consults her friends on Facebook and Twitter. Finally ready to buy, she returns to the retailer’s mobile app on her commute home, places her order and arranges to pick it up at a store near where she lives. At any point along this path to purchase, she could give up in frustration if it’s not easy to navigate any of the channels offered by the retailer or if the information she needs isn’t readily available. She could be deterred by bad reviews of the consumer experience that she gets from Google or her social media contacts. Or she could be may/June 2017

lured away if, during her price comparison on another retailer’s site, she finds that consumer experience more pleasant than the one she is having through the original retailer. And she might not have even begun this particular journey if another retailer had used its detailed insights about her to target her with a more enticing offer in the first place. In 2016, Deloitte’s Omnichannel Consumer Experience Index found that, while some retailers already have extensive omnichannel offerings and are reaping the rewards of their efforts, some have barely started and many others are somewhere in between. The Index also found that retailers in the United States have more extensive omnichannel offerings than those of Canadian retailers, a particular concern given that Canadian shoppers—three-quarters of whom regularly cross-border shop—want digital offerings and experiences in the same way U.S. shoppers do. It’s critical for retailers to find and nurture omnichannel consumers, as they are between three and five times more profitable than nonomnichannel consumers due to their loyalty to a retailer, the frequency of their purchases and the lifetime value of the relationship. Retailers can use a resource like the Omnichannel Consumer Experience Index to see how they stack up against their competitors—where they lead, where they lag and, most importantly, what investments they need to make—in technology, systems and talent—to have the maximum impact. No matter how they compare, all retailers need to constantly refine, learn and adapt by continually monitoring their consumers along the complete path to purchase. This includes using leading technologies, including artificial intelligence, to bring all of the data together, drive insights and deliver outstanding consumer experiences. This isn’t as daunting as it sounds. While some retailers may want to do it all themselves, others will prefer to rely on the current big AI providers such as Amazon, Google or Apple. Both approaches have risks, however. The complexity and cost of integrating AI and analytics into a retailer’s operations means only the biggest retailers can contemplate the go-it-alone approach and even then they may lack the skills needed to pull it all together. Those who align themselves with an existing AI provider could find they are left behind if another, better provider comes along in the future. The best option is to build a model that is always plugged into the network and ecosystem and which relies on being flexible and nimble through partnering with others to help meet each consumer’s personalized needs. By using a proof of concept approach, retailers can start small, fail fast, learn from those experiences and quickly move on to try new things. Wherever retailers are on the omnichannel spectrum, taking steps now to harness technology to provide a better consumer experience will lead to a better payoff in the form of more loyal consumers, higher sales and a greater ROI and ROA. Jennifer Lee is the national retail & consumer analytics leader at Deloitte. She helps companies leverage analytics to drive a differentiated physical and digital experience, in addition to improving margin and efficiency. Jennifer sits on the global retail executive team at Deloitte.



Data Analytics

How Aeroplan enriches transactional data to better understand customers BY MIKE POYSER


uccessful loyalty programs offer value that is relevant to program members. This value can come in many forms—discounts, free gifts, special offers and others—but the key is to ensure that it is what customers actually want. Here at Aimia, a data-driven marketing and loyalty analytics company, we’re seeing first-hand how consumers are becoming increasingly savvy about the way they engage with loyalty programs. According to the 2016 Aimia Loyalty Lens study, 42 per cent of Canadian customers view their data as highly valuable, while 51 per cent of consumers get annoyed when companies don’t use what they know about them to offer better, personalized products and services. Customers expect tailored and relevant experiences and companies are turning to data and analytics to develop multi-dimensional views 6


of customer preferences and behaviour. Ultimately, the challenge they are trying to solve is how to deliver the right message to the right customer at the right time. Many companies are becoming adept at recording and analyzing consumer data on several levels to inform their customer communications. For example, records of past purchases are a type of transactional data that provides great insight into customer behaviour, given that buying often occurs in patterns. Companies

It all starts with enriching your data before jumping to analysis and modelling. MAy/June 2017

Data Analytics will typically aggregate such transactional data to create meaningful input variables for predictive models. However, to truly maximize the value of transactional data, one should consider enriching our transactional data prior to any type of aggregation, analysis or predictive modeling. Such enrichment can include simple things like data cleansing and inputing missing values or more complex things like inferring new transaction-level variables based on pattern recognition. Whatever the case may be, there is an enormous amount of untapped informational value that can be leveraged by focusing on data enrichment at the most granular (i.e. transaction) level data prior to jumping to predictive modeling or more advanced analytics.

Aeroplan: A case study in enriched transactional data Aimia owns and operates Aeroplan, Canada’s premium loyalty coalition program of more than five million members, 75 partners and more than 150 brands across multiple industries and sectors, including airlines, banks and retailers, among others. As such, Aeroplan manages a large expanse of data to ensure Aeroplan Miles are issued to and redeemed by members transacting with Aeroplan partners. It all starts with enriching your data before jumping to analysis and modelling. Sometimes when we look at our data, we’ll notice certain gaps. For example, postal code and detailed address information is often missing or incomplete. Without postal code or detailed address information there are many types of analysis that we would not be able to execute against. Some simple examples include: understanding our member’s preferred shopping regions or inferring where our members live, work and travel. We can estimate the latitude and longitude for a given merchant by first mapping all transactions at that merchant to the home address of each Aeroplan member. Given that we have accurate home address information for most of the Aeroplan membership base, such an exercise would provide a graphical illustration of where a merchant might be located. As expected, especially within certain categories such as gas stations and grocery stores, most transactions at a particular merchant are made by people that live closest to that merchant. Based on this underlying assumption our team is able to engineer a data product that converts each customer’s postal code to corresponding latitude and longitude, and then estimate the merchant location by taking an iterative weighted average of where the most transactions took place. Executing this simple algorithm against our transactional data provides us with fairly accurate estimates for many brick and mortar retailers (especially gas stations, grocery stores, local shops/restaurants, banks) when validated against a known dataset. When you look deeper into the data, you can find that there is a correlation between the types of retailers we are able to estimate location for most accurately and the distribution of the customers that have transacted there. For example, a local bakery in the suburbs has a low standard deviation or distribution in transactions compared to a fast-food retailer in downtown Toronto that attracts customers from all over the city. This is a general trend: certain merchants/partners that are located in downtown or urban settings have large standard deviations (i.e. may/June 2017

people from a wide array of distant postal code are all transacting at the same merchant). The same is true for regional small, specialty shops and tourist attractions. Another area where the algorithm struggles to converge is with online retailers. For example, transactions for “Amazon Kindle” are conducted online and addresses associated with these transactions are from all over the place. This is where we find unexpected value! Although the algorithm fails to do what it was original designed for (i.e. providing an accurate estimate for a merchant’s location)—it inadvertently provides us a useful, scalable method to identify online retailers without trying to parse the merchant name for a .com or .ca.

