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International Payments 4 Maximizing international 6
Editor Brendan Read email@example.com Publisher Mark Henry firstname.lastname@example.org Contributors Monica Eaton-Cardone; Patrick Diab; Toby Holmes; Alastair Johnson; Daniel Krisch; Andrew Monroe; Oscar Roque; Wally Vogel Creative Direction Jennifer O’Neill email@example.com
Blockchain and Cryptocurrencies 8 Why blockchain for 13 Moving to the 12
payments? Bank of Canada, MAS trial DLT
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Security, Fraud & Privacy • Cheques • Payment Processing • Cards PAYMENTSBUSINESS
Maximizing international opportunities
By Andrew Monroe
hen you’re selling products online, your ideal customer may come from anywhere in the world, not just from North America. Maximizing those international sales and revenue opportunities means giving that customer a localized payment experience, regardless of regional currency differences and linguistic barriers. Companies that do this are among the biggest online sellers that are growing and thriving internationally. They’re able to capitalize on global markets because they assimilate to different cultures around the world and recognize that conversion starts with speaking to customers in languages they understand, particularly when it comes to their money.
Here are the three keys to speaking that language and maximize your online sales and revenue opportunities with foreign exchange and international payments.
1. Create a geographically-localized web site With foreign exchange and international payments, getting things right starts by considering the needs and perspectives of your international customers. For example, if you’re a customer in Japan and you’re trying to buy cloud-based software from a company in Canada, it won’t be very helpful if the price is listed as $65 CAD. How much does that cost in Japanese yen, and how much will you have to pay for the currency conversion? The uncertainty might be enough for you to leave a web site and look for a similar product from another company that converts prices May/June 2019
International payments into your local currency. In fact, years of proprietary research by our team at Ingenico has shown that 25 per cent of consumers leave within the first few seconds of visiting a web site that doesn’t offer prices in their local currencies. To avoid losing sales and revenue, it’s critical to create a user experience that offers local currency pricing and which automatically adapts to the customer's geography: from the landing page all the way through checkout. Doing this boosts customer conversion, decreases e-commerce cart abandonment and enhances the overall user experience. However, creating a localized experience requires more than IP (Internet Protocol) geolocation. You must combine it with an intelligent user experience that takes into account the possibility that IP connections aren’t accurate indicators of country of origin. For example, some customers are connected in a given country while travelling for business or pleasure but their actual country of origin is different. In this case, country flags and well-labelled dropdown menus work better. It’s also crucial to consider alternative methods of payment (APM). Globally, in places such as Asia-Pacific (APAC) and Europe, Middle East and Africa (EMEA) credit cards are declining in favour of e-wallets, payment apps and real-time bank transfer products. Supporting these other methods may be critical to capitalizing opportunities in these regions, and many APMs require transactions to be denominated in the local currencies.
greater risk in processing currency conversions through banks. A payment service provider (PSP) can help you limit your risk, reduce your FX costs and streamline your currency administration by offering treasury services. Most PSPs offer daily settlement, which converts funds daily to mitigate the risk of short-term market volatility. Your PSP can also conduct a pre-assessment to determine what currencies you need to set up and where. For example, as a global PSP, Ingenico has a dedicated FX solutions team. We provide industry-specific FX best practices to each of our customers, plus actionable intelligence and insights to help them maximize gross margins and profitability. Ultimately, the right strategy provides a framework you can implement, followed by creative self-management. But you’ll still need to have flexibility to make changes or adapt to market conditions as they arise. That’s where your PSP can continue to play a vital role in providing guidance.
3. Make sure your FX is transparent A major point of contention in the payments industry is the lack of transparency in FX pricing. Generally speaking, payment providers only communicate their rates for FX conversion, and they typically hide their methodologies and markups deep in the details of their contracts. This is far from optimal for online merchants, and it prevents the open conversations that lead to intelligent FX strategies. Adding to the complexity is the fact that the FX market is massively underregulated and has no centralized governing body. As a result, it’s nearly impossible to nail down an “official” exchange rate. This ambiguity gives payment providers leeway when it comes to defining the base rate used for payment conversions. By playing with this piece of the equation, payment providers can erode your potential profit margins and risk making your products more expensive to international consumers. This is an area where it’s vital to work with a PSP that will help protect you. Your PSP should be completely transparent about FX pricing and should incorporate best practices to help you mitigate the risks and reduce the costs associated with accepting international online payments. Unfortunately, these characteristics are virtually non-existent among PSPs, which is why our team at Ingenico has tried to take the lead by offering merchant solutions that incorporate all three keys to an effective FX and international payment strategy. We’ve developed an FX programme that ensures fast, localized payments with full transparency and maximum profit margins. We work with merchants to help them leverage FX to their advantage and implement an approach that suits their business and customers while helping them achieve additional growth. If you’re looking to expand into international markets or maximize your global sales and revenue conversions, you should be focusing on those same priorities.
A good international payments strategy is not just about currency or a localized experience. 2. Implement a good foreign exchange (FX) strategy A good international payments strategy is not just about currency or a localized experience. Merchants also need to understand how to handle remittances and how their outbound currency choices can impact margins. When you truly understand the impact and nuances of exchange rates and conversion timing, it becomes easier to calculate your risk exposure and lock in your profit margins. For example, a streamlined foreign exchange (FX) strategy takes advantage of natural hedges, which reduce your risk of exposure to large swings in exchange rates. If you are receiving income in another country and currency while incurring expenses in that same currency, it can protect you from the exchange rate fluctuations when your expenses and income are in different currencies. Thus, if you have significant local expenditures from overseas vendors, partners, offices or supplies, it makes sense to opt for in-currency remittance. It also makes sense to minimize the number of local bank accounts you maintain with dormant funds. Many merchants believe they need to open a bank account in each country where they offer local currency pricing. But when you have multiple local accounts with dormant funds, the window of FX volatility and risk increase significantly. It also compounds your workload and creates inherently May/June 2019
Andrew Monroe is general manager of ePayments, Ingenico North America (www.ingenico.com).
BMO on crossborder banking and payments By Brendan Read
anada and the United States have long been deeply connected financially with each other through trade, including investments, tourism and individual migration for work, education and also visits, like for shopping and for retirement. Canadians make and receive payments while in the U.S., and from and to U.S. businesses and institutions, and vice-versa. To explore and understand Canada-U.S. banking and payments, trends and challenges, Payments Business recently interviewed Sharon Haward-Laird, who is the head of North American treasury & payment solutions at BMO (Bank of Montreal) Financial Group.
Payments Business (PB): How big and what is the growth potential for cross-border banking: Canadians in the U.S., Americans in Canada, both individuals and businesses? Sharon Haward-Laird (SH-L): According to government data close to 400,000 people already cross the shared border between Canada and the United States every day for business and personal reasons. The U.S. accounts for the fifth largest source of immigrants to Canada, with over 250,000 residents. In turn there are around 783,000 Canadians who live in the U.S. There is a lot of opportunity, and we expect that cross-border banking is going to continue to grow. Whether within Canada or the U.S., businesses have the opportunity to look north or south to help them grow, tap into new markets and increase their potential customer base and generate new revenue streams. For individuals, itâ€™s much easier to buy and navigate online to purchase products that are not necessarily available locally. They are getting more choice than was traditionally available and, here too, we expect to see growth. BMO is focused on creating seamless crossborder banking experiences for all our customers. For our corporate cross-border customers, 6
Sharon HawardLaird, head of North American treasury & payment solutions at BMO Financial Group.
International payments expansion into the U.S. is a natural path as they look to grow in a larger market. An estimated 70 per cent of corporate customers have cross-border needs. Businesses are looking for a financial services organization that can provide them with services that meet all their financial needs, regardless of which side of the border they’re on, across personal and business banking, wealth management and capital markets. For us, it’s a competitive differentiator.
