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Nov/Dec 2017

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

2018 Payments Forecast ❱ Evaluating the new

payments ecosystem

❱ In pursuit of a truly

modernized payment system

❱ The next 12 months of the payments industry

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TableKey of Contents theme

November/December 2017 Volume 8 Number 6 Editor-in-Chief Steve Lloyd

2018 Payments Forecast 10

Three ways Canada’s payments sector can embrace competition and protect consumers

Managing Editor Sarah O’Connor Publisher Mark Henry Contributors Noa Benari; Andrew Boyajian; Kevin Deveau; David Eason; Gord Jamieson; Daniel Kornitzer; Peter Maoloni; Isabelle Moeller; Rob Nathan; Sanjay Tugnait; Christophe Vergne; Susan Wall 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


depends on behavioural biometrics


Growing Canadian prepaid market hits $3.6B in 2016: CPPO study

The changing face of payments and the risks of the unknown



How Interac is evolving in response to industry trends and customer preferences

In pursuit of a truly modernized payment system

Evaluating the new payments ecosystem


2018: The year of the Cloud

Players, challenges and the path forward



Fighting the battle against fraudsters in a new world Security is the foundation of payments technology in a cashless economy

Biometric security technology: Spoof or proof?


Why the future of mobile payments


Tapping into the minds of Canadian e-commerce marketers


The next 12 months of the payments industry


Transforming finance and accounting in the digital age

Events Next issue…

January/February November/December 2017


2018 industry events • Industry disruptors • Alternative e-payment solutions • Restaurants & foodservice • ATMs & ABMs • Cash & cheques PAYMENTSBUSINESS


2018 Payments Forecast

The changing face of payments and the risks of the unknown By Daniel Kornitzer


raditional cash is on its way out and more consumers are using digital payments than ever before. It’s a sea change the industry has been anticipating for years and now merchants are wrestling with both the risks and the opportunities presented to them by this shift in consumer behavior and the explosion of alternative payment methods. 4


This new reality is upon us now—as illustrated by Lost in Transaction - Volume I, an independent research study from Paysafe. Most survey respondents doubt whether they’ll even use traditional cash to shop in two years, as the majority reported they are carrying less cash than they did a year ago. In fact, the average Canadian carries less than fifty dollars in cash in their pockets. As mobile shopping becomes mainstream, customers have more choice and more frictionless payment options than ever before. The November/december 2017

2018 Payments Forecast range of choices digital payments provides, including digital “cash” like cryptocurrencies, prepaid vouchers/ cards, mobile wallets, contactless or even voice-activated payments, gives customers firm control over their payment experience. When asked whether they feel confident about using their mobile phone to shop, 36 per cent of respondents agreed and another 26 per cent strongly agreed. However, the path toward alternative payments isn’t necessarily clear cut.

An inconvenient risk Newer payment methods such as cryptocurrencies and biometrics are taken up enthusiastically by early adopters, with one in 10 respondents saying they have already used cryptocurrencies and 16 per cent using voice-activated payments. But these emerging technologies are hardly close to becoming mainstream as only 10 per cent of the UK, Canada and U.S. population believe cryptocurrencies will be common in two or three years. While digital payments awareness and adoption are steadily on the rise, a sizeable chunk of people still report having security concerns. Thirty-four per cent of Canadians worry about the security of contactless payments, and 54 per cent of UK, Canada and U.S. consumers think cryptocurrencies are too risky to use. The growth of payment options and the accompanying security concerns puts merchants in a difficult position. Prevailing industry wisdom suggests that convenience is the key to customers’ hearts and wallets. That idea is the driving force behind today’s experiencefocused retail channels designed for minimum friction. Paysafe’s Lost in Transaction – Volume 2 research found that 59 per cent of Canadian businesses think longer verification processes increase their risk of losing customers when, in reality, 57 per cent of Canadian consumers say they are willing to accept any security measures needed to eradicate fraud. It turns out, customers like convenience, but not enough to risk security or fraud. November/december 2017

Balancing competing needs The contrast between the predominant industry view and consumer attitudes is stark. Of course, this data doesn’t mean convenience should go out the window. If anything, it illustrates just how delicate the balance is that merchants must strike to succeed, especially as we’re all guilty of saying one thing but doing another. Consumers say they’re open to extra security measures, but will they continue to be engaged if, for example, they encounter double authentication? Paysafe’s Lost in Transaction research shows just how important both sides of this equation are. In particular, it demonstrates the need for merchants to walk a proverbial tight rope between experience and security. However easy customers want their lives to be, they also want their transactions to be secure and private; and that means vigorous, thorough security measures, even if speed of service is impacted. The challenge for merchants is how to utilize new payment technologies in a way that offers the right balance of convenience while anticipating the security concerns of those new technologies.

New technologies, new challenges As alternative payment methods move beyond early adoption, new types of fraud will inevitably emerge. Neither businesses nor customers dispute the value of faster, more efficient fraud prevention. For 63 per cent of survey respondents it’s a top priority. And 48 per cent of Canadian businesses review anti-fraud measures every six months. The challenge, then, lies in execution. In other words, how can merchants implement security measures that are cost effective with minimal impact on the customer experience? Finding that balance is not just about investing in technology. The reality is that all payments methods carry some element of cost and risk; the trick for merchants is to accurately assess those factors before adoption, so that its impact on convenience can be accurately measured. As the number of payments methods and technologies proliferate, the challenges for businesses in assessing and implementing them grow accordingly. The question of which payment methods to invest in is a strategic, business-critical decision that needs to be made alongside experienced payments partners with the expertise and insight to take full account of both business needs and the target audience. Two, five, 10 years from now, the most successful merchants will be those who understand that both fraud prevention and customer convenience aren’t just about their bottom line, but also about building a long-lasting relationship with their customers. Daniel Kornitzer serves as EVP and chief product officer of Paysafe Group plc. Prior to re-joining the Group in 2014, he was CEO and Board Member of In his 20+ years in technology management, Daniel has pioneered groundbreaking initiatives, from one of the world’s first over-the-phone speech recognition systems and the ISO/ITU standards for video coding in use today, to FirePay’s digital wallet and industry-leading risk management processes, which resulted in his subsequent appointment as a member of the NACHA Risk Management Task Force.



2018 Payments Forecast

Evaluating the new payments ecosystem Players, challenges and the path forward By Sanjay Tugnait and Christophe Vergne


he contours of what “money exchange” looks like are changing. Companies must take stock of the payments environment that has enabled this change and the factors that will propel it into the future. However, before they can do that, they must first understand how the payments ecosystem lives and breathes. Drawing from the 2017 World Payments Report from Capgemini and BNP Paribas, which examines and analyzes payments data and trends, we will project what the landscape may look like moving forward. Assessment of the momentum, key influencers and what the industry must overcome to thrive will help stakeholders to not only exist but to flourish in the complete ecosystem.

Size matters First, it is worth noting that the scope of payments is growing. Consider this: during 2014-2015, the volume of global noncash transactions grew by 11.2 per cent to reach 433.1 billion transactions—the highest growth of the past decade. In Canada particularly, non-cash transactions grew at a compound annual growth rate of 5.1 per cent during 2011-2015—driven by growth in card transactions. In 2015, non-cash transactions grew to reach around 12 billion transactions. Finally, Canada witnessed a declining growth rate for cards and direct debits due to the rising popularity of alternative payments such as online e-wallets and person-to-person (P2P) transactions. The leading digital instruments in 2015 were debit cards and credit transfers. Alternate channels—such as wearables and augmented reality—further spurred mobile payments. However, cash remains the main payment form for many—for reasons of speed, wide acceptance and lack of fees—especially for low-value transactions.