In an age where brands are increasingly working hard to differentiate themselves from competitors, enriched transaction data provides more visibility into spending patterns and trends to better identify opportunities to meet customer needs. Lastly, we took this a step further and were able to distinguish between one-time online purchases versus repeated purchases that seemed to be pre-authorized payments—with either monthly or bimonthly recurrences. With enriched data, we can determine the general areas in which most purchases take place. For example, if we can see that an Aeroplan member shops often in downtown Toronto, since purchasing items like food and gas are fairly consistent we can make an educated guess that they work downtown. Items rated as high or very high in standard deviation require a touch more investigation. In an age where brands are increasingly working hard to differentiate themselves from competitors, enriched transaction data provides more visibility into spending patterns and trends to better identify opportunities to meet customer needs. In this example, being able to identify preferred shopping regions and locations enables us to deliver the right message to the right customer at the right time. As deletist consumers don’t think twice about shutting out brands that send them irrelevant messages, it’s more important than ever to use enhanced insights to deliver meaningful value to customers. Michael Poyser, vice president, analytics, Americas coalition at Aimia, oversees analytics work for Aimia’s Aeroplan coalition and proprietary clients, working across the financial, retail and travel sectors. He transformed Aeroplan’s predictive analytics and data modelling engines, and led the development of the Aimia Loyalty Platform—a SaaS customer analytics platform, used by retailers and CPG companies around the world.



Data Analytics

The clock is ticking on IFRS 9 Will your organization make the deadline? By Kevin Deveau


f you are not already thinking about and planning for the IFRS 9 deadline, you’ll want to get moving—quickly. While IFRS 9 may “just” be a new accounting standard, it’s not just accountants who are scrambling to get ready for the January 1, 2018 (or for Canadian D-SIBs, November 1, 2017) deadline. If you’re involved with consumer debt in any way, this policy change will mean big changes for your organization. Following the 2007-08 financial crisis, the International Accounting Standards Board (IASB) believed that one of the central problems with the existing standard was that loan losses were not being recognized until loss events had already happened (incurred loss). Therefore the new IFRS 9 impairment model requires an expected loss model that begins at account initiation.

It’s not easy, but it’s necessary The implementation of this standard will be felt by almost every impacted organization’s business areas, including risk, IT, modelling, finance, treasury and commercial teams. Models that have complied with previous standards or regulations (e.g. Basel capital models) will not fully meet the new requirements of IFRS 9 impairment modelling. For example, IFRS 9 requires lifetime, rather than 12-month, views of expected loss; accurate point-in-time assessments rather than conservative through-the-cycle or downturn assessments; and consideration for a range of macro-economic forecasts and other forward-looking data. Building IFRS 9 impairment models is complex and running these time-consuming calculations requires high-production performance engines to be able to quickly turn out the provisions needed for month-end reporting requirements. 8


Three stages of grief Further, as part of the new standard, all client accounts must be segmented into three “stages” based on credit risk deterioration since initiation to determine whether a 12-month or lifetime loss assessment will be used. If you are involved in debt collection in any way, from in-house collections to DCAs to debt purchasing, these stages will change all of your priorities. For example, when accounts transition from Stage 1 to Stage 2 their impairment requirement leaps from a basis of 12-month expected credit losses to lifetime expected credit losses.

Just about every authority on IFRS 9 agrees that impairments will rise by no less than 30 per cent, but certain portfolios will experience much larger increases. Accounts must enter Stage 2 at more than 30 days past due but may enter before they have even missed a single payment if their current risk is considered to have “significantly increased” since initial recognition. This is challenging for risk managers because it is triggered by a relative increase in credit risk over time rather than an absolute level of credit risk. It is also delicate from a customer standpoint as you cannot collect amounts that are not yet past due. Given the impact of moving from 12-month to lifetime losses, however, extra investment will be required to manage this additional cost. Just about every authority on IFRS 9 agrees that impairments MAy/June 2017

Data Analytics will rise by no less than 30 per cent, but certain portfolios will experience much larger increases depending in particular on product mix and the current impairment approach.

There is no crystal ball, but there are analytics Unfortunately, these policy changes may force a closer look at the value of your customer relationships. You will be required to realistically weigh the costs and benefits of keeping delinquent customers on your books, because curing their accounts may not immediately pull them out of Stage 2 or even Stage 3. Unless you can make a case for why their credit risk is no longer significantly higher than it was at initiation, these accounts are still going to be expensive to keep. Does this sound difficult? Well without analytic support from specialists with expertise on model development, model validation and strategy development, it is. We can’t see the future, but with help from analytics, we can predict it, which means that analytics will be more critical than ever before. Fortunately, investments in analytic solutions can help with all of this and ensure that every step is documented and organized for auditing purposes. Predictive and prescriptive analytics are already helping organizations look forward and make decisions that best serve their bottom line. Organizations are turning to these kinds of

solutions to better understand where they are at on their path to IFRS 9 readiness, how they can meet the impending deadline and how they can manage impairment and risk levels in their portfolios after the change goes into effect. Additional investments in technology solutions that allow rapid, accurate, automated calculations will help address the new operational requirements. Further, the ability to run simulations is needed to provide deep insight into impairment drivers and model dynamics. Ultimately all organizations will need the ability to run and report against both “what-is” and “what-if” calculations in order to manage their portfolios effectively. While all compliance changes wreak havoc on business functions for a period of time, they do serve an important purpose. The new IFRS 9 requirements will take some time to get accustomed to and significant investment to prepare for, but in time your organization will be better off for being able to centralize data resources and processes, automate reporting, simplify impairment methodologies, and be more consistent and transparent across the business. The clock is ticking, will you be ready? Kevin Deveau is vice president and managing director, Canada, at FICO. He is responsible for growing FICO’s Canadian market share and strengthening client relationships.

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Data Analytics

Busting recurring revenue myths By Brendan O’Brien


ommerce heroes like Netflix and Amazon Web Services have set the bar high. Businesses across virtually all industries are rushing to offer their goods and services via some form of recurring revenue. In fact, Gartner research suggests 80 per cent of software vendors will switch to a subscription model by 2020. The revolution is about more than subscriptions—it’s about usage-based models that stand to redefine everything from online shopping to automobile ownership. Today’s hyper-competitive environment makes speed to market an unmistakable advantage. Consider the “age of the customer” truism: regardless of what you sell, an ever increasing portion of your customer base will expect to pay in a way that spans time, mitigates or avoids the hurdle of up-front capital expenditure and better reflects a digital age consumption model. Businesses exploring recurring revenue models for the first time face a wide range of exaggerated claims and fallacies. Let’s clear up some of the recurring revenue myths to provide an accurate roadmap.

Fallacy #1: Recurring revenue is merely a repetitive quote-to-cash motion Quote-to-cash (Q2C) was designed and adopted to serve businesses that sell in a one-time sale model. Applying it to recurring revenue propagates a “transaction-centric” world view and ignores the key imperative to all recurring revenue models. All one-time sale models have a common goal: acquire a customer, get their money, then work to re-acquire that customer. The initial focus is acquisition and the secondary focus is re-acquisition. Recurring revenue is fundamentally different. While customer acquisition remains the critical starting point, the secondary function is not re-acquisition but retention. A healthy recurring revenue business will also want to keep an eye out for upsell and cross-sell opportunities, but retention is the primary goal. Customer retention is maximized when customer satisfaction is elevated. Elevating customer satisfaction is contingent upon maintaining a 360-degree view of how your customers utilize your goods or services. And all of the things that occur “between the bills”: how and how often did they access my offering? What are their consumption habits? How many times have they called customer 10


MAy/June 2017

Data Analytics service? Have they upgraded or downgraded? The successful recurring business not only asks these questions, but seeks answers that continually demonstrate value to the customer. Recurring revenue success is far more likely when these “revenue moments” are proactively responded to, versus merely the “mile marker” financial transactions.