PB: What is the size/growth potential of the payments segment e.g. Canadians using U.S. accounts to pay bills and making purchases while there and vice-versa? SH-L: Canada is one of the largest international remittance markets in the world. With advances in technology and innovation, consumers have access to products and services both domestically and internationally. As the economy becomes increasingly global, the need for seamless and ubiquitous cross-border payments capabilities will continue to increase. Boston Consulting Group’s Global Payments 2018: Reimagining the Customer Experience report highlights the payments segment as one of the brightest spots in financial services. Payments businesses globally are on track to add $1 trillion in new revenue through 2027, said the report, as financial institutions continue to invest in digital technology and look to expand and enhance their capabilities. A key driver for growth is ensuring that there is an integrated payments infrastructure and technology in place to provide a seamless customer experience.
Courtesy BMO Financial Group
PB: What are the challenges entailed in cross-border banking and payments? SH-L: Businesses with cross-border financial operations need to understand both the differences between the two banking environments and the implications of these differences. The main hurdles that any financial institution faces when it comes to cross-border banking would be legacy technology and infrastructure, differences in regulatory and legal requirements and brand awareness. On the surface, the financial products, services and processes closely mimic one another, but there are nuances across markets. These include time required for the clearing processes in each country —for corporations this can impact cash flow—how payments flow between multiple touchpoints, currency conversion and screening to ensure adherence to regulatory requirements. There may even be differences in the data formats in which the payment information is packaged as it travels between the sender and the receiver. It’s important to understand these nuances and have practices in place to account for them. For a business, this is where a banking partner can come in and provide advisory support to help. When a business is looking at their financial institution and their cross-border capabilities, it’s important to understand where their priorities are and if they’re making investments in their technology and payments infrastructure. It’s also important to understand if they’re able to manage both the complexities of different regulatory and legal environments and the nuances that are part of the crossborder payments process. For example, at BMO we’re implementing May/June 2019
Mastercard Send to deliver faster, more cost-effective international payment services seamlessly and securely to bank accounts in more than 75 countries.
PB: Are there developments in play now and in the near future, e.g. payments modernization, that could improve cross-border payments? SH-L: There are a number of initiatives on the horizon that are both regulator- and market-driven, such as faster, real-time payment platforms and the standardization of payments data using the global ISO 20022 messaging standard. As these modernization initiatives continue to evolve the payments infrastructure, businesses will see a faster and more data-rich payments environment. Using the same ISO 20022 data standard in the U.S. and Canada will allow for less manual processes, more transparency and greater efficiency. At BMO we believe that payments modernization is an opportunity to positively impact the customer experience. There are two examples I would point to. First, the globally recognized work we’re doing around the implementation of a payment hub, (https://bit.ly/2H5QurT) which will pave the way for the delivery of faster, more efficient and simpler solutions for our customers. Second, the work underway to implement a single North American wire platform that will improve speed and consistency for customers on both sides of the border. Both initiatives will enable us to better support our customers.
PB: What is BMO's strategy in tapping this market? Why did you take that tack? SH-L: One thing we keep hearing from our customers is that they’re looking for simplified cross-border payments experiences. We’re serving customers seamlessly across all lines of business and throughout our integrated North American footprint. And we see a lot of opportunity with cross-border banking: it is another way we can be a trusted partner for our customers. With our capabilities, we’re uniquely positioned to help our customers transact on both sides of the border by offering a full spectrum of financing, advisory and wealth management services. For example, our treasury solutions include a comprehensive suite of North American payment, receivables, liquidity and fraud mitigation capabilities, accessible through an integrated online and mobile treasury management platform. We also have operations in select global markets such as Europe, Asia, the Middle East and South America, which allows us to provide all our customers with access to economies and markets around the world.
PB: What's next for BMO in cross-border banking and payments? SH-L: We’re focused on taking the inherently complex matter of banking cross-border and making it simpler for our customers, offering an integrated and consistent approach to service and support. Our cross-border banking capabilities are one of our strengths, but we’re not sitting still. We’re continuing to invest and build capabilities with a focus on simplifying the experience for our customers. PAYMENTSBUSINESS
Why blockchain for payments? By Wally Vogel
ou have probably heard all the blockchain hype and are wondering when or if it will actually play a role in your day-to-day business. Blockchain has often been described as a solution looking for a problem. As a result, you may have seen guides to help decide when a blockchain is or is not required. Here’s one of my favourites: Even though this diagram is a joke1, it does sum up a view many have of blockchain and with some Do you need a justification. Of course, you don’t “need” a blockchain today, but blockchain? you didn’t “need” a cell phone in 1980 and you didn’t “need” an Internet connection in 1990. Do you need them today? You didn’t need them then because they were still in their infancy. But once the technologies developed, they could do more and the value of what they could No. do grew with the network effect as users adopted them. Cellphones and the Internet went from being novelties to being useful to being indispensable. So it will be with blockchain, which is just transitioning from a novelty to being useful, and soon will become indispensable.
The one problem blockchain can solve today How can Canadian businesses save $1 billion in office supplies and postage, free up over 250 million hours of unproductive time, avoid their most common fraud vulnerability and save 75,000 trees? The answer is to stop paying suppliers with cheques. These numbers are significant, so let’s look at the data sources and check the math. According to Payment Canada, Canadian businesses issue over half a billion cheques per year2. This means: 1. With cheque stock, envelopes, printer supplies and postage adding up to $1.50 to $2.00 per cheque that represents a total materials and postage cost of approximately $1 billion. 2. The “soft costs” of time to print, assemble, sign and mail cheques is estimated as high as $15 - $25 per cheque according 8
to Scotiabank3. Even at the low end of that estimate of $15 and deducting the $2 hard cost, that leaves $13 of soft cost (time spent). Assuming an average burdened labour cost of $25 per hour that extrapolates to 260 million hours spent on cheques. 3. Over 70 per cent of businesses reported being targeted by cheque fraud in 2018 4, making cheques the most common target for fraudsters. 4. Business cheques typically use a full page (with two stubs below) and an envelope and are often photocopied. That works out to about two sheets per cheque, over a billion sheets of paper per year. Since one tree makes about 8,333 sheets of letter paper5 that means approximately 75,000 trees are used for cheque payments in Canada each year. The environmental impact goes even further as cheques pollute at every stage, from tree planting and harvesting to papermaking and printing, transportation and mailing and delivery.
Previous problem-solving attempts Electronic payment options like electronic funds transfer (EFT) have been available for decades, so why do most companies still pay most of their vendors by cheque? It’s simple: businesses want control and convenience. Cheques offer control in that they can be reviewed, together with any detailed backup documents. They can be approved with a physical signature that is immutable and verifiable. They offer convenience in that the payor doesn’t need to know the supplier’s bank account number, and the attached cheque stub includes remittance details that help the supplier apply the payment. Traditional bank EFT services have not been packaged to provide the same combination of control and convenience as cheques offer. While logging into a secure web portal to authorize an EFT provides control in the form of security, they typically do not integrate with the payor’s accounting system, and the lack of details and backup documentation to review means less control in terms of verifying the validity of the payable. Further, bank EFT required collecting bank account information from suppliers, and this can be difficult. Making it even more so is the fact that the suppliers are inconvenienced by losing remittance details that they would have received with paper cheques. For these reasons, traditional bank EFT adoption has been low. Several new FinTech payment services have emerged and offer an May/June 2019
Blockchain improvement over traditional EFT delivery in terms of convenience by integrating with the payors’ accounting systems and delivering e-mail remittance advice to the suppliers. However, these services effectively require the payors to delegate control to the FinTech providers: to trust their databases as the systems of record for payments and approvals, with less transparency on the end-to-end process.