Old and new players Various elements make up the payments ecosystem, including FinTechs, a dynamic regulatory landscape, changing corporate and customer expectations for value-added services and paymentsenabling technologies. New technologies are expected to transform security and regulatory components, while the surge in data from these transactions will expand value propositions. And what is enabling this ecosystem? Open Application Programming Interfaces (APIs), blockchain and regulatory standardization. Specifically, open APIs, which enable collaboration 6


and data sharing, lend themselves to agility in developing new innovative services. Instant payments are also expected to sustain faster transfer and collection for customers through a more centralized infrastructure. Finally, factors including regulations, competition, customer expectations and emerging technologies are expected to be change drivers.

New challenges and new opportunities What are the threats faced by the new ecosystem? Security is the primary concern. Increasing collaboration in the new payments ecosystem could be a cybersecurity risk by increasing the vulnerability each system and player faces. Around half of bank executives surveyed in the report viewed distributed denial of service attacks as a primary security challenge, while more than 30 per cent also saw customer payments fraud as an obstacle. But security does not have to be a showstopper. Indeed, stakeholders can mitigate cybersecurity risks in various ways. To name a few, evaluating the safety risks from multiple network sources, ensuring regulatory compliance, reviewing partner systems and putting security education first. While security risks will never disappear, they can be handled in responsible and prudent ways. The second challenge—lack of standardization—can also be taken head-on. Despite various standards of different national regulatory systems and different interpretations of regulations, corporations can implement industry-wide standards to harmonize regulations.

Looking forward Finally, one can look at the ecosystem and ask—what next? The path remains ambiguous, with no apparent indications on how APIs and open platforms will evolve. So, stakeholders—including banks and FinTechs—must prepare themselves for collaboration. They must work together to strike the proper balance been convenience and security. Moreover, banks must evaluate their place within the payments ecosystem. Banks must be open to partnering with FinTechs and third-party developers to secure their rightful place in the payments ecosystem down the line. Since FinTechs are continually flying by traditional value chain components, banks must take this time to embrace FinTechs as partners and lean into how they can drive value collaboratively, especially with new payment solutions introduced by Continued on page 26

November/december 2017


Future-Proof Your Business with Digital Payments Solutions Today’s financial executives face a new set of challenges in an increasingly digital world. As their needs and priorities continue to evolve, they’re facing a number of common pain points, including managing working capital, improving efficiency and reducing the risk of fraud. American Express is working closely with payments professionals and executives across all sizes of organizations to not only understand these challenges but help solve for them. “At American Express, we’re committed to evolving and refining our product offerings to not only meet our customers’ changing needs, but to also solve key pain points and challenges that might be standing in the way of growth,” said Paul Roman, Vice President & General Manager, Commercial Payments at American Express Canada. According to a new survey the organization sponsored in partnership with the Canadian Financial Executives Research Foundation (CFERF), finance executives agree there’s a need to improve current processes to address a range of challenges impacting their businesses. The survey found that 44 per cent of senior financial executives said having spend visibility on a timely basis is an ongoing challenge, while 25 per cent have difficulty tracking expenses. As their industries continue to digitize, potential fraudulent activity is also top of mind with 60 per cent citing it as a concern. And while many say that current payment processes work, 69 per cent feel they could use improvements. The recent launch of American Express vPayment™ helps address many of these pain points by assigning specific-use Virtual Account Numbers to each transaction, resulting in greater control, improved reconciliation and reduced fraud when processing supplier payments. This solution dramatically simplifies the task of payment and reconciliation by matching unique information and data to supplier payments. At the point that a Virtual

Account Number is created, the program administrator has the ability to append up to 20 fields of data that will flow back onto the statement for each transaction associated with that account number. This allows for a level of detail in reporting that can’t be matched with a traditional payment product. In addition, American Express vPayment™ can help businesses enhance control while reducing errors and the risk of fraud. The program administrator can determine the exact value of the transaction, the time-frame for processing, and which suppliers it can be used for. Unique Virtual Account Numbers are created for each transaction and are billed back to the same account. American Express vPayment™ was designed for a wide range of companies, including intermediary businesses – such as media buying agencies, or travel booking websites – who are looking for a more efficient way to reconcile payments and eliminate accounting discrepancies. Naturally, it’s also ideally suited for procurement and accounts payable departments within organizations looking to streamline payment processes. It can also simplify travel expenses for organizations while providing an easy way to pay for hotels and other travel expenses, especially for contract employees or infrequent travellers. “American Express vPayment™ was designed with your business in mind. It was created to offer senior financial executives greater security, control and administrative efficiency for making payments, delivering enhanced control, improved cash flow management, improved reconciliation processes, and a lower risk of fraud,” said Roman. As the industry becomes more and more digital, finance departments are tasked to keep up with an ever-evolving set of challenges and opportunities. Leveraging solutions like virtual payments enable financial executives to futureproof their business, with simplicity and peace of mind.

For more information on American Express vPayment™, visit: November/december 2017



2018 Payments Forecast

Fighting the battle against fraudsters in a new world

Security is the foundation of payments technology in a cashless economy By Gord Jamieson

he digital economy is changing the day-to-day routine of consumers worldwide. Whether it’s paying for products online, looking for services or sharing photos with friends, consumers can do all of this with ease from their mobile devices anywhere, at any time. To stay in front of this trend, security is at the foundation of payments technology today. The amount of data available is reflective of this trend. Ninety per cent of the data in the world today was created in the last two years alone. Cash is no longer the top item for criminals to steal—data is the new currency. Today, there are more opportunities for fraudsters to steal data through breaches and phishing scams and create synthetic identities, which can be used to buy products on consumers’ stolen credentials. As we continue to shift towards a cashless economy, addressing cybersecurity to protect consumers is more important than ever.

efficiency for both businesses and consumers. This is coupled with the growth of innovative payment technologies and services. Money transfer solutions, mobile wallet options and FinTech save consumers’ time and, ultimately, money. At the same time, these emerging payment systems face persistent threats as personal data is increasingly targeted by cyber-attackers. For instance, mobile applications like Uber and Skip the Dishes offer new ways of conducting business by allowing consumers to receive services and pay without ever having to exchange money. However, as these payment acceptance points have enabled the flow of data through emerging digital channels, developing innovative payment security processes is essential for companies like Visa to protect consumer data and meet high security standards. Enhanced security solutions can help to improve approval and fraud rates. Data, like device ID, transaction risk scores and biometrics, help in making smarter authentication and authorization decisions.

The convenience versus security equation

Collaboration is key to payments security

The movement towards cashless, led by the increased adoption of consumer technologies such as smartphones, has increased

Tackling fraud requires all players in the payments space to work cohesively. For decades, Visa has worked in accordance with the




November/december 2017

2018 Payments Forecast

Payment Card Industry Data Security Standard (PCI DSS), along with industry stakeholders, policy makers, law enforcement and consumers, to address the risks to digital payments. While such efforts have kept fraud rates relatively low, data scams like card-notpresent (CNP) fraud, which is typically conducted online or over the phone, increasingly account for the majority of the payment fraud perpetrated on Canadian accounts.

The four pillars of security To address these emerging challenges while keeping payments secure, there are four pillars that security needs to address to combat fraud: devalue data, protect sensitive data, harness data and empower everyone. In October, Visa deployed a multi-layered security roadmap that addresses the current fraud landscape and provides new security measures to help decrease CNP fraud and protect consumer data.

1. Devalue data Fraudsters want data because of the valuable information that can be used for criminal activity. By removing sensitive information from the payment ecosystem, stolen account details are useless to them. There are several ways payment card information is stolen. These include skimming, POS tampering, data intrusion and malware. The fallback system to the magnetic stripe is a method by which compromised data is exploited to avoid the security that chip and PIN provide. The fraud rate for magnetic stripe fallback transactions is significantly higher than a chip transaction. While EMV chip has been exceptionally successful at decreasing fraud overall since its introduction six years ago, the elimination of fallback to the magnetic stripe completely will further protect payments in the card present space. Another critical element is the application of tokenization. Tokenization technology replaces the personal account number (PAN) on credit cards, with a unique series of digital tokens that authorizes payments without exposing actual account details. While tokenization is currently available on mobile devices, it still needs to be extended to the CNP and Internet of Things (IoT) spaces. Visa is currently working with merchants to integrate tokens with Visa Checkout, Visa’s wallet service, and to tokenize “card-on-file” accounts. Tokens are unique to the environment in which they are issued and if compromised cannot be used elsewhere. For instance, a Netflix token can only be used in the Netflix environment. This isolates any potential instance of fraud, as that specific token is rendered useless rather than compromising the entire card.