Fallacy #2: Business success is measured only by margin achieved at initial sale Recurring revenue models demand more nuanced KPIs than what a simplistic margin calculation can provide. For born-digital recurring revenue services margin calculation has little applicability at an individual customer level, as there is no individually crafted or provisioned “thing” being offered to each new customer. But for businesses who make physical goods seeking to launch a recurring revenue offering, the continued application of margin calculation as primary KPI poses two challenges. For those positioning a “goods as a service” model, where a consumer pays over time for that which was only acquirable via up-front capital expenditure, margin will likely be achieved at a future date. This poses a risk/ reward model not imposed by one-time sales. The risk is that a customer departs before hitting the future date at which they have paid for the cost of goods sold, and reward is realized only if they are retained past that point. The upside can be far greater than what a one-time sale can yield if the customer is retained in perpetuity. The risk can be mitigated by enforcing contractual commitments and creative incentives such as perpetual equipment upgrades. Customers pay more over the long haul, but always get the latest and greatest offering. For manufacturers of devices which have an up-front cost to the consumer, but subsequently “unlock” access to a subscriptionstyle service (e.g. a home security system with an associated active monitoring service), attempting to achieve margin at the initial device sale can be a road to ruin. Instead, viewing these enabling devices as barriers to entry for consumers is the far wiser approach, long demonstrated by the mobile phone industry. Be prepared to take a loss on an enabling device as necessary (possibly to the point of giving it away!) in order to guide consumers toward a perpetual service that delivers ongoing profit and learn to measure the success of your business with KPIs like churn rates, adoption rates and retention rates rather than merely traditional COGs/margin.

Fallacy #3: Recurring revenue is a synonym for subscription While subscription is a perfectly valid business model, it is the simplest and least technically demanding subset under the broader recurring revenue umbrella. Recurring revenue encompasses multiple pricing models and is defined as such not by a given pricing structure, but by the perpetually tethered relationships between consumers and providers. While the simplistic Netflix subscription model, a non-variable and rhythmic (monthly) transaction, is certainly categorized as recurring revenue, it is equally true that Apple’s traditional iTunes model is as may/June 2017

well. While iTunes is variable and arrhythmic (customers are billed only when they consume something), the tethering of an iTunes consumer to provider Apple by the consumer’s relationship with the iPhone device and iOS and the iTunes app requires the same amount of attention to perpetual customer retention as the Netflix model requires. Such pay-per-drink models as iTunes can also be re-crafted into true arrears-based consumption models (how we pay for utilities, for example), which are variable in amount but predictably rhythmic like subscriptions, or hybrid subscription/ consumption models such as the typical mobile phone bill which incorporates subscription fees with consumption fees and one-time/ad-hoc fees as well. All of these pricing structures are versions of recurring revenue.

Fallacy #4: Consumption-based pricing models will never pertain to my business Your customer’s demands can (and will) change at any time. Assuming usage-based models can’t apply to your business limits customer choice and is counter to any effort to future-proof against unforeseen market shifts. The trend over the last few years across virtually all industries has been in favour of more sophisticated usage or consumption pricing models. Importantly, consumer consumption data provides immeasurable value to the business even when it is not directly reflected in how consumers pay for the service. Using Netflix as an example again, while their customers pay for the service in a straightforward flat subscription, the thorough metering of exactly what those customers watch benefits Netflix on both a micro level (e.g. providing targeted content recommendations) as well as on a macro level (e.g. informing Netflix’s content decisions).

The new recurring revenue world monetization Besides a more reliable revenue stream, one of the primary benefits of recurring revenue is that it allows you to know—in a way that non-recurring revenue models simply can’t—who your customers ARE rather than merely who they WERE. Success begins with an admission that mere tweaks to the way you’ve operated historically aren’t sufficient to get you into the recurring revenue game. A renewed and early focus on the importance of elevating customer satisfaction, combined with the adoption of new processes and systems that are pointed toward that goal (rather than merely figuring out how to generate bills in repetitive fashion) is what distinguishes winners from losers in recurring revenue. To get ahead, look beyond billing to understand how recurring success is inextricably linked to customer care, and why monetization in the age of the customer is the clearest path to recurring revenue nirvana. Brendan O'Brien is chief innovation officer and co-founder at Aria Systems. In 2002, he introduced the world to cloud billing, and innovated database-driven, enterprisegrade web applications before the concept of “cloud” was on the horizon. O’Brien is the industry’s foremost thinker on IoT and recurring revenue: enabling new business models, providing multi-dimensional customer choice, and ultimately increasing revenue. The number-one ranked cloud-billing provider, Aria, empowers enterprises to monetize a wider variety of product offerings, retain their customers for longer periods of time, and grow recurring revenue at scale. PAYMENTSBUSINESS


Data Analytics

Fighting fraud is an everyday (and everybody) job By Gord Jamieson


hether your next purchase is a new suit, new shoes or a new TV, chances are high that you’ll be buying it online. Thanks to laptops, smartphones and tablets, each integrating payment capabilities, not only is it easier to buy the products we want, but it has made Card-Not-Present (CNP) transactions (payments made without a physical card) the preference for shoppers worldwide. In fact, eMarketer reports that global online and mobile CNP transactions totaled $1.7 trillion in 2015, and is projected to grow to $3.5 trillion by 2019. But shoppers aren’t the only ones jumping on the CNP trend—so too have fraudsters, who are taking advantage with increasingly sophisticated attacks. Today, the majority of fraudulent transactions on Canadian issued cards—more than three-quarters (78%) of total fraud—are through CNP transactions and while the majority of Canadians are accustomed to shopping online, a recent survey by Visa showed 81 per cent are concerned about potential fraud. So if consumers can shop when, where and how they want, how can we ensure the shopping experience is both seamless and safe?



MAy/June 2017

Data Analytics

The responsibility lies with everyone involved. Consumers, merchants and processors need to be diligent year round.

How to avoid taking the bait from phishers, smishers, vishers and pharmers Fraud today is perpetrated via many channels, with online increasing dramatically. In fact, online scams accounted for more than 20,000 complaints and more than $40 million in losses by Canadians (according to the Conference Board of Canada). The Visa Canada survey of 1,500 Canadians showed that two-thirds (66 per cent) have received an email scam, almost half (47 per cent) have been a victim of a phone scam, and one in 10 (12 per cent) have been targeted with a scam by mail. While 71 per cent say they have told friends and family about fraudulent activities and nearly four in five (79 per cent) have notified their financial institutions, only about five per cent of fraud is reported to authorities, making it harder for enforcement agencies to catch criminals. With minimal repercussions, fraudsters will stop at nothing to get personal information and card data, making it ever more important for consumers to watch out for signs of fraudulent behaviour.