The main features of blockchain are trust and transparency, meeting the critical need of businesses to control their payments in a way that no solution has before. Approvals are recorded with digital signatures, along with all other key events in transaction processing in an immutable audit trail in a shared ledger. The business can (if they wish) keep their own copy of the blockchain ledger with their transactions for full transparency. They gain the convenience of digital approvals by phone or laptop, without giving up any control. In fact, the control and security are much greater than with paper cheques, which can be intercepted in the mail and altered.
Does your business need a blockchain for payments? Yes. If you are interested in reducing costs, saving time, eliminating fraud risk and helping the environment, then the answer is “Yes, you should eliminate cheques. And to do that while maintaining control and convenience you do need a blockchain for payments.” And implementing a blockchain for payments will not only save you time and money with enhanced security today, it will also position you well for the future. The same blockchain ledger that is securing your digital approvals can also have selected fields shared with your trading partners. Imagine resolving any discrepancies as they arise, rather than spending hours trying to reconcile a vendor account at the end of the month. Imagine a year-end audit where not only are all the invoices and records digital rather than paper, but where each transaction is already validated and digitally signed by your customer or supplier to indicate their agreement. That is the future of blockchain for business as the technology matures and business networks grow. Wally Vogel is a payments veteran, a Certified Engineering Technologist and a Certified Blockchain Professional. He has founded multiple software companies specializing in transaction processing for government entities and business enterprises and is currently serving as a director for Sparcblock, a Canadian company helping businesses streamline B2B transactions. Its SparcPay platform is a convenient and cost-effective way to pay suppliers electronically. E-mail: email@example.com. 1 Sebastien Meunier, “When do you need blockchain? Decision models.”, Medium.com, August 4, 2016. 2 Michael Tompkins and Viktoria Galociova, “Canadian Payment Methods and Trends: 2018”, Payments Canada, report, December 2018. 3 Berkeley Payments, “How Much Does A Cheque Really Cost?”, web site, August 19, 2014. 4 Association for Financial Professionals, “2019 AFP Payments Fraud and Control Survey”, report, April 2019. 5 Conservatree http://conservatree.org/learn/EnviroIssues/TreeStats.shtml
Courtesy AMJ Campbell
A blockchain-based solution
AMJ Campbell moves to blockchain AMJ Campbell, which is one of Canada’s largest movers, is also a first mover with blockchain technology to streamline and secure its accounting processes. It has successfully transitioned from paper cheques to a paperless digital payables process using blockchain. “Blockchain is a disruptive technology and we are embracing it to replace outdated paper processes,” said Bruce Bowser, chief executive officer of AMJ Campbell. “Sparcblock is improving how we transact with our vendors, to ultimately better serve our customers.” Paper cheques are still prevalent in many business-to-business (B2B) transactions. Yet cheques are expensive to issue and are more susceptible to fraud than any other payment method. The new digital process, enabled by Sparcblock, is a fully integrated solution providing review and approval capability using a web portal or mobile device, with quick payment via electronic funds transfer (EFT). AMJ Campbell’s chief financial officer, Jennette Empaynado, stated: “With the Sparcblock solution we spend less time in data entry, filing and paper handling, while maintaining a secure approval process that provides the ability to do detailed review without the paper. We are saving at least 50 per cent in time spent processing payments.” Every transaction is digitally signed to provide heightened security and a full audit trail. It is also automatically synchronized to the accounting system and an enterprise grade blockchain built on Hyperledger Fabric to ensure there are no inconsistencies or confusion. “Sparcblock’s mission is to change business for the better by streamlining B2B transactions,” said Wally Vogel, co-founder and director of Sparcblock. “As consumers, we process digital payments, but by contrast B2B transactions are still to a large extent paper-based which is costly and time-consuming. Our technology is changing that, and innovators like AMJ Campbell are leading the way.” PAYMENTSBUSINESS
Canada needs blockchain
Bank of Canada head office, Ottawa, Ont.
By Alastair Johnson
he federal government’s Budget 2019 included a proposal for an oversight framework to ensure that “retail payment services providers can continue to offer innovation in services, while remaining reliable and safe”1. What’s interesting is that this declaration was not followed by any statement regarding the use of blockchain technology as a solution. If Canada’s payment industry really wants to embrace the ideals set out by the federal government’s statement, blockchain technology should play a major role. Secure, blockchain-based payments provide the exact benefits of innovation, trust and reliability that are sought. They would open up payments within services that had not been considered previously and ensure that consumers’ personal data is not exposed to retailers and third parties, protecting its citizens from data breaches.
Convenience, and peace of mind According to Payments Canada’s Canadian Payments Methods and Trends: 2018 report, the total payments market in Canada grew to more than $9.7 trillion. Use of debit, credit and electronic funds transfers increased while cheques and cash decreased, leading to the report’s writers concluding that both businesses and consumers are opting for more convenient and digital methods of payment2. Blockchain-based payments, particularly those that are attached to digital IDs and therefore usable across devices, will provide the next step forward for consumers who value ease and convenience in their e-commerce transactions. Significantly though, they will achieve this while adding a layer of security that other payment methods cannot, thereby providing peace of mind to buyers and sellers alike.
© Bank of Canada
Fraud prevention benefits One of the biggest advantages of blockchain is the fact that it requires no sharing of personal information between consumers, payment providers and merchants. This innovation, which relies on a process of zero-trust security, eliminates a whole range of opportunities for fraudsters to steal data. Through this process consumers can store and control their personal data while continuing to make quick and simple e-commerce payments. With blockchain, chunks of personal data are stored and encrypted in the individual’s personal vault and then tokenized. These tokens can then be exchanged in a zero-knowledge proof process where the consumer proves something, such as their identity for payment, to another party (such as a merchant): without needing to share the personal data. By removing the exchange of personal data, blockchain-based payments remove a whole host of opportunities for fraud, including contactless near-field communication interceptions, chargebacks, false positives and card-not-present fraud. Equally critically it also entirely removes the need to store sensitive data in centralized servers that hackers can attack. May/June 2019
This is particularly important because Canada, like most other countries, has experienced its fair share of consumer data breaches in recent years. In fact, 2018 was littered with attacks. Last year 100,000 individuals had their personal data exposed as a result of the Bell Canada hack3 and 20,000 customers of Air Canada suffered the same fate4. But it was the attacks on the Bank of Montreal (BMO) and the Canadian Imperial Bank of Commerce’s Simplii Financial subsidiary5, that were most worrying for the finance industry. This type of major data hack from the centralized servers of large corporations is one of the main reasons why blockchain-based payments, which would completely eliminate the possibility of such an attack, are so applicable to Canada.