2. Protect sensitive data As payments move to digital channels, protecting data is critical to keeping cyber defenses prepared against any potential attacks. That is why PCI DSS compliance must always remain at the forefront in the planning and development of any security program. For example, Visa proposes to eliminate the magnetic stripe data (MSD) contactless transaction path which enables mobile devices in Canada November/december 2017

to process contactless transactions as a magnetic stripe transaction and to avoid the risk of stolen account information and fraudulent activity.

3. Harness data While we apply new technologies to devalue and protect data, we must also harness the power of data to identify and prevent fraud before it happens. Consumers want the convenience that digital payments such as tap offers. However, it is equally important to maintain security with digital payments to prevent fraud. By identifying potential threats with this technology before they occur, consumers can have more confidence in approved transactions. There are several security measures that will soon be in place that will help to identify consumers when they are making a purchase. For example, Visa’s 3D Secure program will allow merchants and issuers to exchange data during an e-commerce transaction for purposes of cardholder authentication, eliminating the need for consumers to use static passwords and user IDs to authenticate themselves. Visa has also updated its program to align with a new version of the specification published by EMVCo, called 3-D Secure 2.0, to provide an enhanced shopping experience, better fraud management capabilities and transactions that can be approved with greater confidence. Also, in October Visa expanded the use of the threedigit number on the back of all credit cards, Card Verification Value 2 (CVV2), by requiring all new merchants that take telephone and e-commerce transactions to include the CVV2 in the authorization request in an effort to prevent CNP fraud.

4. Empower everyone Finally, consumers are an important part of ensuring security of the payments they make. Empowering consumers and merchants to fight fraud is essential to protecting all payment card users. For example, starting next year, all Canadian Visa issuers will be required to provide cardholders with the option to enroll in transaction alerts that immediately notify consumers of any fraudulent transactions happening to their account. By keeping merchants and consumers informed and accountable, Visa aims to provide greater data security while also lowering the risks to cyber fraud. As the payments industry looks forward, security remains at the forefront of protecting consumers from fraudsters in today’s data rich landscape. While payment companies, financial institutions and FinTech startups are giving consumers what they want by changing the way we pay for goods and services, it also increases the potential exposure to payment scams and breaches. Solutions such as 3DS 2.0, tokenization and the option for consumers to enroll for transaction alerts are initiatives that will decrease this fraud. The future is happening now and while the key to enhancing payments security is through these four pillars, security for payments needs to continue to evolve with the digital landscape. Gord Jamieson is head of Visa Canada Risk Services.



2018 Payments Forecast

Three ways Canada’s payments sector can embrace competition and protect consumers By Andrew Boyajian


rom paying bills online to purchasing a morning coffee with a mobile wallet, there is no doubt that Canada’s retail payments industry is changing rapidly. To its credit, the federal government has recognized the pace of innovation and the growing importance of non-traditional financial institutions and is developing a new retail payments oversight framework to govern how payment service providers (PSPs) operate. However, considering that Canada has one of the lowest FinTech adoption rates in the world—only 18 per cent of Canadians used two or more FinTech services in the past six months compared to 33 per cent globally, according to a 2017 Ernst and Young study—it’s clear that Canada has a long road ahead to promote competition in the payments space and protect consumer interests. Below, I highlight the proposed changes in the framework that promise the greatest impact in terms of levelling the playing field and giving consumers more choice and convenience. I also share some additional recommendations that would strengthen the framework even further.

Simplify regulation and tier FinTech companies Canada’s current payments infrastructure is designed around traditional payment service providers and the regulatory complexities can be extremely difficult to navigate. This creates significant barriers to entry for FinTech companies, giving banks an unfair advantage. Given the high degree of specialization in the FinTech industry, a one-size-fits-all approach to regulation no longer works. For this reason, the Department of Finance wisely recommended a tiered approach to alleviate some of the regulatory burden on PSPs posing a lower level of risk. While tiering firms under specific thresholds certainly makes sense, it is critical that tiering be based on each firm’s Canadian business, and that clear guidance be given so that firms can easily determine their correct tier. Additionally, it’s equally important to tier based on 10


potential risk and not on superficial criteria such as their industry type or competitors.

Modernize payment rails so money moves in real time In Canada, innovative products are often challenged by old ways of doing business. A prime example is how direct access to core payments infrastructure is restricted to a select few participants. This means that non-traditional PSPs must rely on banks to access the essential payment systems required to do business. Not only are banks often competitors, but they are also subject to de-risking influences from regulators or internal policies that inhibit innovation. As stated in the Competition Bureau’s recent FinTech sector report, FinTech companies “can face a significant degree of agency risk by not connecting directly to the system,” because “those directly accessing the system can act strategically to attain a competitive advantage for themselves.” Limited access adds a layer of operational and credit risk and translates into a lack of control over payment flows. Allowing money to move in real-time would create a safer, more efficient environment, help consumers manage their money and translate to cost-savings for everyone. Likewise, by allowing FinTech companies direct access to payment systems, the federal government can increase competition in retail payments to the benefit of all Canadians.

Demand clear disclosures to inform and protect consumers Embracing competition in the financial sector will go a long way to raising the bar on what we expect from our financial institutions. However, policy makers also need to pressure big banks to be more transparent with Canadians. Most consumers are either blissfully unaware of transaction fees or simply accept them as the price of doing business. On average, Canadians pay $220 each year in bank fees. These service fees from retail customers account for roughly Continued on page 26

November/december 2017


Canadian finance executives are more optimistic about company growth than global counterparts For financial executives, handling uncertainties is part of the job. But even for those who are used to dealing with a certain level of political and economic uncertainty, 2017 has been a special kind of year. And yet, despite ever-changing market conditions and the potential impact of unanticipated events unfolding globally, Canada’s finance executives aren’t shying away from investment. Indeed, as an industry, Canada’s finance community plans to increase spending this year to help combat rising competition and mitigate uncertainty. According to a recent study conducted by Institutional Investor Custom Research Group (IIIR), on behalf of American Express, Canadian CFOs say they are focused on spending to boost their competitive advantage this year amid an increasingly unpredictable global context. As a whole, Canadian finance executives tended to be more optimistic than their counterparts in other international markets, with 57 per cent of Canadian CFOs reporting that they expect to see substantial economic expansion over the next year, while just 38 per cent of finance executives polled outside Canada said the same thing. At the same time, as organizations look for steady hands to help steer through uncharted economic waters in these times of uncertainty, Canadian senior finance executives are playing a more significant role influencing strategic business decisions. In fact, almost all (97%) respondents said the most senior financial officer in their company wields more influence over strategic decision making than their chief executive officer. “Canadian finance executives aren’t shying away from increasing competition and uncertainty in the market, but instead they are stepping up and making strategic investments to keep their organizations in the driver’s seat,” says Paul Roman, Vice President & General Manager, Global Commercial Payments at American Express Canada. “Canadian financial executives, in particular, are expressing a unique confidence in their abilities to expand, even at a time of economic and political uncertainty, which is certainly bolstered by their ability to improve cash flow and working capital management.” November/december 2017

For those CFOs looking to step up investments, the top priorities they identified for their organizations were: customer service, entering new markets, and maintaining a strong focus on improving cash flow and working capital. And while customer service and expansion into new markets remain priorities, the first step for many financial executives is to figure out how to fund those ambitions. That’s why, for many CFOs, the top priorities for 2018 will be improving on cash flow and working capital management. As a result, finance executives are making it a strategic priority, with 90 per cent of respondents agreeing cash flow and working capital management will be more important this year compared to last. In fact, those surveyed believe that improving endto-end visibility of transaction processes (93%), use of credit and corporate card float (47%) and the ability to negotiate with suppliers and customers (43%) would yield a significant financial benefit. This kind of working capital helps organizations secure competitive opportunities, while increasing purchasing power. It provides businesses with the advantage of extending payment grace periods, so that businesses can pay vendors faster while improving and maintaining working relationships for the future. “American Express works with financial executives across the country to help them understand the strategic value of improving cash flow and working capital management,” Roman explains. “When used effectively and strategically, these underused forms of capital can become catalysts for growth, helping to improve supplier relationships, enhance processes and increase financial flexibility, ultimately giving companies the advantage they need to remain competitive and grow.” CFOs know that uncertainty is always going to be a part of the job. But with the right investment strategies, financial executives can rest a little easier, knowing they are implementing the right strategic objectives to help their business continue to drive growth, no matter the uncertainties.