If consumers can shop when, where and how they want, how can we ensure the shopping experience is both seamless and safe? Signs like subject lines and email copy using ominous or threatening language or creating a sense of urgency (e.g. "Your credit card has been suspended"), a lack of a personalized salutation or closing details (e.g. "Dear valued customer"), or typos, poor grammar, punctuation, capitalization consistency and other warning signs in communications from ‘reputable’ companies are often red flags that indicate fraudulent behaviour. Thankfully, Canadian consumers appear to be more aware of ways to protect themselves than others. Eighty-three per cent of those polled say they review their debit and credit statements all the time, nearly three-quarters (72 per cent) have password-protected their smartphones and laptops and three-fifths (63 per cent) believe that fraud and security prevention features are very important when downloading a new digital wallet or mobile payment app. As consumers, the more knowledge we have about fraud risks, the better. More than half (57 per cent) of Canadian respondents say they would like to receive more information from their banks on how to protect themselves, meaning there is a strong opportunity for fraud education (and protection). may/June 2017

Merchants on the front line for fighting fraud Merchants are also playing a very important role in the fight against fraud, because they have the ability to recognize and help stop CNP scams before they occur. Merchants need to watch out for the following fraud indicators to help ensure consumers (and themselves) are protected: • Multiple purchases with different cards, shipped to a single address: This can indicate a batch of stolen cards or account numbers that were generated using illegal software. • Multiple, high value transactions on one card over a very short period of time: This can indicate an attempt to “run the card” until the account is closed. • Multiple purchases made on a card with a single billing address, shipped to many different addresses: This can indicate organized criminal activity. • Online transactions with multiple cards but a single IP address: This may indicate a batch of stolen cards. • Multiple transactions in close succession with very similar account numbers: This may indicate account numbers that have been generated using illegal software.

How can merchants keep their customers—and themselves—safe from fraud? While new methods for fraudulent activities are on the rise, innovative countermeasures have also been making fraud more difficult. Some of the ways merchants and retailers should consider improving CNP fraud prevention measures include: • Requiring confirmation of the three-digit code on the back of a card, which helps prove customers have the card in their physical possession. Retailers and merchants can also ensure billing address verification is used for all CNP transactions. • Adopting solutions based on 3-D Secure Protocol (such as Verified by Visa), which serves as the mechanism for cardholder authentication during an e-commerce purchase. • Evaluating tools such as predictive fraud analytics (to identify signs of risk in real time) and tokenization (which replaces real card data with a replacement number that criminals can’t use for fraudulent transactions). Together these technologies can significantly reduce payment fraud in Canada and around the world, helping to protect both consumers and merchants from cybersecurity threats. There is no “silver bullet” when it comes to protecting against CNP fraud—effective fraud management requires a layered security strategy. It’s important to remember that everyone has a role to play in preventing CNP fraud every day of the year. Collaboration and knowing how to recognize, reject and report fraudulent activities is critical to fighting fraud and protecting consumers’ information as threats in the marketplace continue to evolve. Gord Jamieson is head of payment system risk, Visa Canada.



Travel, transportation & hospitality

Travel in the sharing economy Generational divides drive new payment model adoption By Gino Riola


illennials are leading the charge when it comes to the adoption of sharing economy services and payment models. This was one of the central conclusions of Allianz Global Assistance’s inaugural Winter Travel Intentions survey and the accompanying roundtable held in March. The “sharing economy” refers to emerging digital platforms for services like peer-to-peer ride sharing (Uber, Lyft) or short-term rentals (Airbnb, HomeAway, CanadaStays). The users who engage in providing sharing economy services operate as independent contractors rather than employees, which has left the entire sector in a grey area as far as policy and regulations for the time being. What distinguishes these emerging travel platforms from traditional hotels and pre-Airbnb short-term rentals is their seamless integration with digital and mobile payments technology. Millennial travellers like being able to browse accommodations, read peer reviews, book and pay all in one online platform, and they want to do it with as few impediments as possible. That means minimal to no identity verification, waiting periods and vetting processes or face-to-face interaction. According to experts taking part in the roundtable, this doesn’t always sit well with property owners, especially Baby Boomers who are often renting out their second properties or cottages for extra income. While they would prefer to screen their renters, confirm their identity and ensure that they will not cause disruption with their neighbours or damage to their property before handing them the keys, market demands and the rise of one-step online payment platforms are pushing against property owners’ comfort level. It would be wrong to dismiss sharing economy services as a fad—a recent report on the sharing economy by Statistics Canada found 14


that Canadians spent almost $1.1 billion on private short-term rentals between November 2015 and October 2016, both domestically and abroad. On average, users of short-term rental platforms in Canada spent $307 per year, while those using them internationally spent $584. The study, part of the October 2016 Labour Force Survey, found that approximately 69,000 Canadians aged 18 or over had offered private accommodation services to generate income during the previous year. Though gaining popularity, Allianz’ survey showed that these services are still not trusted by most Canadians. Of the 2,000 people surveyed, only 37 per cent find these services trustworthy. However, Millennials (those aged 18–34) were a lot more likely to trust sharing economy services than Gen X’ers or Baby Boomers. As a result, 66 per cent of Millennial respondents said they were likely to use them within the next 12 months, compared to only 43 per cent of Baby Boomers. A lower price point is definitely one of the reasons why Millennials are particularly drawn to sharing economy services. However, Millennial travellers are also increasingly looking for unique accommodations over standard hotel rooms. Being able to live like a local outside of traditional tourist centres and attractions appeals to young travellers’ desire for authenticity and experience, a trend Airbnb has incorporated in its “Don’t go there. Live there.” ad campaign and its push for its hosts to get involved in renters’ travel experience by guiding them to the best spots in the community. Short-term rentals, especially multi-bedroom houses, apartments and cottages, appeal to groups of travellers or families looking to rent a shared space, rather than separate hotel rooms. Travellers staying for an extended period of time also find better accommodation in fully-furnished amenities with that “home away from home” feel. In MAy/June 2017

Travel, transportation & hospitality

Panelists from Allianz’ Sharing Economy Roundtable (from left to right): Scott Allison, vice chair of the board of directors, Destination Canada; Emily Rayson, chief operating officer, CanadaStays; Gino Riola, vice president, sales and marketing, Allianz Global Assistance; Jason Merrithew, president, Merit Travel; and Sunil Johal, policy director, Mowat Centre, School of Public Policy and Governance, University of Toronto.

fact, CanadaStays, a platform for private short-term cottage rentals, has an average stay of five nights, going up to seven nights in the summer. As the sharing economy continues to gain popularity across demographics, one of the challenges for developers running sharing economy platforms is educating their hosts about a new payments landscape that is faster, more automated and less personal than ever before. Additionally, pressures to regulate and tax the industry are mounting, often leading to confusion and ambiguity. This is where the different players in the travel industry must bridge the divide between the needs of short-term rental hosts and the preferences of renters. For travelers, however, the travel insurance industry can step in to help them protect their prepaid rental booking expenses. Travellers can protect their financial investment with Trip Cancellation insurance should they need to cancel their stay for unforeseen covered reasons. Young travellers are much less likely to purchase travel insurance may/June 2017

and one reason is that this segment wants to make all trip decisions and purchases through an online marketplace. Travel insurance will need to continue to modernize along with this demand, provide solutions for emerging travel trends and adopt digital payments platforms to better serve Millennial travellers. Further, the travel insurance industry has a historical, bird’s eye view of travel trends, existing policy and stakeholder needs. Like all impacted industries, policy makers are grappling with how to regulate new sharing economy services in a way that takes into consideration the safety of users, community needs, evolving market demands, an emerging economic segment and legacy industries feeling the squeeze from an unbalanced regulatory landscape. The numbers indicate that sharing economy platforms are here to stay and will only gain popularity while the industries around them race to keep up to these needs of these new travel trends. Gino Riola is vice president, sales & marketing at Allianz Global Assistance Canada.