Moving to blockchain Fortunately, Canada seems well placed to take advantage of this innovation. On top of the government’s clear strategy to encourage innovation, Payments Canada’s Modernization Target State also lays out a plan to foster competition and innovation without compromising security6. The willingness of institutions to embrace blockchain technology within Canada’s payments industry can also be seen with the Bank of Canada’s involvement in a recent study of cross-border interbank payments7. The report, which was produced in conjunction with the Bank of England and the Monetary Authority of Singapore (MAS), looked at alternative models that could enhance cross-border payments and settlements. And just recently the Bank of Canada and the MAS used distributed ledger technology (DLT) successfully to exchange currencies and published a report8; blockchain is a type of DLT. These small but steady steps all combine to show that Canada’s payment industry is ready, willing and able to support the secure and reliable digital payments that their customers are increasingly keen to use. The next step, into blockchain-based payments, could prove to be the giant leap that really moves the industry forward into the place it hopes to be. Alastair Johnson is the founder and CEO of Nuggets (www.nuggets.life). Nuggets is an e-commerce payments and ID platform. It stores your personal and payment data securely with blockchain, so you never have to share it with anyone: not even Nuggets. 1 Government of Canada, “Budget 2019”, March 19, 2019. 2 Michael Tompkins and Viktoria Galociova, “Canadian Payment Methods and Trends: 2018”, Payments Canada, report, December 2018. 3 Emily Jackson, “Hacker steals data from up to 100,000 Bell Canada customers in second breach in eight months”, Financial Post, January 23, 2018. 4 Christopher Reynolds, “Air Canada mobile app breached, data of 20,000 customers may have been accessed”, The Globe and Mail, August 29, 2018. 5 Ms. Smith, “2 Canadian banks hacked, 90,000 customers' data stolen”, CSO, May 29, 2018. 6 Payments Canada, “Modernization Target State”, December 2017. 7 Antony Peyton, “Canada, UK and Singapore prep for blockchain-powered payments”, FinTech Futures, November 15, 2018. 8 Monetary Authority of Singapore, “Central Banks of Canada and Singapore conduct successful experiment for cross-border payments using Distributed Ledger Technology”, press release, May 2, 2019.
Bank of Canada, MAS trial DLT T
he Bank of Canada and the Monetary Authority of Singapore (MAS) reported May 2 that they have conducted a successful experiment on cross-border and cross-currency payments using central bank digital currencies and distributed ledger technology (DLT). This is the first such trial between two central banks, they said in a release. These technologies have great potential to increase efficiencies and reduce risks for cross-border payments. Cross-border payments today are often slow and costly. These payments rely on a correspondent banking network that is subject to counterparty risk, inefficient liquidity management and cumbersome reconciliation. The Bank of Canada and the MAS have been collaborating in the use of DLT and central bank digital currencies to make the cross-border payment process cheaper, faster and safer. Blockchain is a type of DLT.
Cross-border payments today are often slow and costly. The two central banks have successfully linked up their respective experimental domestic payment networks, namely Project Jasper and Project Ubin, which are built on two different DLT platforms. The project teams used a technique called Hashed Time-Locked Contracts (HTLC) to connect the two networks and allow payment versus payment (PvP) settlement without the need for a trusted third party to act as an intermediary. The Jasper-Ubin project was carried out in partnership with Accenture and J.P. Morgan, which supported the development of the Canadian network on Corda, and the Singapore network on Quorum, respectively. Following the successful conclusion of the project, the Bank of Canada and MAS jointly published a report that proposes different 12
design options for cross-border settlement systems. Titled “JasperUbin Design Paper: Enabling Cross-Border High Value Transfer Using Distributed Ledger Technologies”, the report describes the technical implementation of HTLC and highlights possible limitations and challenges with the implementation model. The report further suggests areas of research in DLT interconnectivity mechanisms and alternative network models. This represents opportunities for further collaboration among central banks, financial institutions and FinTech firms. The Bank of Canada and MAS said they would like to encourage the global financial community to build on these findings and work together to make international payments better, faster and cheaper. “The world of cross-border payments is complicated and expensive: our exploratory journey into the use of DLT to try to reduce some of the costs and improve traceability of these payments has yielded many lessons,” said Scott Hendry, Bank of Canada senior special director, Financial Technology. “The importance of international cooperation through projects such as this one cannot be underestimated. Only through continued collaboration and fundamental research will it be possible for this technology to mature and for policy-makers to fully understand its potential.” “Project Jasper and Project Ubin have built on previous innovations in the payments area to demonstrate that cross-border payment and settlement can be made simpler and more efficient,” said Sopnendu Mohanty, chief FinTech officer, MAS. “Together these projects have addressed many technical questions and brought the technology to a higher level of maturity. The next wave of central bank blockchain projects can make further progress by bringing technology exploration together with policy questions about the future of crossborder payments. It is challenging work, and we welcome other central banks to join us in this global collaboration to bring benefit to consumers, businesses and the broader financial industry.” May/June 2019
Moving to the mainstream? By Monica Eaton-Cardone
he J.P. Morgan Chase blockchain-based Interbank Information Network (IIN)’s launch of the JPM Coin digital currency has sparked renewed international interest in both cryptocurrency and blockchain1. The company recently announced that 220 banks have signed on to IIN, a major development that will impact payments and other industries in Canada and worldwide2. It positions J.P. Morgan as a major disruptor in the international payments sector and will likely leave other banks scrambling to catch up. For example, the current method for international payments and other secure transactions involves relying on outdated wire transfers that can take days to clear and finalize. But the JPM Coin blockchain technology offers secure and instantaneous payments with faster and more accurate record-keeping.
Blockchain drivers The key takeaway from this development has more to do with the platform than the tokenized coin itself. As a long-time champion of the many advantages and applications of blockchain, which is a form of distributed ledger technology or DLT, I believe that JPM Coin will help it finally transition into the mainstream. As more companies discover blockchain’s usefulness in solving some of the payments industry’s biggest challenges, global blockchain technology revenues are forecasted to climb to over $23.3 billion U.S. dollars by 2023. And more than 60 per cent of its market value is in the financial sector3. In the retail environment alone, blockchain is expected to impact supply chain management, inventory management, authenticity verification, auto-renewal and subscription services and customer data and loyalty programmes. As a result, a recent analysis of blockchain in retail projected its market value will be 29 times higher in 2023 than 2018—rising from $80 million to more than $2.3 billion—at a compound annual growth rate of 96.4 per cent4. Though only six per cent of businesses are ready to use blockchain for payment initiatives today, survey findings suggest 13 times as many will be on board within the next five years5.
J.P. Morgan initiatives With JPM Coin’s record-keeping features, J.P. Morgan can make better use of staff and other resources, potentially saving substantial sums of money. No doubt something that will be watched closely by May/June 2019
other banks considering blockchain. In 2015, J.P. Morgan was one of the founding companies of Quorum, the Ethereum-based blockchain that powers JPM Coin. On May 2 of this year Microsoft and J.P. Morgan announced a strategic partnership to accelerate the adoption of enterprise blockchain6. Along with being applied by a number of major companies, Quorum has been tested by companies including Goldman Sachs Asset Management and the National Bank of Canada. Cryptocurrency triggered major buzz in 2017 when the value of one bitcoin soared from under $1,000 to nearly $20,000. But then the cryptocurrency market as a whole fell by roughly $400 billion7 over 12 months. To circumvent the wild fluctuations of bitcoin and other cryptocurrencies, J.P. Morgan has taken a different approach by assigning its digital coin a constant value equivalent to one U.S. dollar. J.P. Morgan will be adding new features. This includes the ability for IIN members to rapidly identify and instantly verify whether or not a payment is connected to a valid bank account.