2018 Payments Forecast


The year of the Cloud By Kevin Deveau


t is hard to believe that we are almost ready to say good bye to 2017. Much of the conversation throughout the year was focused around cyber security, and rightfully so. Organizations throughout different industries, from technology to healthcare, experienced some of the largest data breaches in history. When speaking about the importance of cyber security, cyber insurance and corporate responsibility to protect consumer data, we will look back to 2017 for worst-case scenario examples of how giant corporations can become bullied by individual hackers. However, on a positive note, it was this surge in data breaches that encouraged both consumers and organizations to become more vigilant when it comes to protecting their data. It is because of this that we began to see innovations in the technologies that support and protect our valuable data. One of those innovations was the migration to the Cloud. At FICO, we all know that data is king. I must give our internal development group credit; they saw the opportunity the Cloud presented years ago and began building our services to support it before the industry really began to materialize. It’s because of this foresight that we have been able to position ourselves as leaders in this space. I personally believed that the early movement to the Cloud would be smaller, net-new clients. I felt that these clients with limited 12


internal resources would welcome a service that removed some of the burdens from an operations standpoint, but I did not know how long it would take before larger, more established organizations began to make the move. I was surprised to see some of the giants here in Canada ready and eager to make the transition onto the Cloud already this year. Out of the major banks in Canada, we have over 60 per cent that have already made the transition to the Cloud and we fully expect the others to follow suit into the new year. There are a number of reasons why banks, along with other organizations, are moving to the Cloud.

Market conditions When changes happen within the market, your organization will want to react quickly. For example, when changes to a credit policy happen, institutions want to execute them across the board to all customers, as fast as possible. However, with the current infrastructure supporting most organizations, that has been a challenge. Currently, some organizations could take up to eight months to get a credit policy change in production and 12 to 14 months to launch a new credit card. These processes require several different pieces to work in tandem within your industry in order to bring a project across the finish line. In reality, it often equates to long timelines.

Upgradability Clients want to have the newest available products and services, November/december 2017

2018 Payments Forecast

whether these customers are multi-national organizations or individual consumers. By moving solutions to the Cloud, it makes the speed to which companies can deliver upgrades and services increase exponentially.

IT responsiveness IT teams are stretched thin. Tasking them with redundant system upgrades is not an efficient use of their time or your organization’s resources. By migrating software to the Cloud, it ensures that these valuable team members can use their energy on the types of projects that elevate your business, expand your offerings to clients and that ultimately matter. Less time can be spent updating software and more time can be spent using it. On the Cloud, providers take on the responsibilities of configuration, patching and upgrades on an ongoing basis.

Best practices This is simple: all markets are competitive. As players start moving toward the Cloud (and their offerings start benefiting from it), it is only natural to assume that their competitors will begin to move there as well. The obvious benefits will eventually begin to be realized and sought after by clients and they will demand the speed and agility that only the Cloud can provide.

What’s next? Practically speaking, as many customers embark on their November/december 2017

digital business transformation new business approaches and a fundamentally different architectural approach is required to deliver their services. As for looking ahead, it’s fair to say that the next step will be to see organizations begin to put all of this data on the Cloud to use. Once their organizational data is on the Cloud, it can be used without limits. The data collected can be used to inform decision making across the business. This will decrease the amount of time it takes to do things like scoring customers credit worthiness, for example, or to validate suspicious transactions. Multiple systems can cross reference shared pools of data to make complex decisions quite simple. The efficiencies added by the transition to the Cloud will translate to better served clients, lower operational costs over time and a better bottom line. The Cloud is not a new concept, it is one that has been growing and evolving for years now, but the recent surge in cyber-attacks has made it a solution that makes perfect sense to so many organizations. As data becomes more abundant and increasingly valuable as the years go on we are continuously learning new, innovate ways to use it to make smarter, more efficient decisions. I’m looking forward to seeing what we come up with this year. 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. FICO is a leading analytics software company, helping businesses in 90+ countries make better decisions that drive higher levels of growth, profitability and customer satisfaction.



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Select the top three processes or systems that are your current biggest challenges.

Where is the greatest need for enhanced automation in your organization (select all that apply)?

asked to identify their top three processes or systems that are posing a challenge a whooping 89.5 per cent pointed the finger at IT, followed by accounting (68 per cent), human resources (37 per cent) and mail management (26 per cent). Enter Ricoh's Business Process Services (BPS). Between their applications, cloud or on-premises solutions and on- or offsite process management, your business can save some serious cash. And by providing accurate, timely and complete performance metrics on demand, Ricoh can give you the information you need, when you need it, in order to make the critical business decisions that help you meet your business objectives. Ricoh is empowering the digital workplace and Ricoh BPS for AP/AR enable organizations like yours to offload the burden of day-to-day AR and AP management—from AP invoice, remittance and cheque processing to AR data extraction and processing and more.

Embracing the opportunity Payments Business readers recognize that it’s not all doom and gloom and these significant challenges are made worthwhile by the amazing opportunities made available through transforming these outdated processes. Respondents identified reporting and report creation as the area in greatest need of transformation (63 per cent) followed closely by business analytics (58 per cent). Other popular responses included reconciliation (37 per cent), integration (27 per cent), architecture (31.5 per cent), document processing (31.5 per cent) and managing expectations (31.5 per cent). Overall, the key objectives of respondents’ transformation initiatives are simplified business processes (73.5 per cent), reduced costs (68 per cent) and real-time insights (63 per cent). Leveraging technology and their 80+ years of experience providing innovative business solutions, Ricoh makes automation and optimization simple and effective, allowing you to stay focused on running your business. Their past was built on imagining change and so is their future.

The power of great partners Respondents demonstrated a wariness of using a third-party provider versus developing internal November/december 2017



Sponsored content solutions or purchasing software solutions, with 79 per cent indicating they would not consider that option. Concerns include security, control, privacy and integration. On the other hand, respondents also recognize that the potential benefits of using a thirdparty provider can include significant cost savings and inefficiencies, as well as dramatically expanded expertise. Ricoh currently does business with 350 of the Fortune 500 companies, empowering accounting departments by digitizing and automating common work processes including AP and AR. For example, with an automated solution in place, Canada’s leading courier company will see savings in the millions of dollars due to increased efficiency, automation, better data processing and fewer inaccuracies. Ricoh delivers services to improve the way your entire organization works, collaborates and shares information. From your core infrastructure to tools your people use every day to the way you communicate, transform and manage information, Ricoh services provide today’s changing workforce with the right information at the right time, in the right form, no matter where they are. Broken processes, over-reliance on paper and manual data entry continue to plague many mid- to large-sized companies. If you are one of them, Ricoh's BPS solutions enable you to streamline, automate and enhance AP and/or AR management. If you are ready to make information work for you and your organization? Imagine. Change. Visit to learn more.