Events & Entertainment

Changing how cashless payments are accepted at events By Samuel Mulligan


live event is meant to be an experience to savour. Whether you’re seeing your favourite band or cheering for your team, it’s a chance to join with others to share in a moment to remember. But there’s a big difference between being part of the crowd and being stuck in a crowd. While waiting in line to get in, grab something to drink or buy a souvenir can be unavoidable, it shouldn’t take away from the real reason you’re there. That’s why event organizers are always looking to ease the purchasing experience for attendees—ensuring sales are made quickly, with as little of the action missed as possible. Two Montreal technology startups have recognized the fact that when the good times roll, it’s important that waiting lines roll too. As announced at SXSW, Connect&GO and Mobeewave are coming together to revolutionize how payments are accepted at live events. Combining radio-frequency identification (RFID) and mobile contactless payment acceptance, this service—which is enabled by Global Payments—will provide an innovative cashless payments acceptance solution to live events around the world.

Addressing payment pain for both attendees and organizers Organizers of major festivals and sporting events are embracing more cashless solutions because they recognize that dealing with cash is a problem—both for people attending events and for those working at them. As handling cash takes more time, it leads to longer queues and less people getting served. Relying primarily on cash also creates the possibility that attendees may run out of funds while at an event and inevitably reduces their ability and willingness to spend. 16


Supporting cash payments can be an expensive and problematic proposition. For attendees, it means dealing with high ATM charges, while organizers have to contend with the security issues of handling and transporting large amounts of cash. By using cashless solutions, event organizers are likely to see increased spend-per-head and more impulse purchases. It’s therefore not surprising that they are looking for ways to simplify the payment process at their events. The new service provided by Mobeewave and Connect&GO offers organizers the ability to accept multiple methods of payment using a single mobile device. Operating without a cable connection, the system is especially practical for large events.

By using cashless solutions, event organizers are likely to see increased spend-per-head and more impulse purchases. Beyond simply accepting payments, the system also offers additional features such as inventory tracking and detailed sales reporting. As Connect&GO CEO, Anthony Palermo, explains: “We designed this service for the event industry, because most venues don’t have a payment system in place. Event organizers need to come in with their own payment system, which can be challenging. Our system—which uses a 3G or wi-fi network—can be up and running in minutes and is flexible enough to be used across the event industry. Anything from food and music festivals to amusement parks or stadiums.” MAy/June 2017

Events & Entertainment An all-in-one cashless solution Linking RFID technology and mobile contactless payment acceptance, Mobeewave and Connect&GO are aiming to provide a service that meets both event organizers’ need for flexible payment options and is in line with the expectations of modern consumers. Harnessing both companies’ expertise, their service makes it possible for event attendees to make payments by simply tapping an RFID-enabled wristband, a mobile wallet or a contactless credit card to a near field communication (NFC) enabled smartphone.

“Event organizers recognize that the longer it takes to pay, the fewer sales are made. But supporting contactless payment isn’t only about quicker sales, it also means shorter waiting lines—meaning attendees miss less of the action.” Removing the need for external hardware or Bluetooth devices, this service essentially turns a mobile device into a point-of-sale (POS) terminal. In doing so, it allows them to easily accept contactless payment in a quick and convenient manner—either at stationary locations or by mobile vendors moving throughout a venue. With the support of Global Payments and in collaboration with concert promoters, evenko, the two companies were able to successfully test the solution at live events in Montreal. “Event organizers recognize that the longer it takes to pay, the fewer sales are made,” said Maxime de Nanclas, co-founder and COO of Mobeewave. “But supporting contactless payment isn’t only about quicker sales, it also means shorter waiting lines—meaning attendees miss less of the action.”

Creating cashless, experiential solutions for events Connect&GO was founded in 2012 as a division of RFID Academia—a resource for training and RFID engineering consultation services for Canadian businesses. After a creative partnership between RFID Academia and Quebec marketing agency Piranha, Connect&GO cofounders Anthony Palermo and Dominic Gagnon saw an opportunity to create a new company specializing in the development of experiential solutions for stadiums, theme parks, festivals and other events. It was at this time the two partnered to create Connect&GO. Connect&GO started developing cashless payment solutions in response to client requests for a flexible method of receiving payments at their events. The primary goal was to replace physical cash and tokens with a new, digital solution. Using RFID technology, the guest’s wristband/pass becomes an e-wallet that allows them may/June 2017

Using RFID technology, the guest’s wristband/pass becomes an e-wallet that allows them to make simple cashless transactions at the event. to make simple cashless transactions at the event. An excellent way to keep the guest in the experience of the event, cashless solutions remove friction that may have been caused by using traditional methods of payment. Connect&GO has deployed its cashless payment solutions at a variety of events including music festivals, sporting events and pop-up shops.

Turning phones into contactless payment terminals Like Connect&GO, Mobeewave was created to provide a much needed solution that fits with the realities of a more cashless world. Founded in 2011 by Benjamin du Haÿs and Maxime de Nanclas, the company offers a service that enables anyone, anywhere to accept contactless payments using just their smartphone. Harnessing the NFC capability and secure element found in modern mobile devices, the patented Mobeewave solution turns a phone into a mobile POS terminal. This enables it to be used as either a peer-topeer (P2P) or merchant solution—making it both an alternative and a complement to services like PayPal, Venmo, Square, iZettle, Apple Pay and Samsung Pay, as well as any mobile banking app. Mobeewave has provided its service as a white-label solution to financial institutions and non-profit organizations around the world for use in their own banking or fundraising apps. Its mobile contactless payment acceptance solution has been used at a number of fundraising events, including The Princess Margaret Cancer Foundation’s Road Hockey to Conquer Cancer and Speaking of Dogs Rescue’s Party4Paws.

Supporting cashless payments at upcoming events Mobeewave and Connect&GO will provide their cashless payment service to facilitate on-site transactions at two upcoming events, C2 Montréal (May 24–26) and Michelin Challenge Bibendum (June 13–15). Guests at both events will be able to make instant purchases by either tapping their credit cards or their RFID badges directly on the mobile devices provided to event vendors. Vendors will have preloaded their menu items directly into the device and will be able to track all sales in real time. Guests will enjoy the freedom of using the cashless option that best suits them. Because each badge will be registered to a guest’s personal profile, a receipt for each transaction will be sent directly to the guest via email. Samuel Mulligan, communications manager at Mobeewave, is immersed in the world of FinTech and payment innovation. His work addresses numerous topics, including in-person payment acceptance, mobile wallets, mPOS, contactless, P2P and mobile payment. Prior to joining Mobeewave, Samuel was the director of communications for technology developers Virtual Artifacts.