More Canadian moves? As noted by the National Bank’s testing of Quorum, Canada is moving towards blockchain. And just recently the Bank of Canada successfully completed the first-ever trial currency exchange using interbank DLT technology8. Though it is unclear if there are other longer-term plans for the Bank of Canada regarding blockchain, it is an interesting turn of events that may signal further disruption for the Canada payments ecosystem in the few years. Risk management and fraud prevention expert Monica Eaton-Cardone is co-founder and COO of Chargebacks911 (www.chargebacks911.com). 1 Julia Horowitz, “JPMorgan's move into crypto puts the rest of the industry on notice”, CNN Business, February 19, 2019. 2 J.P. Morgan, “Largest Number of Banks to Join J.P. Morgan Interbank Information Network”, web site, May 6, 2019. 3 “Size of the blockchain technology market worldwide from 2018 to 2023 (in billion U.S. dollars)”, Statista, 2019. 4 Research and Markets, “Blockchain in Retail Market by Provider, Application (Compliance Management, Identity Management, Loyalty & Rewards Management, Payment, Smart Contracts, and Supply Chain Management), Organization Size, and Region - Global Forecast to 2023”, June 2018. 5 Jeffrey Horowitz and Carl Slabicki, “The Future of Payments – A Corporate Perspective”, BNY Mellon, report, November 2018. 6 Microsoft, J.P. Morgan, “J.P. Morgan and Microsoft announce strategic partnership to drive enterprise adoption of Quorum”, news release, May 2, 2019. 7 Billy Bambrough, “Blow To Bitcoin And Crypto As Asset Manager Makes 'Bubble' Warning”, Forbes, February 8, 2019. 8 Doug Alexander, “Central Banks Use Blockchain for First Time to Swap Currency”, Bloomberg, May 1, 2019.
Blockchain: good governance matters By Oscar Roque
any view blockchain as a disruptor. But here at Interac we see it as an enabler. To date, our journey has been an exciting one—exploring and experimenting with blockchain technology— while applying it to new use-cases and problem sets. With over three decades of building payments ubiquity in the Canadian market offering a real-time, good funds and push payments model, our position in the payments landscape gives us a unique perspective. Collaboration is a key driver to our success. As a trusted partner to financial institutions, acquirers, retailers, FinTechs and regulators, we have learned how integral trust and good governance is.
Good governance: the building blocks of Blockchain What is good governance? At a high level, it is the successful creation and execution of rule sets, processes and hierarchies that are designed to manage human interactions and behaviours. Good governance is absolutely critical in blockchain applications especially since one of the fundamental tenants of blockchain is its ability to weave together multiple industries, creating a new business network that is able to drive new value to the market. For without a centralized authority or administrator, setting and enforcing the “rules” within a business network is as complex as it is essential. Founding members and even participants must focus on creating the appropriate governance framework to manage the business network from day one. As no two groups or systems are alike, there needs to be a shared understanding of common value propositions, organizational core competencies, economic models and management structures. This will determine the initial (and ongoing) success of the business network. There are two main ways to start a business network, each with a different focus at the onset. 1. Speed-to-market, whereby the business network is formed with a minimum viable ecosystem to quickly build out and iterate on the market value, technology and governance. This provides the benefit of fast-tracking to a commercialized state, but with midlonger term consideration around onboarding new participants. 2. Scale-at-market focuses on being more inclusive and working with as many participants as possible in the initial build-out. It provides the benefit of launching with a more mature network, but at the risk that initial commercialization will take longer than the speed-to-market approach. 14
Governance is never-ending. Regardless of the initial approach, having a relentless focus on expanding the network effect and evolving the governance framework will determine the business network’s long-term viability. This negotiation can be more challenging and lengthier than you might first assume. Don’t make the mistake of overlooking the softer (human) elements. Being able to negotiate between multiple parties is a core skill and communicating successfully with others may be more central to your success than the technology itself. Governance today is largely offline and manual. With blockchain, there is a tremendous opportunity to digitize governance and increase efficiencies. But it is paramount that it is done right each and every time. As blockchain enables real-time efficiencies, it can also propagate maligned intent resulting in material damages. There is a path forward. One of due diligence and thoroughness: “measure twice, cut once”. Coding governance on blockchain will never be a simple task; governance requires meticulousness. In fact, organizations that have good governance today, albeit functioning offline, are in the best position to be successful in placing governance on-chain tomorrow. These organizations have the opportunity to lead, not only by example but also to provide their advisory expertise as a potential new market offering e.g. “Governance as a Service”. As governance goes digital, there will be an emerging need for a unique type of persona. A hybrid of both a governance expert and software engineer, the concept of a “governance scientist” will be responsible to ensure good governance frameworks are successfully coded, implemented and evolved on-chain. Good governance is fundamental to the success of any blockchain system; blockchain can offer a natural opportunity for transitioning governance processes on-chain. Not getting it right means inconsistencies, overlaps, gaps in processes and no means to efficiently deal with bad actors: which will ultimately impact the output and efficiency of a blockchain system. There is no one-size-fits-all to blockchain governance. But finding trusted partners to help negotiate how business networks will work and being flexible to adapt as you learn what’s working and what’s not is a good place to start. Oscar Roque is assistant vice president, innovation, research and emerging solutions, Interac Corp.
At nanopay, we are reimagining payments: a new reality, where all payments are frictionless©, borderless, and riskless. nanopay is a global payments technology company offering payment and liquidity products for businesses and banks. Our mission is to lead the world’s transition to digital cash, or offer the infrastructure to enable what’s more commonly known as Central Bank Digital Currency (CBDC). We are privately funded, led by the Merchant Banking Division of Goldman Sachs. Our technology differentiates us. Our platform is built using next-generation Centralized Ledger Technology (CLT) and securely digitizes central bank currency to move value from one user to another instantly. The platform’s unique architecture is made up of reusable elements which means we are able to implement platform-wide changes in near real time. Delivering high levels of security, performance, and resilience our technology is ideally suited to transform the global payments infrastructure. Connect is a business payment product, which easily integrates with ERP software and enables both domestic and cross-border payments through a simple web interface or API. Built for businesses that have higher value transactions in multiple currencies, Connect offers a cost-effective and secure way to move money globally. Businesses can simplify processes, improve visibility, and streamline workflows—all at a lower cost than traditional payment services and credit cards. In addition, Connect offers real-time status updates provide peace of mind and ease of reconciliation. With customizable APIs and an individualized integration approach, Connect reduces the time and cost of implementation. Liquid is a real-time intercompany cash and liquidity management product, which enables self-service virtual account management through a simple web interface or API. Designed for banks and their corporate clients, Liquid provides the opportunity to free trapped capital and invest excess funds with real-time information on cash positions. In addition to configurable or real-time sweeping, treasurers can define their ideal account hierarchy structure without the cost of opening and closing physical accounts. Liquid is a white-labelled solution that integrates with legacy systems and infrastructure through APIs, which is a faster and easier way to go to market than building a custom in-house solution.
www.nanopay.net Laurence Cooke, CEO & Founder nanopay 905 King Street W, Suite 300, Toronto, ON, Canada, M6K 3G9 P: 416-900-1111 | E: firstname.lastname@example.org
Courtesy BC Ferries
BC Ferries sets sail with advanced payments
By Brendan Read
he British Columbia Ferry Service (BC Ferries) is one of arguably Canada’s best known and patronized transportation companies and one of the world’s largest ferry operators. Its highly varied fleet of 35 vessels operate safely year-round, carrying vehicles, passengers and cyclists on 25 routes to 47 terminals, serving urbanized areas and remote coastal communities, in protected waters and wide-open straits and in ever-changing weather amidst spectacular scenery. All told, in 2018 BC Ferries carried 8.7 million vehicles and 22 million passengers. These include foot-passengers using mass transit to and from Metro Vancouver (TransLink) and Victoria, Nanaimo and the Sunshine Coast (BC Transit). The company experiences high demand in the summer, on weekends and holidays and it has a growing commuter market to Metro Vancouver. Moreover, BC Ferries is one of the province’s largest hospitality providers. It serves millions of people: with big rushes for its buffets, cafeterias and cafes on its major routes within 30 minutes of boarding. It is also a leading retailer with popular on-board gift shops on many of its vessels. All of the factors create a busy and complex payments environment. To help manage it, BC Ferries has been rolling out debit card acceptance, initially for foot passengers, cyclists and for food service and gifts, since October 2018. The new programme joins its existing 16
payments array, both cash and credit cards and also online prepaid and loadable Assured Loading Cards and The BC Ferries Experience™ Card. To understand the new debit card programme Payments Business recently interviewed Erwin Martinez, who is chief information officer, British Columbia Ferry Services Inc.