What are the key objectives of your transformation initiatives (select all that apply)?

How Ricoh helps • Full AP automation for a large Canadian waste management company reduced manual data entry, increased processing speed and allowed mobile workers to quickly participate in approval process through invoice scanning, data capture and ERP integration.



• Increased efficiency for a large Canadian retailer while improving vendor relations and enabled increase in recognized revenue through non-PO and EDI exception data entry and processing plus cloud repository for images and ERP integration.

• Created a customer invoice portal for a Canadian paint manufacturing and distribution company that presents secured invoices and facilitates communication and payments. Enhancements shortened Day Sales Outstanding by 40 per cent and increased customer satisfaction.

November/december 2017

• Payment processing and mail management for a large Canadian courier, including electronic processing, deposit, and payment matching with full ERP integration for GL coding, look-ups, data cleansing and clearing.

Want to know more about your card programs? Do you issue fleet cards? Manage transactions? Is it vital to keep on top of technology which affects your mobile solutions?

Sign up NOW for a free subscription to Payments Business magazine. Visit our website at and learn more about the magazine Payments Business is a Lloydmedia, Inc publication. Lloydmedia also publishes Financial Operations magazine, Canadian Treasurer magazine, Canadian Equipment Finance magazine, Direct Marketing magazine and Contact Management magazine.

2018 Payments Forecast

Biometric security technology: Spoof or proof? The security of biometrics technology is in the spotlight and stakeholders must take a balanced view of its strengths and vulnerabilities By Isabelle Moeller


he Oxford English Dictionary offers two definitions for the verb “spoof”: “To make (something) appear foolish by means of parody; to send up” and “To render a system useless by providing it with false information." Sadly, where the spoofing of biometric security technologies is concerned only the latter applies and there is little to laugh about. The recent rise of biometrics deployments in consumer services has confirmed spoofing as a vulnerability that needs careful management. A wide variety of specialist interest groups, friendly and otherwise, make it their mission to expose the limitations of each solution brought to market. Indeed, detractors routinely use high profile failures to suggest that biometrics as a mode of security is just too risky a business to be worthwhile. They are wrong.

It’s the system, man As with all flavours of security technologies, the weak points in biometrics have spawned a race between those creating and applying the solutions and those seeking to undermine them. As new solutions are launched weaknesses are identified and countermeasures developed. In May, a BBC reporter with the aid of his twin brother “cracked” a high street bank’s voice recognition system, proving the insecurity of the system. The weak point here, however, stemmed more from how the solution was implemented than from a failing of the recognition technology itself. All biometric systems have some vulnerabilities (it’s worth noting that the iPhone’s fingerprint sensor was successfully hacked just a week after launch). What matters is how these vulnerabilities are mitigated. In general, there are two factors that determine how effective a biometric solution is and both require some trade-offs before a useable solution can be reached. Firstly, the solution is only as good as the biometric data it enrols and then recaptures each time the user authenticates. The recaptured ‘image’ can be impacted by myriad factors depending on the mode being used. Ambient noise can interfere with voice recognition, for example, eyelashes can obscure an iris image, varying skin conditions can impact fingerprints and so on. Secondly, the matching process also depends on how tightly the solution’s parameters are set. Insisting on too high a degree of 18


similarity between the stored and presented image creates too many false negatives, where the genuine user is denied access and the system rendered unusable. It’s also worth remembering that a hacker never needs to replicate an individual’s biometric image absolutely, they need only replicate enough of it to fool the system. So, if the matching process isn’t rigorous enough then false positives result, where fraudulent users are granted access and the point of the system is defeated. There is always a balance to be struck. How should the system conclude that it has sufficient verifiable data to confirm the user’s identity?

Horses for courses The choice of biometric modality has a big impact here. The variations between different biometrics mean that some are better suited to particular use-cases than others. Fingerprints, for example, leave a latent image on the data capture surface, which make them excellent for criminal identification. That said, the latent image itself can be copied, replicated and used in a spoof attack. Irises, on the other hand, leave no replicable trace making them far less useful in criminal applications. Thanks to the social sharing revolution, digital pictures of people’s faces are in very easy supply, particularly in developed countries, meaning that facial biometric solutions have to work harder than ever to verify their subject using 3D mapping and liveness detection techniques. The technologies are responding. In the near future the use of new, cheaper multispectral sensors (which simultaneously capture multiple biometric images within a narrow spectrum) will greatly improve the industry’s ability to detect false biometrics. In automated border control systems that use face recognition, for example, infrared sensors can now determine if a mask is being used.

High stakes, getting higher The growing popularity of iris and voice recognition systems present fresh challenges. Siri, Cortana and Alexa are all gaining serious traction and when banking and payment apps start to use iris recognition to grant access to the user’s account the stakes rise significantly and the motivations of the thieves will surely step up accordingly. Although improving spoof detection is important, trying to chase a perfect anti-spoofing technique for any biometric is a fool’s errand. Continued on page 26 November/december 2017

2018 Payments Forecast

Why the future of mobile payments depends on behavioural biometrics Great customer experience that enables smooth, frictionless and secure mobile shopping will be the catalyst for the mass adoption of mobile payments By Noa Benari

Bringing UX and fraud prevention together


orrester Research estimates that the market for mobile payments will reach $142 billion by 2019. Peer-to-peer and point-of-sale payment methods have gained very little traction and the adoption of in-person mobile payments is relatively slow and very fragmented. Mobile payments are still far from maturity and are clawing their way into an established, complicated ecosystem. The biggest obstacles standing in the way of wider mobile payments adoption are the high risk of fraud and the conflict between fraud detection and prevention and the user experience. Finding authentication methods that work on both fronts should be a number one priority for mobile payments providers.

The importance of customer experience At the very core is this: How can companies create customer experiences that are smooth and frictionless to the degree that they become a competitive advantage? Replacing something as simple as swiping your credit card is not simple—or enough. If users perceive mobile payments as faster and more efficient than other payment methods, they will likely continue to use it. To increase mobile payment acceptance, the whole process needs to be easy to understand and use. PwC’s Mobile Payment Report 2017 shows that speed and ease of use ranks among the top three criteria of making a payment solution attractive. Authentication methods that interrupt transaction flow will no longer suffice.

The rise and fall of Apple authentication A survey conducted by Juniper Research showed that more than 40 per cent of iOS users in the U.S. will not use the newly introduced facial recognition as an authentication method for mobile payments. In addition to these negative results, as well as the fact that Apple´s recognition technology often fails on people with darker skin, Apple is still trying hard to overcome the ability to spoof the smartphone with a photograph of the person. November/december 2017

Customers want quick and easy mobile payments—with a very high level of fraud prevention and detection. Current authentication methods using static biometrics, passwords or emails as the second factor are problematic from the perspectives of both security and user experience. That is why behavioural biometrics is a hot trend. Behavioural biometrics very efficiently bridge the gap between the UX and authentication. It’s an authentication technology that recognizes users based on their unique behaviours, such as keystroke patterns, scroll velocity and touch pressure. During World War II, Allied forces used behavioural biometrics to verify the authenticity of telegraph messages they received by identifying the operators based on the way they were sending dashes and dots.