Industry Update

A trusted, secure payments system that’s driving innovation Debbie Gamble

By Debbie Gamble, vice president of digital products and platforms, Interac Association and Acxsys Corporation.


t’s no surprise that in a country as big as Canada, with a highly developed communications systems and widespread adoption of digital technology, people and businesses have embraced mobile in just about every aspect of their lives, including in how they send and receive money. It’s essential that payments adapts and evolves to meet this growing demand and makes those transactions as frictionless as possible. Interac has always been a payments pioneer, building and operating a modern, efficient and secure payments system that is trusted by millions of Canadians and hundreds of thousands of Canadian merchants. The backbone of our products



and services—the Inter-Member Network (IMN)—has helped to make Interac Debit the most popular payment method in the physical payments sphere, while Interac e-Transfer has become the leading digital money transfer platform in Canada. Now, the introduction of the Interac Token Service Provider (TSP) last year is allowing us to do the same for mobile payments. But we’re not doing it alone. The rate and scope of innovation—by financial institutions, equipment vendors, retailers, app makers and others—and the strong uptake of digital technologies by consumers, mean Canada’s payments industry will make the fastest progress toward anticipating and meeting the demand for digital payment solutions by working together as much as possible, pooling its best thinking so the transfer of

money is frictionless and a true accelerator of commercial activity.

Openness For some in our industry, the idea of collaborating with others, especially those who traditionally have been seen as competitors, is a difficult concept. It’s no secret that there are those in the technology sector who favour “closed” systems, in which a single vendor tries to control the design and features of products. Others believe that “openness” is the best way to create a more robust and innovationenabling environment. When it comes to payment systems, which must enable secure transfers of money between as many people and organizations as possible, we are firmly on the side of openness as the best option. MAy/June 2017

industry Update Indeed, openness is one of the five principles guiding our approach to creating a modernized payments system. As part of that, we recently began an open API initiative to allow third-party developers to connect their applications to our platforms and services. Working in conjunction with Communitech, we met with several startup and SME companies to hear their ideas for building on our API to streamline requesting and receiving money online. The three best ideas received an initial cash injection from us and will be provided with a year of mentoring to help them create and execute a prototype or pilot of those ideas. We firmly believe that opening up our platforms and services to thirdparty developers will spur the creation of innovative new offerings, particularly in mobile, and boost the growth of Canada’s payments ecosystem. That ecosystem will also benefit from the shared services we provide to our member institutions— including fraud detection and a directory of highly secure proxy identifiers that allows the transfer of money without any personal financial information being disclosed between sender and recipient—and which can be located at the centre of the network, leveraging pooled rather than siloed data.

Embracing standards Closely linked to openness is another of our guiding principles: embracing standards such as ISO 20022. Later this year, Interac e-Transfer messaging will be fully operable with this global standard for payments messaging and we will have an ISO-compatible third-party gateway interface that will allow vendors to invest in applications that comply with that standard, knowing their software will operate seamlessly with the Interac e-Transfer platform And because our real-time rails are message agnostic, customers of financial institutions that have not yet upgraded to ISO 20022 will still be able transact easily with those whose financial institutions have made the upgrade. Allowing participants to select the timing that works best for them and their clients to upgrade to ISO 20022 facilitates our third guiding principle: ubiquity. may/June 2017


“Good funds”

Digital payments systems create the most value when they connect all individuals and businesses to each other, allowing anyone to make payments or transfer money to anyone else and minimizing the friction involved. Our Interac e-Transfer payment platform currently connects more than 250 financial institutions, about 120,000 businesses and five million monthly active users. And every time a user or business joins, it means everyone on the network can now transact with them and in more situations. A network that connects almost everyone has another key benefit—offering valuable shared services to its participants at low cost. Our directory of proxy identifiers, for example, maps each user to the email address or mobile phone number they use to accept money transfers from others, which eliminates the need for financial institutions to create and maintain their own databases of customers and their counterparties at other institutions.

Our final guiding principle is perhaps our most important: that “good funds” is the better model for a digital payments system. Unlike most traditional methods of money transfer such as cheques or electronic funds transfers (EFTs) which are built on a promise-to-pay or risk-based model, a good funds model means a payor’s funds are immediately removed from their account when they make a payment or transfer. This is critical in a fast-paced digital economy, where delaying access to funds can slow down commerce as recipients postpone paying their own bills or making other purchases until the clearing process is complete. By eliminating the risk of unfunded payments, the working capital required by financial institutions can be reduced. Individuals benefit from improved cash flow and a reduced need to rely on costly debt instruments such as credit cards to bridge the gap between payments and funds availability. It also promotes commerce by reducing the trust required between parties who have never done business before and making on-the-spot anonymous transactions possible without requiring physical cash.

Data abstraction Data abstraction, of which proxy identifiers are a great example, is the fourth of our guiding principles. In light of legitimate concerns people have about identity theft and protecting their personal privacy, the more data abstraction in the payments system, the better. By using an email address or mobile phone number as a public identifier for Interac e-Transfer transactions, we eliminate the need to use much more private and sensitive identifiers, such as a payee’s bank transit and account number, to complete a digital payment or money transfer. In fact, Interac e-Transfer transactions require no bank account information and no personal financial information of any kind, just the recipient’s email address or mobile phone number and a security question to which only the recipient will know the answer. An upcoming service enhancement this year will even eliminate the need for the security question for recipients who enable “auto-deposit” for a given payor, such as an employer or a regular customer.

We know that no single entity can think of every possible way to make digital payments faster or better, anticipate every need or want of consumers, or solve every obstacle to more frictionless transactions. Consumers and businesses expect to be able to send and receive payments whenever they want, however they want, on whichever device and network they want. That’s why we wholeheartedly embrace an open, collaborative system that brings a collective approach to creating a payments system that will continue to meet the needs of Canadians and Canadian organizations in the 21st century. By working together, all of us in the Canadian payments industry can ensure that Canada’s financial system will become known around the world for its technological and creative prowess, in addition to its well-deserved international reputation for soundness.



Industry News

66% of Canadians are ready to drop cheques, 50% wouldn't miss cash New survey reveals signs of a tipping point on emerging new payment technologies Ottawa, ON -- Dropping the $1,000 note and penny from our currency pales in comparison to the paperless, digital payment revolution that is underway. According to the Payments Pulse survey conducted by Payments Canada and Leger Marketing, the country seems willing to change with a majority ready to drop cheques altogether and half willing to do the same with cash. Yet, with change comes uncertainty. Although users of electronic payment tools, such as e-wallets, almost unanimously applaud their convenience, very few Canadians (less than 15 per cent) have adopted such innovations to date. When asked, 66 per cent of respondents are willing to let go of cheques and 50 per cent cash. Of the only 13 per cent of Canadians who have adopted e-wallets, 83 per cent say convenience is the greatest benefit. Although a majority are not willing to pay a fee (70 per cent) for such convenience, a surprisingly high percentage of respondents (48 per cent) are willing to trade a certain amount of privacy. Interestingly, on an emotional scale from very excited to very anxious about such changes, 50 per cent said they were somewhat to very anxious about the arrival of e-wallets. When asked about other fast emerging innovations like artificial intelligence and self-driving cars, the anxiety levels edged even higher hitting close to two thirds of Canadians. In mobile banking, just over a quarter (27 per cent) have deposited a cheque using their smartphone camera with a staggering 97 per cent satisfaction rate. When shopping online, 41 per cent have stored their personal credit card information within a mobile app or an online e-commerce site and nine out of 10 people are confident in its security. “As we modernize the Canadian payments

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system, it is important to regularly take the pulse on the attitudes and behaviours of Canadians,” says Gerry Gaetz, CEO of Payments Canada. “This data demonstrates a natural ambivalence around emerging technological advancements in payments but endorsement from early adopters, which often signifies a tipping point. This is an important insight for Payments Canada and our financial institution participants as we collaborate on the future of Canadian payments.”