Erwin Martinez, chief information officer, British Columbia Ferry Services Inc.
Payments Business (PB): Let’s set the payments stage. What is the amount and breakdown of BC Ferries’ revenues? Erwin Martinez (EM): We are currently finalizing our figures for the fiscal year (FY) ended March 31, 2019, so I will cite from our FY 2018 figures. Annual revenues total $899 million. Retail revenue is $98 million, which is 11 per cent of the total. The largest components of our $899 million revenue are vehicle and passenger fares at $618 million and provincial fees (which may be called subsidies) at $179 million.
PB: What led to BC Ferries to offer debit payments? What objectives did you set out for it? EM: We have heard from our customers for quite some time that May/June 2019
Transportation they would prefer to have the option to pay with debit cards. So, our primary objective was to meet the stated customer need in a reliable manner and without adding time to each transaction at the register. Reliability is very important in that we did not want to frustrate our customers with attempting debit transactions only for them to fail due to some technical connectivity issue.
route and location of the vessel. A little-known fact with the public is that it is possible to take credit card transactions while off-line to the payments network, but it is not possible to accept debit card transactions when off-line. Our challenge was then to maintain a very high level (approximately 99 per cent) of connectivity reliably throughout each day, regardless of weather and route.
PB: How unique is your debit payments programme?
PB: How were they—and how are they—being overcome?
EM: We believe we may be one of the only commercial services supporting debit card transactions on a moving platform in North America, and maybe even the world. By moving platform, we mean mostly ferries, trains and buses. We researched this a couple of years ago and found some trains and bus services were taking debit cards, but learned it was only while they were in the stations: not while they were moving/in-transit. We have yet to validate this with any entity such as Interac.
EM: The technical approach we have taken includes using the cellular network in the south and satellite connections in the north. Each vessel has redundant systems to allow automatic fail-over in case one modem connection fails. We implemented this and tested it for quite some time to make sure we could consistently obtain the approximate-99 per cent target. This was achieved for all southern routes, including, significantly, our major routes connecting Vancouver, Victoria and Nanaimo. On the northern routes we achieved 82 per cent to 98 per cent connectivity, depending largely on weather conditions. Despite not meeting our 99 per cent target in the north, we decided to roll out debit there as it would be better customer service to support debit when possible rather than to not support it at all. The northern routes use satellite exclusively during the vessels’ voyages; there is very little cellular data coverage available along them.
PB: Outline the programme, including rollout. EM: We worked on the technology starting in late 2016. And then we did extensive testing to make sure it was reliable and would stand up in varying weather conditions and under peak transaction volumes. Basic deployment timeline: • 2017-11-25: Salish Orca, first ship to sail with PIN pads, no debit card support yet; • 2018-10-17: Debit card pilot on the Tsawwassen – Swartz Bay route (Spirit of British Columbia, Coastal Celebration and Coastal Renaissance); • 2018-12-02 to 2018-12-06: Rollout to major vessels on the other three major routes, making debit available before Christmas; • 2019-01-17 to 2019-01-25: Rollout to the remaining five southern routes; • 2019-03-07: Rollout on the northern routes (Northern Expedition); and • 2019-04-06: Supported debit on the Northern Adventure as it re-entered service.
PB: What have been the results so far?
At this time all routes that are assigned with vessels that take credit card transactions now support debit. The vessel rollout is complete.
EM: We have received a good number of positive comments from customers: in person on the vessels, via our web site and in social media. Prior to the acceptance of debit card transactions on the vessels, we had an average breakdown of 60 per cent credit card and 40 per cent cash. During the initial debit card acceptance pilot on the Tsawwassen – Swartz Bay route, which is our busiest, debit cards were used for 10 per cent of all transactions, with 55 per cent credit card and 35 per cent cash. Now that we are fully rolled out on all routes that process transactions, the breakdown is 20 per cent debit card, 50 per cent credit card and 30 per cent cash. Since February of this year this trend has been steady. We are not sure what the trend will be in the summer, when there are a greater mix of local and out-of-province tourists.
PB: Which companies have you partnered with?
PB: What are the next steps?
EM: Our vendor partners are: • Oracle/Micros: existing point of sale (POS) system supplier; • Moneris: PIN pad payment provider; • Acceo TenderRetail: Software vendor to provide integration between Micros and Moneris; • TELUS: provider of cellular/LTE data for the southern routes; • Infosat: provider of satellite data for the northern routes; and • PR Bridge Systems: provider of cellular/LTE payment gateway modem setup.
EM: We are studying to determine whether we can take debit cards at the vehicle ticket booths based largely on whether we can do so without slowing down the transaction process and avoid backups that make customers wanting to catch the next ferry anxious and frustrated. We are considering making the change to debit at the booths to coincide with the general deadline to stop acceptance of swipe-only credit cards by October 2020. We also have some plans to look into integrating payments with TransLink for example, so that foot-passengers can enjoy seamless rides, but it is too early to speak to solid plans in that regard. We appreciate that our customers are travelling point-to-point where a trip on a BC Ferry vessel is just part of that travel goal.
PB: What challenges have you faced? EM: The number one challenge is maintaining stable ship-to-shore network connections for ships during their voyages, irrespective of May/June 2019
Modern payments for sustained growth By Toby Holmes
he irreversible decline of mass transit has been predicted so often, it’s surprising (and welcome) to hear some positive news about the sector. But non-private-vehicle transportation is having a renaissance. This is partly driven by the rise in popularity of rideshare apps across North America (and more recently bike share and electric scooters in some regions). But the positive knock-on effects are carrying over to the bus, ferry, rail (commuter, light, heavy) and general municipal transit industries. Case in point: Canadians took more than 155 million trips on mass transit during January 20191. On a broader timescale, the proportion of Canadian commuters who drove to work in a private vehicle actually declined by 1.2 per cent between 1996 and 2016. And in Canada’s three largest cities, less than 70 per cent of commuters commuted in a private vehicle2. This is being reflected in systems like TransLink, in Metro Vancouver, B.C., which saw a record 437.4 million trips in 2018: a 7.1 per cent increase year-over-year from 2017 to 20183. Montreal, Quebec’s transit system also saw its ridership increase by 2.3 per cent between 2016 and 20174.
Mass transit payments rely on outmoded technology and add unnecessary complexity to riders’ journeys. There are similar upward trends in the United States. In a March 2018 report, the Congressional Research Service disclosed that mass transit ridership across the U.S. had risen by about three per cent over the past decade5. And the American Public Transit Association (APTA) found that in the 20-year period from 1997-2017, public transportation ridership actually grew 21 per cent, faster than the rate of population growth at 19 per cent6. The question remains whether this growth is sustainable. And whether—like TransLink—ridership increases owe more to external factors than to transit agencies’ abilities to attract and retain new riders and create streamlined, easy journeys for their passengers. Transit agencies and operators can take a big step toward sustaining these recent gains in ridership by modernizing their 18
payment processes. This is a low-hanging fruit opportunity and one that is easier (and faster) to implement than traditional IT deployments and transit service expansions and improvements. But unfortunately, it’s also one many operators and agencies in North America have lagged behind on.