Static versus behavioural biometrics Behavioural technology has become so advanced that we are able to analyze many different data types and end-point interactions behind each transaction, efficiently solving the problems of static biometrics. Both traditional methods (such as fingerprint scanners) and solutions such as Apple ID often fail to accurately authenticate the user behind a transaction. Static biometric data can be easily stolen and used for nefarious purposes. A truly secured mobile payment solution requires a high degree of accuracy that will not generate false alarms, interfere with customer experience or be vulnerable to spoofing. To withstand automated bot and RAT attacks, a secure solution needs to continuously authenticate the user throughout the session. Behavioural biometrics invisibly run in the background without interfering with the user experience, removing step up authentication and risk-based authentication while significantly reducing fraud. Since behavioural biometrics remove friction and don’t interfere with the transaction flow, users can do more and spend more throughout each session, with a positive effect on the bottom line. There is no forced enrollment, Continued on page 26 PAYMENTSBUSINESS


2018 Payments Forecast



November/december 2017

2018 Payments Forecast

Growing Canadian prepaid market hit $3.6B in 2016: CPPO study By David Eason


he Canadian Prepaid Providers Organization (CPPO) released its second annual benchmark study, entitled Canadian OpenLoop Prepaid Market: 2016, that shows 17 per cent growth of the open-loop prepaid card market in Canada between 2015 and 2016. Growth in all nine active segments of consumer-, corporateand government-funded prepaid cards drove the market to $3.6 billion in total value loaded onto cards—revealing that Canadians are embracing prepaid payments tools at the same trajectory as most other major economies. The Canadian open-loop prepaid market has experienced healthy growth in both total loads and expansion into new segments. The CPPO study revealed that in 2016 Canadians loaded $1.8 billion on general-purpose reloadable cards, which are a payment tool used to replace cash and cheques and supplement bank accounts for a highly banked population. For example, Koho offers a reloadable prepaid Visa card, issued by Peoples Trust Company, that serves as a “mobile hub for your money.” The solution is specifically designed for Millennials, many of whom are looking for a seamless, realtime, hassle-free way to manage their money and lead financially independent lives. The North West Company’s open-loop reloadable prepaid card program, with Scotiabank as the issuer, is used by a large percentage of its clients as the cornerstone of their personal financial management. Given the scarcity of banking services in the remote communities across Northern Canada, The North West Company’s November/december 2017

prepaid card offering allows direct deposit of government benefits, which is a huge comfort and time saver for cardholders. Of course, prepaid cards aren’t just for Millennials or underserved communities. The prepaid incentive market reached $189 million in open-loop prepaid card loads in 2016, which is relatively small versus the US$90B billion non-cash incentive market in the U.S.— revealing strong growth potential. With Canada’s broad geographic dispersion across five major population centers, it is expensive and cumbersome for corporations and governments to deploy non-cash incentive programs—a factor that will likely contribute to the openloop prepaid card growth in the incentive category. In Canada, open-loop prepaid cards are rapidly replacing cheques across corporate disbursements, payroll, healthcare disbursements, disaster relief and student cards. The average load onto corporatefunded prepaid cards grew 11 per cent last year. The CPPO study reported growth across several prepaid categories, revealing that this innovative financial solution is being used and embraced by consumers, corporations and governments. Prepaid products continue to take a bite out of cheques and they claim a significant slice of the Canadian payments ecosystem. For more information about the Canadian open-loop prepaid market, access the Canadian Open-Loop Prepaid Market: 2016 study and infographic at David Eason is the Canadian Prepaid Providers Organization’s chair.



2018 Payments Forecast

In pursuit of a truly modernized payment system How Interac is evolving in response to industry trends and customer preferences By Peter Maoloni


anada is a recognized global leader in developing and using technology that makes payments faster, but there is still a lot of friction in some electronic transactions that is preventing us from having a truly modernized payment system. Finding better ways to exchange value more quickly is only part of the solution—we also need to persuade consumers and businesses to change some of the behaviours they have become accustomed to over many years, such as using cheques or cash to settle accounts. This one of the many reasons Interac e-Transfer rolled out two new features in October of 2017: Autodeposit and Request Money. These features work together to make the Interac e-Transfer more streamlined and user-friendly. Request Money allows users to send a request for funds directly from their mobile or online banking and Autodeposit allows a user to register to have funds automatically deposited into their account when they are sent an Interac e-Transfer, eliminating the need to answer a security question. Canadian consumers and businesses are enthusiastic adopters of new payments technologies and have always been at the forefront of real-time payments. As a UK-based consultancy recently noted, Canada leads the world in the move toward becoming a cashless country, ahead even of Sweden where electronic payments account for 95 per cent of retail transactions. Many things have come together to propel Canada to the top of this global ranking, notably the willingness of Canadian financial institutions to cooperate and invest in the core infrastructure to create the interoperability needed for a ubiquitous payments system that connects as many consumers and merchants as possible. Ubiquity is one of the five core principles we believe should underlie any modernized payments system, because the more 22


a payment network connects, the more it will get used. A single payment network not only minimizes the friction involved in using or transferring money, it also tends to bring down the marginal costs of that network as it grows and more transactions are made on it, and it allows users to enjoy valuable shared services. In short, a ubiquitous network leads to real-time money movement at the least possible cost, making it a true accelerator of commercial activity. That is certainly the case with the Interac e-Transfer system, which continues to enjoy exceptional growth of roughly 50 per cent yearover-year. More than 235 million transactions are expected to be made over the platform in 2017, up from last year’s 158 million transfers, with a total value expected to be at least $90 billion, compared to $63 billion the previous year. More than 250 financial institutions offer the platform to their customers and roughly 14.5 million of those customers—out of a total banking population of between 21 million and 23 million—use the system every year.

Canada leads the world in the move toward becoming a cashless country. The growing popularity of the Interac e-Transfer platform comes from its strong capabilities, such as 24/7/365 availability, real-time payment notifications, analytics and reporting. All users are protected with multiple layers of security including encryption technology, financial institution authentication and proprietary risk management, making it one of the most secure P2P solutions globally. And, as it turns out, it’s also rapidly becoming a trusted solution for P2B, B2P and even B2B transactions. November/december 2017

2018 Payments Forecast That evolution didn’t happen overnight. Although Interac e-Transfer has been around for about 15 years, it was originally targeted at the P2P segment. In time, however, as microbusinesses and small businesses became aware of it and had access to it through their financial institution, they started to use it to accept payments and disburse funds, albeit on a small scale at first. As this usage continued to grow, we developed and launched our first Interac e-Transfer service specifically aimed at small businesses—bulk disbursement—that allows them to bundle several Interac e-Transfer transactions together, significantly reducing the amount of time, paperwork and cost involved in making each transaction.

A ubiquitous network leads to real-time money movement at the least possible cost, making it a true accelerator of commercial activity. While this growth in using Interac e-Transfer for P2B, B2P and B2B payments is bringing us closer to becoming a cashless society, we know that building a modernized payments system that completely displaces traditional payment methods means continually finding ways to reduce or eliminate any remaining points of friction in the payment process. One way we’re doing that for Interac e-Transfer is through Autodeposit, introduced in 2017 and which is increasingly being offered by many major financial institutions across the country. Autodeposit allows users to register an identifier, such as their email address or mobile phone number, to receive funds directly into their designated account with a financial institution without having to answer a security question as part of each Interac e-Transfer. These transactions are completed with the same bank-grade security as every other Interac e-Transfer transaction, meaning the transfer of funds takes place through the established and secure banking procedures financial institutions have used for years to settle cheques, bank machine deposits and withdrawals. With Autodeposit, senders save time by not having to provide a security question and answer for an Interac e-Transfer transaction to any user who has enabled the feature, while recipients save time by not having to answer a security question to complete each transaction. By making these transactions faster and more convenient, we have reduced some of the friction, which should make Interac e-Transfer an even more popular alternative to traditional payment methods such as cash or cheques, for consumers and for small businesses. Another way to increase use of non-traditional payment methods is to make them more convenient than existing methods. That is the rationale behind Request Money, another new feature we recently introduced for Interac e-Transfer. With this feature, money can be requested from anyone in Canada within the security of the requestor’s online or mobile banking application, using an email November/december 2017

or text message. It can be used both for P2P transactions, such as asking a roommate for their share of the rent or for reimbursement for movie or concert tickets, and for B2P and B2B transactions such as invoicing a customer or supplier. The benefits for microbusinesses and small businesses are obvious, as they can now easily request payments from their customers using Interac e-Transfer and have their money deposited directly into their bank account. This combination of improved convenience and reduced friction will be an important part of helping Canada maintain its world-leading status in building a cashless society. Even so, old habits die hard and it would be naïve to think that cash and cheques are about to disappear completely. Many consumers and businesses have become accustomed to these and other antiquated ways of paying out or paying in, so another important part of building a modern payments system is building awareness of the innovative technologies and enhanced features that are now available to displace traditional payment methods. It would also be naïve to think that financial institutions and organizations like Interac have all the answers when it comes to anticipating and meeting the needs of consumers and businesses. True, as a digital payments pioneer for more than 30 years, we have amassed extensive experience working with businesses and merchants on our other core business lines, such as debit and mobile payments, and continue to develop and roll out enhancements to the Interac e-Transfer platform. But we also believe that the best way to build a modernized payments system is to do it in an open, not a closed, way.