Other key findings from the Payments Pulse survey • On average, Canadians make 22 cash transactions a month, spending a total sum of $220. They also write three cheques a month worth a total value of $245. • Only 19 per cent of the population does their shopping online. • One-quarter (27 per cent) of Canadians are willing to pay per transaction to not have to use cash or cheques and use an electronic payment that is accessible through the internet or mobile device. The results both support and inform the transformation that Payments Canada is undertaking with the financial services industry to modernize the payments infrastructure and rules that underpin financial transactions in Canada. When completed, financial institutions and payment service providers will have a modern, fast and data-rich infrastructure on which to innovate and develop better ways for Canadians to pay for goods and services and transfer money. The survey of 1,500 Canadians was completed online between March 23 and April 2, 2017. A probability sample of this size would yield a margin of error +/- 2.5% 19 times out of 20.


More than onethird of Canadian firms do not have cybersecurity insurance: FICO report

While ahead of global averages, Canadian businesses still have a long way to go to fully protect themselves in the event of a data breach • 36 per cent of Canadian security executives surveyed say their firm has no cyber security insurance, compared to 50 per cent in the U.S. and 40 per cent globally. • 80 per cent of respondents say insurers should do more to explain how they price risk coverage. • Ovum conducted telephone surveys for FICO of security executives at 350 companies in Canada and other countries. TORONTO -- Canadian firms are ahead of the curve when it comes to cybersecurity risk insurance, but over one-third (36 per cent) have not taken out cybersecurity insurance at all. Those are key findings in a new survey conducted by research and consultancy firm Ovum for Silicon Valley analytics firm FICO, which reveals that even among those that have insurance, only 18 per cent say they have cybersecurity insurance that covers all likely risks. Although the survey showed the efforts Canadian organizations still have to take to ensure they are fully protected in the event of a cyber-attack, it also shows that these organizations are significantly more responsible than many of their global counterparts when it comes to insurance—especially when compared to the U.S. While only 16 per cent of Canadian organizations say they have no intention of taking out cyber-

MAy/June 2017

Industry News

risk insurance, more than a quarter (27 per cent) of surveyed U.S. executives responded the same way. “Without cyber-risk insurance, organizations are leaving themselves in a very vulnerable position,” said Kevin Deveau, vice president and managing director of FICO Canada. “It’s important for businesses to assess the strength of their cybersecurity defences and to make sure they are covered if they are faced with a data breach. The ripple effect of a breach can be felt throughout the organization for a very long time, especially now that Canada’s Digital Privacy Act will require organizations to report any breaches to regulators and customers.” There is still confusion in Canada and other countries about how cybersecurity insurance premiums are set. Eighty per cent of Canadian firms feel that more could be done to help organizational decision makers understand how risk price structure is calculated. More than a quarter of respondents (26 per cent) feel that the introduction of an established industry standard to benchmark cybersecurity risk would be beneficial. Currently, 20 per cent feel that the premiums calculated based on their business do not accurately reflect their risk profile. Ovum conducted the survey for FICO through telephone with CXOs and senior security officers in 350 companies based in Canada, the U.S., the UK, and the Nordics in March and April 2017. The respondents represented firms in financial services, telecommunications, healthcare, retail, e-commerce and internet service providers.

To send press announcements, please direct them to Sarah O'Connor, Managing Editor, at

may/June 2017

Canadian retailers view mobile commerce as the way of the future: AMEX report American Express study indicates 72% of retailers believe new technology adoption is critical to survival TORONTO -- Canadian retailers are recognizing how important the adoption of digital and mobile technologies are in the face of rising consumer demand and new competitors entering the Canadian retail industry, according to the fifth annual Canadian Retail Insights Report released today by American Express. According to the report, 88 per cent of businesses feel their industry is more competitive than ever thanks to new online competitors, with 74 per cent fighting harder than in the past to retain customers. What holds the key to success? There is a consensus that the key to winning the battle is to put the customer first. In fact, 91 per cent of businesses are focusing on enhancing their customer service experience to differentiate from their competition and part of that strategy involves mobile offerings for customer engagement and retention. "Canadian retailers are listening to what their customers want, and what they're hearing is that consumers are demanding more from their shopping experience," says KerriAnn Santaguida, vice president and general manager, merchant services, American Express Canada. Across all industries, 76 per cent of Canadian retailers believe that mobile commerce is the way of the future, while the sentiment is even stronger in certain industries as 90 per cent of fast food businesses echo this belief. "Mobile has had a profound impact on the digital shopping experience. The modern consumer has a global marketplace in the palm of their hand 24/7 and this creates opportunity to engage with them at so many more touch points. Creating a mobile commerce strategy that includes intuitive app experiences and mobile responsive design enables consumers to connect with you when and where they want to."

technology practices in the past 12 months believe the shift to mobile payments is being driven by consumer demand and is critical to staying competitive (compared to 75 per cent in 2016) in an industry where existing players are investing in technology and new competitors are entering the market. Furthermore, 72 per cent of Canadian retailers believe that adopting new technologies will be key to their future and helping them to attract new customers, while 61 per cent believe these technologies are already changing the way they engage with their customers. While it is clear to retailers (72 per cent) that adopting new technologies is a matter of survival, there seems to be a disconnect when it comes to actually implementing these new technologies. Of all the industries surveyed, respondents from the fast food industry who haven't adopted new payment technologies in the past 12 months were most likely to say they are planning to invest or improve their mobile payment options (31 per cent) in the next 12 months, while the numbers were significantly less for other industries, including gas (six per cent), restaurant (11 per cent), general retail (12 per cent) and grocery (16 per cent). "It is surprising how low these adoption rates are, when online technologies have also been listed as a source of increased competition," says Santaguida. "In order to remain competitive retailers will need to meet the changing consumer demands. American Express is committed to mobile payment innovation and to helping Canadian retailers make the most of their mobile payment infrastructure." Still, Canadian retailers remain confident about the future, with 89 per cent reporting a positive outlook for their business over the next 12 months, despite the shifts in technology and rising competition.