Digital and mobile payments needed Consumers around the world have been conditioned, primarily by e-commerce giants, to expect convenient, seamless payments. Like Amazon’s “one-click” purchasing, the “tap-and-go” simplicity of the Starbucks app and of course the real-time, mobile-integrated, location-aware payment process that Uber and Lyft (and their competitors) feature. Mass transit payments, by contrast, are too often removed from the process of booking or boarding, rely on outmoded technology and add unnecessary complexity to riders’ journeys. Even contactless payments have had only marginal effect7 (though, as this publication explored last year8, contactless technology does have potential in major Canadian metros; see TransLink’s implementation of credit card tap-and-ride, the first Canadian transit agency to do so). Too few transit agencies and operators are leveraging the digital and mobile channels to make payments easier. According to a recent report by CellPoint Mobile, Challenges Facing Municipal, Regional and National Transit Agencies in the United States only 30 per cent of providers currently collect fares through mobile apps. In fact, only 39 per cent of U.S. ground transportation providers have an app at all, and only 37 per cent can accept alternative payment methods or APMs. One possible reason for this lag is that, according to the same report, a majority of fare collection and payment systems (44 per cent) are developed in-house, while a quarter (25 per cent) are implemented through contracts with third-party suppliers without a formal procurement process. It’s not surprising then that 13 per cent of operators say implementing mobile technology is their single biggest organizational challenge, despite mobile’s inherent flexibility and interoperability with other systems. Mass transit operators are effectively “going it alone” with their payment and fare collection. And their passenger experience is suffering for it.
Serving mobile, multi-modal riders So how can mass transit agencies operators make the payment, ticketing and overall journey more convenient for their riders, May/June 2019
2019 Industry Events especially the increasingly multi-modal ones? And how can they meet the needs of their infrequent riders, like part-time workers, students and visitors and those who split their commutes between transit, driving and working from home? By offering a mobile app that eases the difficulties that riders experience. That means offering digital and mobile technology that is on par with what’s offered by ridesharing companies such as Uber and Lyft, if not Amazon and Starbucks. It means supporting a variety of mobile and digital payment methods, including popular global mobile wallets like Apple Pay and Google Pay, but also more specialized (but growing) payment methods like WeChat Pay. And it also means moving away from traditional kiosks and fare collection systems.
Offering a mobile app eases the difficulties that riders experience. Digital and mobile payments also lay the groundwork for more seamless integration with other transit options—including ridesharing services—to better meet the needs of riders who may begin their journeys in a cab or Uber, connect with regional rail and finish on the local bus or subway. This is increasingly common, and some municipal transit agencies (like Edmonton, Alberta’s9) have begun forging formal partnerships with third-party transportation services to meet this demand. A unified payment process across modes would create further convenience for travellers and commuters, potentially boosting ridership (sustainably) across the entire system. The good news is that many regions are experiencing growth in ridership. But transit agencies in both Canada and the U.S. need to work to maintain this growth. And they need to pursue strategies that can help them bring in new riders, starting with implementing mobile and digital approaches to ticketing and payments. Only by creating seamless, convenient journeys leveraging the technology their passengers are familiar with and prefer will they be able to sustain their passenger volume increases. And ensure their relevance in tomorrow’s ground transportation environment. Toby Holmes is vice president of sales for ground and sea for the U.S. for Cellpoint Mobile (www.cellpointmobile.com). Toby drives CellPoint Mobile’s growth in the U.S. passenger transportation sector, targeting rail, ferry, bus, car hire, taxi and rideshare operations, as well as metro and regional transit systems. 1 Statistics Canada, “Monthly Passenger Bus and Urban Transit Survey (MBUS)”, survey, April 30, 2019. 2 Statistics Canada, “Journey to work: Key results from the 2016 Census”, release, November 29, 2017. 3 Justin McElroy, “Gas prices and transit ridership at record highs in Metro Vancouver–and the two are related,” CBC News, April 27, 2019. 4 Angie Schmitt, “Transit Ridership Slumping? Not in Canada.”, StreetsblogUSA, April 23, 2018. 5 William J. Mallett, “Trends in Public Transportation Ridership: Implications for Federal Policy”, Congressional Research Service, report, March 26, 2018. 6 America Public Transit Association, “2019 Public Transportation Fact Book”, April 2019. 7 Robin Arnfield, “Canada's ambitious transit payments transformation”, PaymentsSource, May 16, 2018. 8 Brian Weiner, “Modernizing Canada’s Transit Payments,” Payments Business, July 4, 2018. 9 Alexandra Zabjek, “Next stop for ETS could be partnership with ride-hailing companies like Uber”, CBC News, July 5, 2017.
may May 16-17 DigiMarCon Canada Toronto, Ont. https://digimarconcanada.ca/ May 21-23 Reed Expositions CNP Expo & Conference San Francisco, Calif. www.cnpexpo.com May 28-29 Retail Council of Canada STORE 2019 Toronto, Ont. www.storeconference.ca
June June 4-6 Canadian Venture Capital & Private Equity Association Invest Canada ‘19 Vancouver, B.C. www.cvca.ca/event/invest-canada-19/ June 5-7 FEI Canada 2019 Annual Conference Blue Mountain, Ont. https://feicanadaconference.ca/ June 12-13 Big Data and AI Toronto 2019 Toronto, Ont. www.bigdata-toronto.com/2019 September 17-19 Canadian Finance and Leasing Association (CFLA) CFLA Annual Conference 2019 Vancouver, B.C. www.cfla-acfl.ca/events/cfla-annual-conference-2019/
September September 23-25 Bank Customer Experience Summit Chicago, Ill. https://bankcustomerexperience.com/
October October 7 ACT Canada Forum Toronto, Ont. www.actcda.com/act-canada-forum/ October 27-30 Money 20/20 USA Las Vegas, Nevada https://us.money2020.com/
Visit us online www.paymentsbusiness.ca PAYMENTSBUSINESS
Serving modernized payment solutions By Patrick Diab
he hospitality industry is undergoing significant changes as consumer tastes evolve, and savvy competitors enter the market with creative
and digital ways to serve customers. Statistics from 2018 estimate that accommodation and food services generate over $110 billion in revenue per year for the Canadian economy1. Recent forecasts predict that food services alone will total $75 billion in sales in May/June 2019
20192,3. At the same time, innovative players like online events and travel agencies, food delivery services and apartment-sharing apps are putting pressure on businesses to modernize their service offerings and payment systems. To remain competitive, it is important that hospitality businesses maintain the latest payment solutions as essential components of their operations. Regardless of the services or products they offer, when equipped with the right solutions these merchants can accurately track their sales and expenses and make informed decisions to help boost profitability. More importantly, an agile solution can help close critical technology gaps that prevent a company from turning every visitor into a paying customer. Fortunately, there are a variety of options available designed to meet the needs of hospitality management.
Terminals that accept the latest methods
According to our 2019 MonerisMetrics data, more than half of all card-present transactions processed in the first quarter were contactless. Hospitality merchants may be accustomed to tap credit cards, but digital wallets and other smart device payments are becoming popular with diners, shoppers and tourists who want a frictionless experience without rummaging through their wallets. The good news is that many point of sale (POS) terminals that support tap cards can also support newer contactless technology simply by activating it through the payment processor. Business owners should keep in mind that 95 per cent Canadian adults have at least one major credit card4. This means that nearly all Canadians rely on plastic to pay, whether online or in-store, so long as the business is equipped to accept them. You can keep your business open to the majority of guests by maintaining a functioning payment terminal and online payment page that are configured to accept a wide range of card brands.