We also believe that the best way to build a modernized payments system is to do it in an open, not a closed, way. That is why we began an open API initiative this year to allow third-party developers to connect their applications to our platforms and services. We believe that, by giving developers the opportunity to create consumer experiences for exchanging money using the Interac platform, we can help spur the creation of even more offerings and boost the growth of Canada’s financial technology ecosystem. Expect to see some of the fruits of that initiative as the new year unfolds. 2018 won’t be the year Canada becomes completely cashless. But if the innovations and enhancements to digital payment services over the past few years are any indication, it will certainly take us much closer to that goal. Peter Maoloni is AVP, Online Products and Platforms, Interac Association and Acxsys Corporation.



2018 Payments Forecast

Tapping into the minds of Canadian e-commerce marketers By Susan Wall


anadian e-commerce marketers want to improve the website experience, understand the importance of mobile commerce and explore one-click buying and social selling. Those are the key takeaways from the research we commissioned earlier this year. Working with research firm Demand ROI, we surveyed e-commerce managers, directors and vice presidents at companies in Canada, the U.S., the UK and Australia with a minimum head count of 200 employees. The survey was conducted via email in the spring of 2017 and we received a total of 409 responses, with 109 respondents from Canada. Of the Canadian respondents, 80 per cent reported having both brick-and-mortar and online operations.

Online and ready for business One of the top business priorities for Canadian retailers in 2017 is improving the website experience, which makes a lot of sense given the online landscape. According to the Canadian Internet Registration Authority, the average Canadian spends 36.7 hours online recreationally each month—more than anywhere else in the world. The Canadian government considers access to high-speed internet a fundamental right and is working to provide it to 100 per cent of its population. In that kind of environment, retailers are right to focus on creating opportunities to connect with consumers online. Each connection is a possibility to create a relationship with the consumer and, ultimately, establish brand loyalty.

Mobile’s critical role The research suggests that Canadian retailers know that the mobile highway can bring more customers—and more sales. The majority 24


of retailers we surveyed said mobile commerce is critical (49 per cent) or important (41 per cent) for the future of their brand. As retailers see an increase in mobile usage by consumers, they are starting to blend offline and online retail experiences with options like in-store Wi-Fi for online shopping and price comparisons and personalized in-store offers on mobile devices, two possibilities that they think will have a great impact on in-store sales. So, how are Canadian retailers optimizing mobile strategy? Fiftyfour per cent of the retailers we surveyed have a dedicated mobile strategy and make investments in the mobile experience—but only 47 per cent are optimizing by phone versus tablet. The Canadian retailers who aren’t optimizing their mobile strategy should take note: 46 per cent of those surveyed say that customers use their phones before, during and after a purchase. This could mean a missed opportunity for those who haven’t optimized their mobile strategy.

Exploring the possibilities We asked Canadian retailers where they would focus if time or money weren’t issues. Their response: one-click buying and selling on emerging social channels. These goals make a lot of sense: We know Canadian retailers are already focused on improving the digital experience and 76 per cent responded that social media is the marketing channel with the greatest impact on sales, since it creates opportunities for them to reach their customers—no matter where they are. November/december 2017

2018 Payments Forecast

that they are very effective. So, what is holding them back from making better data-driven decisions? The overwhelming concern for Canadian retailers was the cost and complexity of data analysis tools: 50 per cent named this as their number one concern. It may be that Canadian retailers perceive the cost of the tools as greater than their worth, or they may be waiting to see what happens for retailers in other markets. Is the investment worth it for them? Canadian retailers should bear in mind that investing in data analysis can pay off many times over by providing more information about consumer behaviors and helping them make better decisions about their businesses—which, in turn, can help drive sales.

A secure future of e-commerce success While the to-do list might seem long (improve the website experience, explore mobile commerce, consider using data to drive decision making), Canadian retailers have a great market to work in. In many parts of the country, stores aren’t easy to get to, so exploring ways to bring the store to the shoppers is well worth the effort. Taking the time to figure out what works is a solid investment.

Hesitant to invest in data One way to feel confident about adopting new marketing channels or enhancing existing ones is to use data to measure business outcomes and determine which techniques and tools to invest in next. When we asked Canadian retailers how they felt about their ability to leverage data for business decisions, only 53 per cent feel November/december 2017

As vice president of marketing for Oracle + Bronto, Susan Wall is responsible for all marketing strategy and leading all lead generation, branding and positioning initiatives. She brings an extensive background in brand marketing, product marketing, marketing research, media and advertising to her role.



2018 Payments Forecast Evaluating the new payments ecosystem Continued from page 6

open APIs, blockchain, artificial intelligence and big data. All in all, there are opportunities for banks, corporations and FinTechs to get ahead in the ecosystem; but only if they have the wherewithal to prioritize consumer needs through collaboration and partnerships with outside institutions. Sanjay Tugnait is CEO, Capgemini Canada. Christophe Vergne is Capgemini Payments and World Payments Report Leader.

Three ways Canada’s payments sector can embrace competition and protect consumers Continued from page 10

five per cent of bank revenues which, keep in mind, are well north of $30 billion in some cases. Consumers deserve to know what they are paying for and this means all costs levied on the consumer need to be disclosed succinctly, accurately and using terms that are easy to understand. Current disclosure requirements are insufficient and only required for certain PSPs. The issue is particularly pronounced for consumers making foreign currency payments, where banks are infamous for adding hidden markups. Given that one in five Canadians are foreign born and many have friends and family overseas or do business abroad and therefore a need to send money overseas, the Department of Finance should demand that exchange rates and fees be made straightforward to compare. Further, PSPs should be required to disclose “markups” by showing the difference between their exchange rate and the mid-market exchange rate. For instance, TransferWise transparently displays its fee upfront and deducts it before conversion, then uses the real exchange rate, independently provided by Reuters without any markup. By simplifying the regulatory environment, improving system access and demanding clear disclosures, policy makers can remove many of the ingrained competitive advantages held by the Big Five banks and, finally, promote true competition in the payments sector and financial industry at large. This will not only inspire cheaper services and put consumer interests first, it will spur another wave of FinTech innovation that will lead to even faster, more convenient digital payments for all Canadians. Andrew Boyajian is head of banking, North America, at TransferWise.

Biometric security technology: Spoof or proof? Continued from page 18

Try as the industry might, it cannot prove a negative; it can never say that a capture device is completely fool proof, simply because it 26


can’t be tested against the unlimited universe of current and future spoofing techniques.

With facility comes responsibility In terms of the end-user experience, biometrics are terrific; they are fast, convenient, reliable and, arguably, are untouchable by any other consumer-facing security technology today. Indeed, the facility enabled by biometrics is driving mass deployments across a host of devices and services; something that is bound to continue despite its vulnerabilities. This all adds up to an important point. A single biometric solution is not a ‘silver bullet’ and, in many cases, should be deployed as a factor in a multifactor authentication solution—one that is carefully designed and parameterised to mitigate the risks of failure associated with the use-case to which it is applied. To this end, biometrics’ credibility, together with the security of those that use its technologies, will be determined by the industry’s ability to identify—and adhere to—best practices. While the legal framework and policy creation for biometric data privacy remains a matter for lawmakers, commercially independent guiding principles for the design, deployment and operation of biometric technologies already exist. They are the product of international collaboration between academics, governments, vendors and other key stakeholders at the Biometrics Institute. Only by sharing live deployment experiences, establishing guiding principles, creating best practice guidelines and promoting the responsible use of biometrics globally can the industry truly claim to be representing the interests of end-users. Biometrics may be perfect, but our use of them is not. As the adoption of biometric technologies continues to accelerate, it is our collective responsibility to ensure we strike the right balance between delivering a great user experience and mitigating security risks along the way. Isabelle Moeller is chief executive at the Biometrics Institute.

Why the future of mobile payments depends on behavioural biometrics Continued from page 19

no authentication triggers and hundreds of different (and unique) behavioural variables that can be used to identify the user behind each transaction throughout the session. The future of payments is increasingly mobile. Users value frictionless experience and, in the world of ever-increasing risks, the need for continuous authentication methods such as behavioural biometrics will only grow. Noa Benari is VP marketing at SecuredTouch. SecuredTouch is a pioneer in behavioural biometrics for mobile, delivering continuous authentication technologies to strengthen privacy and security and reduce fraud while improving customers' digital experience. Application- and device-based solutions are in use at clients around the world, including major financial institutions.

November/december 2017

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2018 The Merchant’s Guide to Transactions, Cards & eCommerce

Great rates. Brilliant results. Contact for rates and information Mark Henry , Publisher 905-201-6600 x223 Payments Business is a Lloydmedia, Inc publication. Lloydmedia also publishes Financial Operations magazine, Canadian Treasurer magazine, Canadian Equipment Finance magazine, Direct Marketing magazine and Contact Management magazine.

2018 Industry Events

January 2018 January 14-16 National Retail Federation Retail’s Big Show 2018 New York, NY January 28–31 Retail Solutions Providers Association INSPIRE 2018 Hawaii, USA January 29-31 American Conference Institute 18th National Forum on Prepaid Card Compliance Washington, DC PrepaidCard January 29 - 31 Northeast Acquirers Association NEAA 2018 Uncastville, CT

February February 6-7 ATMIA ATMIA US Conference 2018 Las Vegas, NV February 26 – March 1 WB Research eTail West 2018 Palm Springs, CA February 26– March 1 GSMA Mobile World Congress 2018 Barcelona, Spain

March March 1- 2 Conference Board of Canada Cyber Security 2018 Ottawa, ON March 18 InfoTech Canadian Financing Forum 2018 Vancouver, BC

March 26-29 ICMA 2018 Card Manufacturing & Personalization EXPO Orlando, FL March 26-29 Smart Card Alliance Payments Summit 2018 Orlando, FL

April April 9-12 NAPCP Commercial Card and Payment Conference 2018 San Diego, CA April 17-18 BDC Canadian FinTech 2.0 Summit 2018 Toronto, ON April 17 - 19 Electronic Transactions Association TRANSACT 2018 Las Vegas, NV April 24-25 ATMIA Canadian ATM & Payments Summit 2018 Toronto, ON April 25-28 Central1 Momentum 2018: Annual Summit for Credit Union Leaders Toronto, ON April 29- May 2 NACHA Payments 2018 San Diego, CA April 29 - May 1 Canadian Credit Union Association 2018 National Conference for Canada's Credit Unions Toronto, ON

Halifax, ON Conference

April 30 - May 2 ACT Canada Cardware 2018 Niagara Falls, ON


May (TBD) Finovate FinovateSpring 2018 San Jose, CA May 8 Canadian Prepaid Providers Organization Prepaid Symposium 2018 Toronto, ON May 9 - 11 Payments Canada 2018 Payments Summit Toronto, ON May 14 - 17 Reed Expositions CNP Expo & Conference 2018 Orlando, FL May 29-30 Retail Council of Canada STORE 2018 Toronto, ON May 15-17 WB Research eTail Canada 2018 Toronto, ON

June June 5 - 7 Canadian Venture Capital & Private Equity Association Invest Canada Conference 2018 Calgary, AB June 5- 8 Internet Retailer IRCE Conference + Exhibition 2018 Chicago, IL June 13-15 FEI Canada 2018 Annual Conference

Visit us online 28


September/October 2017

June 18 - 20 CUCA National Credit Union Treasury and Finance Forum 2018 Toronto, ON

August August 2018 (TBD) FinTech Canada FinTech Canada Conference 2018 Toronto, ON August 21-22 The Prepaid Press tppEXPO’18 Las Vegas, NV

September September (TBA) NAPCP Commercial Card and Payment Conference 2018 Toronto, ON September (TBA) Western States Acquirers Association 2018 Conference Rancho Mirage, CA September 3 - 4 (TBC) InsuranceNexus 4rd Annual Insurance Analytics Canada Summit Toronto, ON canada

October October 5 - 6 BAI BAIBeacon18 Orlando, FL October 14 - 17 CUCA National Credit Union Lending Conference 2018 Victoria, BC

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secure payment solutions Verifone is one of the world’s largest POS terminal vendors and a leading provider of payment and commerce solutions. We operate in more than 150 countries and employ nearly 6,000 people globally. Our steady growth has come organically, through a dedication to innovation and strategic partnerships, as well as from savvy acquisitions.

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November/december 2017



2018 Payments Forecast

The next W 12 months of the payments industry

By Rob Nathan

e’ve reached a point where more of our daily processes are automated than not, right? Think about it. Your coffee maker wakes up before you do. Your Google Home shuts off your lights as you’re locking up the front door. At the office, no matter what you do, there are systems automating multiple processes for you. It’s all becoming automated and it’s all so we can have a seamless experience from start to finish. That’s what the future looks like: just a bigger network of automated systems. In just a few years, you might be the owner of an automatic, self-driving car. For now, let’s shorten our look into the future and just take a look at the next year. For most companies, business operating systems rule the way things are done day-to-day. Those systems are in place so we can do more for ourselves and for our customers. No matter the industry, our customers are also constantly and proactively looking for onestop shops, where they can do everything all at once, all in one place. Notice how Amazon has come to rule the world. Anything that makes our lives easier is bound to stick around for awhile. Integrating payment acceptance into business operating systems and software is another step toward simplicity. It’s creating a more seamless process and experience for both the business and the customer, and we’re going to see a lot more of it as we move into 2018. This steep tilt to integrating payment acceptance into software might mainly be driven by younger generations of consumers and the way they expect to spend their money. Let’s look at an example of the direction quick-service restaurants are heading. We’ve watched restaurants operate with what has taken the form of self-service kiosks, where customers can browse menu items, place orders and make payments all from one device. That means credit card acceptance has been directly integrated into the software that runs that restaurant’s business. Not only that, mobile ordering and pick-up or delivery has created a unique experience for convenient online purchasing, further engaging customers that aren’t even in the store. Such a format not only smooths out the customer experience by ensuring quick and simple transactions, but it streamlines the collection of data coming from multiple sales channels for the business. Integrating payments is a way of doing business that saves both time and money. Managing multiple streams of data, including payment transaction data, all within one system removes the extra steps that were involved when managing multiple systems, and as a result reduces risk of human error. If you’re using a software that doesn’t integrate payment acceptance, you might want to be because you’re going to be seeing a whole lot more of it (and that’s a good thing). Here’s to another year and an exciting future for the payments industry. Rob Nathan, EVP Integrated Solutions, CardConnect, has more than a decade of technology consulting, operations and business development experience. Since joining CardConnect in 2009, Rob has led the company’s integrated payments initiative and oversees the strategic growth of technology and core product offerings.



November/december 2017

Seamless & Secure Solutions / Wherever, Whenever & However Consumers Choose to Pay

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Payments Business Magazine Nov/Dec 2017  
Payments Business Magazine Nov/Dec 2017