The rise of mobile payments As mobile continues to grow as the dominant medium for online sales, 91 per cent of Canadian retailers who adopted new payment



Industry News

Strengthening FinTech ecosystem key to maintaining Canada's global position: TFSA report TORONTO -- Strengthening the FinTech ecosystem in the Toronto region must be an imperative for the country's financial services sector and governments in order to maintain and grow the region's international market position, according to a new report from the Toronto Financial Services Alliance (TFSA), researched and written by Accenture and McMillan LLP. The report, Seizing the Opportunity: Building the Toronto Region into a Global FinTech Leader, is based on primary and secondary research, which included a survey and interviews with executives in the government, financial services and FinTech sectors. The research found that the Toronto/ Kitchener-Waterloo corridor today benefits from a strong core of financial institutions, top-tier research facilities at local academic institutions, a strong talent base and relatively low business operating costs compared with other global FinTech ecosystems. However, the analysis also identified the need to develop a clear, consistently implemented, policy-driven Canadian FinTech strategy focused on fostering innovation among all participants in the ecosystem to address ongoing challenges. If not addressed, these challenges could risk the Toronto region falling behind other international financial centres, according to the report. "We have a strong FinTech and financial services cluster in this region, and much is

being done by industry and government to build our global leadership," said Janet Ecker, president & CEO of the TFSA. "But the evidence is clear: We are still in the middle of the pack. Other global centres are not standing still and neither can we. Strengthening the FinTech ecosystem will be critical to the continued success of our global financial industry." The report sets out six key calls to action to ensure a strong industry position globally: Collaboration: Closer and more frequent engagement among FinTech startups, wellestablished financial institutions and the venture capital community. Capital: Improved access to sophisticated seed-level and local later-stage capital for Canadian FinTechs. Regulation: Reduced regulatory burden on emerging FinTech companies, and modernized regulatory frameworks to attract foreign investment and further reflect changing business models, technologies and priorities. Research: Encouraged commercialization of research for financial services to further establish the region as a global leader. Talent: Creation of opportunities and conditions that will attract top talent with experience growing and scaling FinTech companies. Awareness: Raising of the region's profile on the global stage as a FinTech hub.

"Today's report represents a snapshot in time, but every day, new and more powerful technologies will inevitably bring change and disruption to our financial services industry – in Canada and around the world," said Robert Vokes, managing director of Accenture's financial services practice in Canada. "The time has never been more critical for the Toronto/Kitchener-Waterloo corridor to rise to the challenge and compete globally in a highly competitive—and increasingly important—sector of the economy." Robert Scavone, a partner in McMillan's financial services group and lead author of the regulatory section of the report, said, "one takeaway from the report is that while good regulation has given Canada a worldclass reputation for the safety of its financial system, we haven't kept pace with other leading FinTech centres in creating a regulatory ecosystem where FinTech innovation can thrive and grow. Our regulatory landscape is confusing and fragmented, and compliance can be a significant barrier to entry for FinTech startups, discouraging collaboration with incumbent financial institutions. We have a lot to learn from other FinTech centres such as the UK, Australia and Singapore, which are experimenting with such tools as regulatory sandboxes, which Canada is only just beginning to try out."

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MAy/June 2017

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2017 Industry Events

May May 7-10 Canadian Credit Union Association 2017 National Conference for Canada's Credit Unions Halifax, NS May 10-12 Electronic Transactions Association TRANSACT Las Vegas, NV May 16-19 WB Research eTail Canada Toronto, ON May 23 Canadian Prepaid Providers Organization Prepaid Symposium

May 24-26 Payments Canada Summit 2017 Payments Panorama Toronto, ON May 30-31 Retail Council of Canada STORE Toronto, ON

June June 6-9 Internet Retailer Conference + Exhibition Chicago, IL June 14-16 FEI Canada 2017 Annual Conference Whistler, BC

Conference Toronto, ON

June 28-29 InsuranceNexus 3rd Annual Insurance Analytics Canada Summit Toronto, ON

September 27-28 Western States Acquirers Association 2017 Conference Rancho Mirage, CA

August August 22-23 The Prepaid Press tppEXPO’17 Las Vegas, NV

October October 4-5 BAI BAIBeacon17 Atlanta, GA

August 28-30 Mobile Payments Conference Chicago, IL

October 12-14 CAMA EXPO 2017 Quebec City, QC

September September 20-21 NAPCP Commercial Card and Payment

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Pay channel report

Embracing an omnichannel approach By Scott Blum, vice president of Total Merchant Services.


dramatic shift in shopping and retail is happening in the U.S., Canada and other countries. Driven by technological advances, the changes include consumers’ rising use of smartphones, the growth of online shopping and the emergence of new payment types like EMV cards and Apple Pay. Recent trends confirm the shifts at retail, as evidenced in a recent survey by WSJ/comScore regarding consumer shopping behaviors. In 2014, 46 per cent of consumer purchases were made online. By 2016, it had increased to 51 per cent. How consumer purchases are made is also changing. The majority (42 per cent) search and buy online. Twenty-two per cent research online and in store and buy in store while 20 per cent search and buy in store. Finally, 16 per cent research online and instore, but buy online. In order to respond to these shifting trends in consumer shopping behavior, retailers are changing the way they do business and are embracing an omnichannel approach. In addition, more and more merchants are increasingly migrating from traditional terminal-based solutions toward featurerich, cloud-based integrated payment technology at the point of sale (POS). Utilizing cloud-based POS systems has been shown to boost overall revenue for merchants through features associated with inventory management, reporting, integrated loyalty programs and other valueadded features. In addition, many of these software solutions enable omnichannel payment acceptance including accepting payments in-store, online, and on-thego through mobile applications. As 2017 continues, more merchants will convert to cloud-based POS over outdated hardware. New payment types introduced in the last several years will continue to grow in 2017. First, mobile payments and mobile wallets 26


like Apple Pay and Samsung Pay will continue to gain traction. In 2016, Juniper Research estimated that 148 million payments were made via an NFC-based mobile device, and a report from Strategy Analytics forecasts NFC payments will total $240 billion by 2021. In addition to the growth in NFC, EMV chip payments have grown significantly in the last several years in response to the EMV mandate in 2015. In 2016, only 41 per cent of merchants were accepting EMV payments despite the mandate; however, adoption is expanding rapidly and should continue in 2017 as EMV chip payments become the standard in the U.S.

mind omni-commerce trends, including the growth of mobile and e-commerce and the need to make sure their payment processing partners can enable card present and card not present payment types. Customer buying habits are blurring in-store, online and mobile purchasing, and a successful retailer increasingly needs all channels working together to maximize sales. Software vendors that have multi-channel payment use cases or are planning on enabling these use cases must select a payment provider that can support omnichannel integration, including card present payments in-store, card present transactions on a mobile device,

Customer buying habits are blurring in-store, online and mobile purchasing, and a successful retailer increasingly needs all channels working together to maximize sales. A payment processor targeting this market should provide integration capabilities with multiple payment types, including EMV and NFC. Better still, the processor should provide software vendors and their customers EMV and NFC-enabled payment devices that are fully certified. Because the end customer in many cases will be upgrading to a new payment device, the cost of the new device should be reasonable to avoid a significant investment from the end user. Payment processors should make the integration of EMV and NFC payments easy for software developers by providing APIs and SDKs that can be quickly coded and/ or installed. In addition, architecture that keeps EMV compliance “out of scope” for the developer is critical to ensure that the software does not have to be certified, which can take over a year and is very costly. Software developers also need to keep in

card not present e-commerce payments or payments via app. Finally, the need for security and compliance continues to be an important trend. While it’s true that the change to EMV and PIN-compatible terminals will reduce payment fraud for card present payments, many payment “hackers” are shifting their attention to card not present payments, such as e-commerce transactions. As omnichannel implementations become “table stakes” for retailers, their data security and breach requirements have shifted focus from card present to card not present transactions. Payment providers working with software vendors should make sure they that have strong security solutions which will allow developers to keep stringent security requirements “out of scope” of their software but will still keep their end users and consumers protected. MAy/June 2017

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Payments Business Magazine May/June 2017  
Payments Business Magazine May/June 2017