POS solutions that simplify operations The ability to serve customers quickly and attentively is key to the success of any hospitality business, so it can be easy to think that success depends on the speed of your staff. However, it is worth stepping back to consider your POS system overall and the staff training required to navigate it. Complexities in your POS set-up can cause slowdowns during your busiest hours. iPad POS solutions are a great way to start your small-to-mediumsized business with hardware and software that are streamlined to simplify the checkout process. For larger businesses, an integrated May/June 2019
POS system with robust front- and back-end tools can help manage bookings, inventory, scaling, central product catalogues, pricing and promotions. Don’t underestimate the value of having a built-in reporting feature within your POS system. These reports can present insights, such as sales volumes and labour expenditures and inform your decisions about expenses, profitability, products and employees. Take the guesswork out of staffing and product changes, and make smarter, more effective business decisions overall. Another way to keep operations running smoothly is by simplifying the tools that your staff use when serving guests, accepting payments and reconciling bills at the end of the night. POS systems that offer the best user experience and operate on the latest software will allow your team members to navigate intuitively and quickly, even during peak hours.
B2B transactions that keep vendors happy Payment solutions are not just for your customers; they are for your vendors as well. Whether you work with vendors for food supply, retail items or outsourced client services, it is important to have a business-to-business (B2B) payment solution that is secure and easily manageable. Like customers, vendors can benefit from immediate payment methods that are traceable and convenient. The risky days of writing large-sum cheques and money orders will eventually phase out as the world of B2B payments catches up with real-time payments technology, which has already started. If you haven’t thought about modernizing your B2B transactions, it is not too late to start. Many payment processors that offer consumer-facing solutions also service B2B payments with products such as ePayments and electronic fund transfers (EFTs). Some come with bookkeeping features and transactions updates to help you better manage payment flows in and out of your business. B2B solutions with such advanced financial tracking features in place will give you a clearer look at your funds, and what purchases you can make for next month while staying within your means. As more innovative payment options come to the market, businesses that stay ahead of the trend can increase their resilience against market ebbs and flows and the wave of new competitors that aim to redefine the customer experience (CX). When leveraged efficiently, a reliable and versatile POS system can help improve the CX by giving them the option to pay how they want. It can help business owners refine their overall staff training and vendor operations as well, and ensure they are agile enough for today’s fastpaced world of commerce. Patrick Diab, vice president, product and client solutions oversees the ongoing evolution of Moneris’ product portfolio. Patrick joined Moneris in November 2002 and has 17 years of experience in the payments industry. He has also held roles in technology, product and client integration and has sat on McMaster University’s Ecommerce Fraud Committee. 1 2 3 4
IBISWorld, “Accommodation and Food Services - Canada Market Research Report”. Restaurants Canada, “Restaurants Canada Quarterly Forecast”, 2019. “The 2018 Hospitality Market Report”, Foodservice and Hospitality, November 6, 2018. Canadian Bankers Association, “Focus: Credit Cards: Statistics and Facts”, August 27, 2018. PAYMENTSBUSINESS
Doors to opportunities By Daniel Krisch
ith more than 8,100 hotels operating in Canada today, hotel managers face a critical task in balancing the dynamic between providing a highly personalized guest experience for customers and offering them an array of self-service tools for an easier and more comfortable individual hotel experience. Self-service applications for processing guests’ hotel payments, start ahead of the booking process. Guests now rely on thirdparty tools like hotel review web sites, online travel agents and price aggregators that circumvent the traditional booking process and increase scrutiny on differentiation among offerings. The desire for high-tech payment options continues for guests at the hotel and following their visits. Today’s travellers want increased power to make purchases across hotel properties through familiar and easy mobile platforms—from the hotel’s branded app to third-party payment apps—and expect the ability to contact staff for needs at their convenience and with minimal effort. But guests’ reliance on self-service and the increased demand for personalization has led hotel operators to express concerns about their future within this space, as more nimble competitors have quickly adopted this technology.
The facts and fears We saw this anxiety firsthand in our 2019 Oracle Hospitality Benchmark Report where we polled 199 hotel operators, asking them about the current use of mobile technology within their organizations. From our findings, these top hoteliers expressed mixed feelings on their mobile capabilities, prioritizing the area within their businesses, but harbouring concerns about keeping up within a growing industry. Specifically, 91 per cent agree that mobile is critical to improving guest experience and cultivating loyal customers and 66 per cent believe mobile 22
implementations can reduce operating costs. However, 50 per cent alarmingly feel that their company is not investing in the necessary technology quickly enough. This slow adoption of mobile technologies reinforces the need for immediate change, most significantly in improving and simplifying payment technology for customers. On a positive note, hotel executives have already acknowledged this need, with 90 per cent of respondents stating that the guest experience could be improved by enabling guests to use their smartphones to manage basic services like booking rooms and check-ins/check-outs. Respondents similarly expressed a desire to improve mobile capabilities for guests during their hotel stays both for the guest experience, but also for loyalty, with 50 per cent stating its importance for cultivating loyal customers. This interest of improving mobile purchasing capabilities and cultivating loyalty programmes through mobile technology has major implications for the payment industry. It opens the door for more opportunities than ever before for mobile payment platforms to partner with hotels in their ongoing development of mobile apps and enhanced technology. Our survey demonstrates that respondents are open to accepting mobile payments and integrating these and other emerging payment platforms into their current technology. These same moves could go a long way toward calming their anxiety about their future in the mobile space.
First steps for faster payments For starters, integrating a mobile payment platform into a hotel’s app can be critical for those frequently travelling on the go, providing them with the ability to securely book and pay for a hotel at their fingertips within seconds. Similarly, by integrating technology within these same mobile applications that allows for checking in and out, hotels can further limit the time spent
waiting in line for hotel confirmations and processing of bills following a stay. This in turn can help hoteliers receive payments faster and seamlessly: a win-win all around.
Build the bond by integrating loyalty Additionally, integrating mobile payments within hotel loyalty programmes gives guests the ability to access everything they might need in one location and at the convenience of their phones. This also benefits hotels; they can sync their loyalty and point of sale (POS) systems in the cloud to uncover insights while cutting out paperwork. For example, many hotel loyalty programmes frequently offer perks for app users, which are helpful when trying to entice customers into joining and in building their affinity for the hotel or chain. This can be done seamlessly or even automated when the hotel’s loyalty, POS and hospitality management systems are in lockstep in the cloud.
Say yes to mobile-enabled service As well, further integration of mobile payments tools within a hotel’s mobile offerings can benefit “tap-happy” customers looking for some R&R. With an app that puts everything in the palm of a guest’s hand, it’s easy for them to order beverages on their phone while poolside, without the hassle of carrying cash or payment cards. It also streamlines the order process, with orders going directly to the bar or kitchen, decreasing the chance of errors, minimizing service times and lessening the use of mobile POS terminals. These and other means of integrating mobile payments offer an even greater level of accommodation for hotels’ customers of tomorrow, (Generation Z, Millennials) who have adopted high levels of daily mobile engagement. Earning these guests’ allegiance now will go towards keeping their loyalty in the long term. Daniel Krisch is senior director, hospitality strategy, hotel and cruise solutions at Oracle Hospitality. (www.oracle.com/ca-en/industries/hospitality). May/June 2019
How payments are made and managed payments is undergoing an exciting evolution. Examples include: • Contactless cards and mobile wallets • Internet of Things • Real-time payment rails • Blockchain and cryptocurrencies • ATM, cash and cheque modernization But security and fraud risks also are rapidly evolving. There are new techniques, tools, standards and regulations to facilitate fast, intuitive, transparent and secure transactions and processing. Payments Business (www.paymentsbusiness.ca), published by Lloydmedia, keeps track of these trends and provides thought leadership from industry experts.
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Advance Your Branch Embrace change and build member loyalty
Sometimes small change makes a big difference. Cummins Allison self-service coin counters differentiate your branch and make it a destination for your members, all while creating opportunities to introduce value-added products or services. With multiple machine choices, hands-free coin management programs, and the ability for members to deposit coin totals directly into their savings account, youâ€™ll get more from your coin-counting operations.
Why offer self-service coin counting? It matters to your members. Get the report: