Payments Business Magazine Nov/Dec 2019

Nov/Dec 2019

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

2020

Payments Forecast ❱ Future-shaping trends ❱ Gaming: from play to pay ❱ Bridging the cash and digital worlds

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November/December 2019 Volume 10 Number 6

2020 Payments Forecast 4

Editor-in-Chief Steve Lloyd steve@paymentsbusiness.ca Editor Brendan Read brendan@paymentsbusiness.ca Contributors Tracey Black; Neil Butters; Len Covello; Jay Fischbach; Stacy Gorkoff; David Grindal; Daniel Kornitzer; Anthony Loiacono; Paul Parisi; Brian Raine; Daniil Saiko; Molly Shea

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Creative Direction Jennifer O’Neill jennifer@paymentsbusiness.ca Photographer Gary Tannyan

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President Steve Lloyd steve@paymentsbusiness.ca For subscription, circulation & change of address information, contact subscriptions@paymentsbusiness.ca 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 info@paymentsbusiness.ca www.paymentsbusiness.ca Subscriptions available for $40.00 year or $60.00 two years. ©2019 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.

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Bright forecast for payments modernization 6 How Gen Z guides payments 8 Building the Digital ID foundation 10 Adopting emerging payments solutions 13 The future of cross-border regulations 14 Opening the borders to opportunities

Canadian credit unions take steps to expand international payments

Loyalty 16 Future-shaping trends

Look for personalization, redemption options and "points as currency"

Events & Entertainment 17 Gaming: from play to pay Cash & currency 18 Bridging the cash and digital worlds 19 Libra: the AOL of crypto?

Features 20 Combatting fraud with centralized data 22 Five reasons to automate invoices Next issue…

Winter

Made possible with the support of the Ontario Media Development Corporation

Industry Disruptors • International Payments • Alternative e-payment solutions • ATMs & ABMs • Cards • Cash & Cheques • Events & Entertainment • Issuers • POS & mPOS • Restaurants & Foodservice

November/December 2019

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Bright forecast for payments modernization 4

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November/December 2019

2020 payments Forecast

By Tracey Black

P

ayments modernization around the world continues to progress, addressing consumer and business needs for greater speed, flexibility and security. In its sixth annual Flavors of Fast report, FIS identified 54 countries with active real-time payment programs, up from 40 in 2018. Here in Canada we are making good progress on our own payments modernization path. Modernization is not only going to transform the clearing and settlement systems operated by Payments Canada, but it will also impact the systems and processes of our member organizations.

Those involved in the journey know that this initiative is complex.

The prize at the end of the journey is a modernized payments infrastructure that will allow Payments Canada members to provide faster, data-rich payment products and solutions to their customers.

A look back at how it all started Canada’s payments modernization journey kicked off with our Vision published in 2016 that was based on the input from more than 100 organizations. What we gleaned from those financial institutions, regulators and stakeholders is that Canada’s modern payments system must be fast, flexible and secure, promote innovation and strengthen Canada’s competitive position. The Vision continues to guide us as we near the end of 2019, helping to keep us on track to deliver value to all Canadians.

Pulse check on where we are today Payments Canada publishes a Modernization Roadmap every December that describes how we will continue to support the Vision. We have delivered several major milestones within the last couple of years.

ACSS. We made improvements to our retail batch payments system, the Automated Clearing Settlement System (ACSS), in 2018 through the implementation of a new credit risk model to reduce system risk, address regulatory requirements and comply with global best practices. We also made improvements to the Automated Funds Transfer (AFT) through the introduction of a third exchange window to accelerate funds availability.

The third exchange has been a game-changer for users in Western Canada. One year after launch it accounts for more than 10 per cent of monthly AFT transaction volumes (more than 21 million transactions) between financial institutions.

Lynx. We have made substantial progress on the replacement of the Large Value Transfer System, our high value payments system, with a Real Time Gross Settlement system we are calling Lynx. Lynx will enhance the safety, soundness, cyber-resiliency and flexibility for high-value payments in Canada.

In October 2018 we announced SIA Perago as our application provider and in May 2019, IBM as our lead technology partner for Lynx. Our three organizations have been working closely together since May 2019, focusing on building out the solution and setting up the infrastructure for Lynx. Payments Canada has been engaged with November/December 2019

member participants and regulators to determine how we will test and implement the new system, and to develop the required bylaws and rules and new policies and procedures that will help govern participation in the system. This work will continue into 2021.

Real-Time Payments. We’ve also made headway in designing a new real-time payments system, the Real-Time Rail (RTR) that will provide the ability for Canadians to make and receive payments immediately and securely, 24/7, 365 days a year.

Most notably, a series of workshops with our members, regulators and stakeholders this past year reconfirmed the value of selecting technology suppliers for each of the payments message exchange capability and the clearing and settlement capability for Canada’s RTR. This approach will help ensure a fast, flexible and secure payments system that is efficient, convenient and interoperable.

ISO 20022. Last and perhaps most importantly, Payments Canada continues to champion ISO 20022, which will play a foundational role in Canada’s modern payment systems and in enabling data-rich payments. All of our systems are being built to support ISO 20022, allowing for the inclusion of relevant payment information within the payment message. We are excited by the value that ISO 20022 can support, including interoperable cross-border exchanges, the introduction of new products and services and the digitization of manual processes related to invoicing and payment reconciliation, to name a few. Payments Canada is targeting to support ISO 20022 on Lynx by November 2021 and on the RTR at launch.

Modernization will provide a platform for innovation that will result in more choices.

Where we are headed, what to expect Modernization of our payment systems will provide value for the Canadian payments ecosystem. The total benefit from payments system modernization alone is significant: estimated to be $6 to $7 billion annually for the economy.

For financial institutions, enhanced payments systems, policies and rules will support product and service innovation. For businesses, modernization will lower operational costs related to payments, allowing organizations to move funds more quickly and efficiently and to more effectively manage their cash flow to improve bottomline returns. For Canadians, modernization will provide a platform for innovation that will result in more choices for how, where and when they want to pay.

Our progress to date is demonstrating our ability as an industry to work together. Continued collaboration will be key to delivering the Modernization Roadmap. At Payments Canada, we’re excited to tackle both current and future challenges associated with modernizing Canada’s payments systems, and to watch the future unfold.

Tracey Black is executive director, Modernization, Payments Canada.

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2020 Payments forecast

How Gen Z

guides payments

By Daniel Kornitzer

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Commerce and mobile commerce (mCommerce) continue to grow in Canada. eMarketer forecasts that 31.5 per cent of the $64.6 billion in eCommerce sales in 2019 will be carried out using a smartphone or tablet.

The connected growth of eCommerce and mCommerce is being driven in part by the digital preferences of Generation Z (Gen Z), which are Canadians aged 16 to 24. Both online and in stores, Gen Z provides a map of where Canadian payments is heading in 2020 and beyond.

Mobile natives in the CNP space Born from the mid-1990s onwards, Gen Z is the first generation that can be termed true digital natives: consumers who have grown up more intimately connected to the web than any previous age group. Furthermore, the 16- to 24-year-olds could also be described as “mobile natives”. Their adolescence saw smartphones become ubiquitous following the July 2008 release of the first iPhone in Canada, as well as the explosive growth in tablets after their introduction a couple of years later.

Smartphone usage has certainly never been higher in Canada, with 66 per cent of adults reporting owning a device in 2018, according to the Pew Research Center. For younger Canadians, smartphone ownership is almost universal: Pew reports that 90 per cent of 18- to 34-year-olds have a device.

It seems only a matter of time before eCommerce becomes dominated by mCommerce. Indeed, the growth in smartphone and tablet usage is seeing these devices become younger Canadians’ default online shopping platforms. 40 per cent of 16- to 24-yearolds prefer to buy goods on their smartphones or tablets rather than on desktops or even laptops, according to our Q1 2019 research.

By contrast, just 11 per cent of Canadian Baby Boomers (ages 55+) prefer mobile shopping.

If Canada looks to be shifting towards mCommerce, frictionless in-app payments through the Uber ride-sharing app, the GOLO and Uber Eats food delivery platforms and other apps look like they are set to be a big part of that future. Over half of 16- to 24-year-olds (52 per cent) have some experience of using in-app payments, and a 6

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November/December 2019

2020 payments Forecast fifth (20 per cent) use Uber, GOLO or similar apps regularly, according to our data. If older Canadians appear yet to be converted — only nine per cent of Canadians aged 25 and older are regular users of in-app payment — the future seems to be already being created by the app-centric Gen Z. At the same time alternative payments should also grow, if Canada’s Gen Z is taken as a guide. Indeed, 40 per cent of 16- to 24-year-olds have used a mobile wallet, such as Apple Pay or Google Pay, to make an online (as well as offline) purchase and 18 per cent use this payment method regularly. Again, younger Canadians are progressive in this respect, with only nine per cent of all other consumer age groups using a mobile wallet frequently.

Whether on a mobile device or a “conventional” laptop, younger Canadians are embracing other forms of alternative payments in the card-not-present (CNP) space. Online cash replacement systems are relatively popular, with over a quarter (26 per cent) of Gen Z using such a product regularly or even occasionally. Other age groups are more agnostic, with only 16 per cent of all other Canadians using an online cash product even occasionally.

A similar dichotomy can be seen for online prepaid payment solutions like our paysafecard product. Over a fifth of Gen Z (21 per cent) have used this payment method, more than double the 10 per cent of other age demographics who have tried prepaid PINs and cards online.

Gen Z’s adoption of alternative payments online could be interpreted as evidence of their financial exclusion. After all, the minimum age needed to obtain a credit card — arguably still the king of Canadian payments — is 18 in most provinces and even 19 in British Columbia, Nova Scotia and several others.

Will younger Gen Z consumers desert alternative payments when traditional payment products become more accessible? It seems more likely that their payment preferences will broaden rather than shrink, given the diverse array of methods they already embrace.

Canadians still use cash regularly, which is significantly higher than their counterparts in the U.K. (66 per cent) and the U.S. (70 per cent).

Again, the argument can be made that the younger Gen Z cohort have limited access to credit cards and therefore favour cash before graduating to cards. However, their high usage suggests a more enduring relationship. If Gen Z is an indication, cash seems to have legs in Canada.

Cutting-edge payments interest Overall, Gen Z are at the vanguard of new payments technologies.

The age demographic has a higher awareness of cutting-edge instore innovation. Some 75 per cent of global Gen Z consumers are aware of checkout-less stores compared to 70 per cent of the older demographics. While Amazon’s checkout-free Go stores are currently only available in the U.S., it seems likely that Canada’s younger consumers would be fast adopters if they expand north in 2020.

Biometrics are another area of payments innovation where Canada’s Gen Z is highly receptive. Over half (54 per cent) of the age demographic would make a one-off online entertainment purchase, such as a concert or cinema ticket, using a voice-activated technology like a smart speaker. A comparable majority (also 54 per cent) would also use their voice to sign up to Netflix or another subscription service. This level of confidence suggests that payments by voice could gradually become the new Canadian norm, given that an unprecedented 17.9 per cent of Canadians are expected to use a smart speaker in 2020, according to eMarketer.

Payments by voice could gradually become the new Canadian norm.

Card-present and innovation In the card-present (CP) space, Canada’s Gen Z are also at the forefront in demanding, and therefore driving, payments innovation.

As discussed, they are the leading users of mobile wallets, a payment method with a growing presence among CP retailers across Canada.

Similarly, with contactless payment approaching a tipping point in Canada — 49 per cent of CP stores and merchants offer it, according to our Q3 2018 small-midsized business (SMB) research — Gen Z is arguably the most important demographic behind this change.

Close to half (48 per cent) of 16- to 24-year-olds we polled in Q2 2019 preferred to shop in stores offering contactless points of sale (POS). As contactless terminals become even more widespread in Canada, this preference is likely to become even more entrenched.

Cash use Even as Gen Z favours using contactless and mobile wallets instore, they are not completely abandoning Canada’s oldest payment method, namely cash. Close to four-fifths (78 per cent) of Gen Z November/December 2019

Widespread payment by cryptocurrency in Canada is perhaps further off. After all, only three per cent of Canadian eCommerce sites offer Bitcoin and other cryptocurrencies as a payment method, according to our Q3 2018 SMB report. However, there does appear to be consumer demand for crypto, particularly from Gen Z. Almost a third of the demographic (29 per cent) predict that they will make a cryptocurrency purchase of some description by 2021, according to our Gen Z research.

The immediate focus will be on the year ahead. In tandem with rising smart speaker sales and ever higher smartphone penetration in Canada, Gen Z’s payment preferences will drive how the next 12 months evolve. Their adoption of mCommerce and alternative payments, as well as innovations such as contactless, mobile wallets and voice-activated payments will no doubt influence older consumers — and, of course, the Generation Alpha that follows theirs — payments’ longer-term future.

Daniel Kornitzer is Paysafe’s chief business development officer.

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2020 Payments forecast

Building the Digital ID foundation

By Neil Butters

T

he payments industry has already made significant progress helping Canadians adopt and embrace new technologies, such as contactless and digital payments. Now it’s time to apply what we’ve learned to the development of a truly digital ID that will help people unlock the full potential of the digital economy.

With more aspects of our lives moving online, it is increasingly important that people can securely verify who they are digitally while 8

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at the same time safeguarding their personal information. Yet the identification documents we use — such as driver’s licences, passports and health cards — largely remain stuck in the analogue world.

A digital ID, on the other hand, will allow us to verify who we are online, protect our personal information and give us more control over how our information is used and shared. It will also eliminate threats associated with physical IDs, such as theft and counterfeiting.

Digital IDs also offer numerous benefits for businesses and governments. These include allowing them to deliver services more November/December 2019

2020 payments Forecast conveniently and effectively while reducing costs and the risk of fraud. The Digital Identity and Authentication Council of Canada (DIACC) estimates that the current reliance on physical IDs is creating nearly half a billion dollars in lost productivity every year, usually because people need to visit an office in person to present and verify their identity documents.

Canadians put great value on their identity. New research commissioned by Interac Corp. found that 83 per cent count their identity among their most valuable assets, with just over half saying it is more important to protect their identity online than their money.

A truly effective digital ID will need to be both convenient and trusted.

But with that survey also showing that two-thirds of Canadians are worried a digital ID would be at greater risk of theft than a physical ID, it’s clear we still have a lot of work to do to educate consumers before digital IDs gain widespread acceptance and use.

Communicating the benefits Narrowing the knowledge gap about the relative security of physical and digital IDs must be at the top of our to-do list. Given all of the reports about online data breaches, it’s understandable that the superior security of digital ID can seem counterintuitive to many people. But that ignores the very real risks of physical ID documents.

Consider the use of a driver’s licence when making a purchase or collecting an online order from a store. You only need to verify who you are, which your photo and name should be enough to do.

Yet your licence has your address, date of birth and other personal information that you’re also sharing at the checkout. And if there are surveillance cameras behind the checkout and those cameras are connected to the Internet, it’s possible that someone could hack into them and capture an image of your licence: and your personal data.

A digital ID, on the other hand, would allow you to confirm who you are through secure, encrypted channels, eliminating both the oversharing of personal information and the risk of that information being hacked.

Convenience, trust critical A truly effective digital ID will need to be both convenient and trusted. Consumers won’t use something if it’s not more convenient than what’s already available, and they also won’t use it if they don’t have the confidence that it’s secure.

Our experience with contactless payments shows that when you get this combination right, you create a critical mass of users and a viable ecosystem. Data from Payments Canada shows that as Canadians discovered the convenience of contactless payments and came to accept the security underpinning it, transactions increased from $9.6 billion in 2012 to more than $100 billion just five years later.

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In the absence of a secure digital ID, many people have resorted to insecure improvisations when they need to verify their identity online, such as when booking a vacation home in a foreign country or purchasing an insurance policy. Nearly half of the people in our survey admitted they had taken photos of their physical IDs to be able to share them online, even though almost 60 per cent knew this was a risky thing to do.

Addressing the knowledge gap among Canadians and replacing those risky workarounds with a secure, convenient and trusted digital ID is a shared goal that will require coordination and collaboration among a wide range of stakeholders, including governments, regulators, businesses, associations, and banks and financial institutions. Education on the risks and inefficiencies of physical IDs must be matched by action: we need to give Canadians a safe and convenient alternative.

Consumers will willingly accept digital IDs if they are executed correctly and if they have sufficient trust in the institutions delivering the solutions. Nearly three-quarters (72 per cent) of Canadians in our survey said using a digital ID to access government services should be as secure as making a payment online. Just under two-thirds (62 per cent) said knowing their digital ID is protected by the security used by their bank or financial institution would prompt them to favour a digital ID over a physical one. And nearly as many (58 per cent) said they would trust digital IDs more if they knew regulations were in place to protect their interests.

Consumers will willingly accept digital IDs if they are executed correctly.

At Interac, we have a well-established history of working with a wide range of partners to bring new technology into Canadians’ lives while creating an atmosphere of trust. Our many innovations, such as Interac e-Transfer and Interac Flash, provide Canadians with secure ways to pay and exchange money with ease and convenience.

We believe that the foundational technology behind our network — including encryption and tokenization — and the trust Canadians have in the security of that technology, will play a central role in enabling digital ID across a range of devices and platforms.

We’re already working with public and private sector partners to digitize existing IDs, such as driver's licences, and explore how people could use these credentials to access goods and services while controlling the amount of information they share. We look forward to continuing to work with other stakeholders, including those in the payments and identity ecosystems, to make digital IDs a reality in Canada while maintaining the foundation of trust Canadians expect and count on.

Neil Butters is director, Products & Platform, Interac Corp.

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2020 Payments forecast

Adopting emerging payments solutions

By David Grindal

O

ur traditional world of stable payment acceptance mechanisms is long gone.

Payments used to just mean either cash and cards for a merchant or automated clearing house (ACH) and wire transfers and larger-amount cheques for a business, government or institution. The only person-to-person (P2P) payments that were made used cheques, especially for small-value transactions like school trips.

Canada’s payments environment Canada is fortunate to have one of the world’s highest rates of contactless point of sale (POS) devices. Canadians love to “tapand-go” regardless of card type. This has also led to widespread acceptance of the “Pays” (e.g. Apple Pay, Google Pay, Samsung Pay) and other near field communication-based payment methods. This is in stark contrast to our neighbours to the south, where contactless cards are still somewhat of a rarity.

At the same time the omnipresence of smartphones (and tourists from the world’s most populous country, yes, China) have driven the acceptance of quick response (QR)-code payments in Canada. Signs for WeChat Pay and Alipay are no longer uncommon. In fact, Air Canada accepts these two payment methods.

Turning to eCommerce, the alternatives for online payments range even wider, with cryptocurrencies, private label eWallets and other mechanisms entering the mix. To get a sense of how vast the alternative payment landscape is, some providers list more than 1,500 different types today.

The greatest changes may be yet to come. Most of the disruptive payment types mentioned above are still built on the paradigm of card payments. While the rectangular plastic form factor may have disappeared, these payment methods still mostly rely on card-like processing rails and familiar settlement mechanisms. The seamless Starbucks app payment experience consumers enjoy each morning still relies on linkage to a card-based bank or credit account (or an occasional inconvenient manual reload).

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Upcoming changes In the next few years, Canada will welcome a completely non-cardbased, real-time payments system. Like the Interac e-Transfer today, these rails will go direct from account to account, with funds moving to their intended destination in seconds.

This new payment network (to be called “Real-Time Rails” or RTRs) will also introduce a full application programming interface (API) payment ecosystem, allowing consumers and authorized third parties to initiate payments from an assortment of phone and PC applications. Additional features such as a “Request to Pay” — a variation of e-Transfer’s Request Money — and the support of rich remittance data will revolutionize business invoicing and P2P payments. Businesses will be able to request payments electronically accompanied by invoices, right down to stock keeping unit (SKU)-level detail. The payments themselves will travel with the full information of what’s being paid for (or not), right down to line-level detail.

Preparing for disruption So, how do Canadian firms prepare for all this new payment tech?

Let’s start with merchants. Wanting to accept as many payment types as possible across their customer-facing channels, merchants face some of the greatest adoption challenges.

For years, consultants and vendors have encouraged merchants to adopt an omnichannel approach, but what does this actually entail? Merchants need a core payment functionality that services all their distribution channels while retaining the ability to plug in new payment types as needed (see Figure 1). Seamless access to

complementary applications like customer relationship management (CRM) and loyalty program databases should also be prioritized.

Specific modules can be plugged in as needed to support payment types as desired.

Getting to omnichannel can be difficult, but a modular approach November/December 2019

2020 payments Forecast offers the flexibility to accept and remove different payment types as and when the business requires. The truly bleeding-edge technology can be outsourced and integrated only when proven and when volumes justify the change.

Parallel to any ambitions for omnichannel presence, merchants must also prepare for an API-based payment ecosystem. In today’s world, merchants can only get to the banking system through merchant acquirers that pull a payment through the card rails. In the not-too-distant future of APIs and real-time payments, merchants will use payment initiation services providers (PISPs) to instruct the customer’s bank to send (i.e. push) a payment across RTRs (See Figure 2).

two are not the same. See box below for further discussion.]

To start, financial institutions (FIs) need to be aware of the potential impacts of the technologies mentioned above. These innovations are not new; they have been fully adopted in other regions. Every large bank in Canada has established a payment innovation lab. To varying degrees, most have taken the first experimental steps on the path to an API ecosystem. Smaller institutions should collaborate with their peers, their FinTech partners and member associations to start their journeys.

Given the capital budgeting restrictions that all FIs face, no institution will be able to modernize in a year or two. A longer term and stable capital funding plan is a must.

Payments Canada is committed to nurturing a more open and accessible payment ecosystem. Such a change to the payment paradigm would reduce fraud and better secure eCommerce channels and open payments to non-credit card holders. This environment is still a few years away, but merchants need to begin asking their processors, their banks and their own IT and payments teams how they will take advantage of these new capabilities.

This is where planning and analysis come in. What parts of your payment systems need renovation and in what order? Which infrastructure or channel enhancements can deliver customer or cost benefits right away? For example, a fancy API-based real-time payment initiation system won’t do much good if it ultimately feeds into an hourly batch payment process.

This is also the time to examine the institution’s core payment architecture. This may be the most difficult (and perhaps single most costly) piece of the payments modernization process, but it also drives the most significant long-term benefits. It will affect every future payment enhancement that FIs want to make.

A key requirement of the new infrastructure will be flexibility.

No one knows exactly what changes will be required in the years (or decades) to come. Payment systems must have the capability to

Bringing modernization to banking In the banking sector, new technologies range from those that deliver enhanced customer experiences (personalized card control, cardless ATM withdrawals, personal financial management tools) to more truly transformational ones (real-time payments, Request for Payment capabilities, APIs and open banking). [Note that those last

API ecosystem versus open banking An open banking environment requires an API ecosystem, but the reverse is not true. An active application programming interface (API) payment ecosystem can exist without the opening of traditional banking information.

In an API payment ecosystem, the various players (including financial institutions (FIs), FinTech developers, payment processors and others) both consume and expose APIs to speed up product development. This expands the number of people working on new

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customer solutions. It drives efficiencies, provides flexibility and sometimes even drives new, and unintended, use cases. FIs will benefit from a wider acquisition channel for new customer transactions.

A full-fledged open banking environment requires an active and mature API ecosystem, but it also requires FIs to allow authorized and secured partners to access banking and customer payment data, including the ability to initiate, modify and control payments on behalf of a customer.

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2020 Payments forecast adapt, grow and change with each institution’s needs. At this point, many institutions are considering the implementation of a “Payment Hub”: a piece of infrastructure that connects to channels, backend applications, payment engines and networks, providing the orchestration controls to accept payments and route them where they need to go inside or outside the banks.

Future-proofing the infrastructure Businesses of all types will face barriers to their success in this area over the next few years. Talent will become an issue as the demand for experienced payment professionals increases. The existence of distinct silos will hinder progress. Individual business units will compete with modernization infrastructure projects for capital funding. The difficulty of renovating legacy siloed systems will increase the complexity, cost and risk of modernization.

To build an effective payments infrastructure, businesses must establish cross-functional teams and merge enterprise-wide objectives with departmental needs. The costs of payment modernization should encourage a business to explore alternative procurement models, a journey that goes beyond the simple buy/build decision.

Businesses should evaluate potential partnerships with vendors,

emerging FinTechs and other non-traditional payment providers that could fill niches in their modernization plans. Businesses must also recognize that in certain selected areas, outsourcing may be the best approach. With capital budget restrictions, operating expense alternatives, including public cloud computing, should be explored.

Finally (and unfortunately), businesses should not underestimate the effort required. The adoption of new disruptive technologies is (almost by definition) difficult. From the internal naysayers to the inevitable project issues, there will be obstacles. Even with an outsourced approach, there will be issues affecting what firms can achieve and when firms can achieve it.

Therefore, businesses must prepare for a long-term approach.

Executive sponsorship must know this will be a multi-year effort.

But as always, firms should look for short-term payback deliverables, hopefully ones that deliver real customer impact.

For decades, the Canadian payments ecosystem has stood among the best in the world. As payment technologies evolve, businesses and financial institutions need to ensure we stay there.

David Grindal is director, solution consulting, North America, ACI Worldwide (www. aciworldwide.com).

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November/December 2019

2020 payments Forecast

The future of crossborder regulations

By Jay Fischbach

T

echnology is helping move the world of payments away from the complex, slow operational model to a more centralized and digital process. As a consequence, regulators are seeking a means to continue to keep up with the pace of innovation, particularly in foreign exchange.

Regulations across the global foreign exchange market have always proven to be a challenge in both establishing policies and maintaining them internationally as countries set up, monitor and report their own regulations. All the while, international crossborder payments continue to exceed $200 billion each year, reports McKinsey & Company.

Digital transformation and industry innovation are now adding further difficulties and pressures when it comes to data security and regulating digital cross-border payments. Global transaction regulations to stop money laundering and fraud add a layer of complexity to back-end cross-border payment processing.

As we move into 2020, financial institutions (FIs) are expected to conduct more digital payments than ever before and, as a result, we will continue to see tighter and more stringent industry regulations.

Through these changes we must consider and address the key considerations for establishing a successful innovation model while ensuring institutions are meeting customer and business demands.

Digital transformation The cross-border payments model is now shifting towards a future rooted in technology, innovation and connectivity, all of which are establishing a framework for a new era of cross-border payments.

The question is, as digital solutions and market consolidation between global payments processing and FinTech platforms are increasing, how will the industry react?

The rise of FinTechs in the cross-border payments industry is unparalleled. The immense growth is driving new business models and new strategies. FinTech companies have been seeking methods to breach the industry by simplifying outdated operational processes.

Payments providers are now turning to solutions such as open and closed DLTs (distributed ledger technology), improvements to automation, optimization and payment tracking.

On the other side of this “bitcoin”, regulators are also leveraging digital transformation in order to solve key challenges. For example, November/December 2019

KYT (know your transaction) allows for large volume transaction monitoring to identify high risk transactions on a continuous basis.

Further, some of these new firms allow FIs and regulators to assess risk of exposure to illicit activity specific to token issuers at point of issuance/redemption, and all transactions in between involving the tokens. Artificial intelligence (AI)-driven predictive analytics also enable regulators to access additional insights into current and potential future problems within the industry.

Regulation changes will need to be addressed in order to monitor and control digital cross-border payments and virtual currencies.

Regulators are working to find a balance between enabling industry expansion through services, such as FinTechs, without compromising customer data and leaving the industry open to manipulation.

Monitoring areas such as KYC (know your customers) and AML (antimoney laundering) are at the top of the priority list for regulators.

Implementing digital solutions to secure digital identities and make payment transactions more transparent play a key role.

Transparency Gone are the days of vague and irregular cross-border payments processing, which was at one time acceptable to customers and institutions alike. Now, every country has its own unique set of regulatory requirements and rules surrounding payments.

Customer expectations surrounding transparency and traceability are also changing and are helping to drive these regulations, especially in the FX (foreign exchange) space. Customers want to see where their money is going, how it is getting there, who is receiving it and the fees associated with each “touch” in the transaction chain.

These fundamental shifts in customer perspectives and knowledge, combined with technological innovation, lends them to be the ideal catalysts driving transparency.

In parallel to transparency, we are also seeing more customers demanding accessibility to their cross-border payments and the accompanying data. This is especially true as transaction transparency is a large focus for the industry as demonstrated through the SWIFT GPI initiative. This solution not only improves transparency, but it enables users to see how and why they are being charged and by which institution.

The regulatory framework has also moved into the crypto space, where previously there was significant anonymity. The travel rule has been mandated on crypto currency exchanges, which means wallet PAYMENTSBUSINESS

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2020 Payments forecast details at a minimum will need to be encapsulated within messages.

This adds further transparency to transactions, which should be a positive for the industry.

Cybersecurity The financial industry continues to be a critical part of Canada’s economic infrastructure. The Macdonald-Laurier Institute recently identified the key risks to Canada’s financial systems. Products, such as SWIFT for payments, the EFT systems and online banking/online brokerage are susceptible to cyberthreats. Therefore, identifying cybersecurity needs for institutions as well as establishing regulations in response to potential threats will be critical in 2020 and beyond.

Personal information disclosure is now required and mandatory for regulatory purposes to protect against fraud. The rising concerns over security in cross-border payments primarily stem from mobility and digitization. Yet, new regulations and compliance technologies,

such as digital identities, can support and facilitate the need for higher security in the payments industry.

Security is affecting customers all over the world and in varying industries. In the financial industry, it’s ultimately about managing and securing your digital identity. The primary focus for regulatory bodies as we head into 2020, especially for FIs, will likely focus on data security, anti-fraud and AML. Cross-border payments pose unique challenges for regulatory bodies and technology due to their complexities. Industry barriers continue to be removed with more players entering payments industry. In 2020 we will begin to see more regulations come into place as technological solutions continues to drive the industry forward to a more forward thinking and innovative marketplace.

Jay Fischbach is chief operating officer at the Exchange Bank of Canada.

Opening the borders to opportunities Canadian credit unions take steps to expand international payments

By Brian Raine

T

he payments environment in Canada and internationally is in flux. But credit unions are not just keeping pace with that change, they

are now leading it.

Bringing the benefits of low transaction fees, digital interfaces and convenience to all credit union members. Central 1 continues to focus on providing the technology and innovation through leveraging the collective scale of the broader credit union system.

Central 1 recognizes that speed to market and innovation are paramount. Achieving this optimum outcome means balancing inhouse development with external partnerships.

Growth and changes This opportunity now includes international payments, which are expected to grow four to five per cent in the coming years, according to a report by SWIFT and McKinsey & Company: A vision for the 14

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future of cross-border payments. Although cross-border flows represent only one-sixth of total transaction value, international payments revenues total up to $200 billion globally.

This expansion is being fuelled by increasing international commerce, migration and changing economic trends. In addition, the payments landscape is experiencing disruption that is changing the dynamics of international payments. These disruptors include: • Innovation from FinTech companies putting pressure on financial institutions; • Changing consumer demands focused on cost, simplicity, transparency and convenience; and • Regulatory pressures such as open banking, which is coming to Canada. Open banking enables bank customers to share access to financial data with third parties in exchange for services and products. Other markets including Europe and Australia are further along the open banking journey than Canada.

November/December 2019

2020 payments Forecast In Europe, traditional banks had a large market share of international payments. Specializing in foreign exchange conversion was a highmargin business. However, the market has shifted. Innovation from FinTechs has increased pressure on banks and has resulted in a migration to lower margins for foreign exchange transactions.

The same trend in Europe is happening in Canada. This means the Canadian market is ripe for disruption. International transfers are currently concentrated, with the big banks capturing a significant market share. FinTechs are now challenging the traditional ways of international payments in Canada, providing customers with better rates, faster transactions and more transparency.

Credit unions and international payments It’s no surprise that credit unions are broadly not thought of as international payments players. In contrast to larger financial institutions, credit unions are independent and locally owned. But the reality is that for many Canadians, credit unions are their trusted financial institutions that provide numerous financial services: including international payments.

Approximately one in five Canadians is a member of a credit union.

Credit unions hold a 7.1 per cent share of deposit-taking domestic asset market, according to the Canadian Credit Union Association.

There are approximately 252 credit unions serving an estimated 5.7 million members outside of Quebec. Critically, there are 395 credit unions that are the only financial institutions operating and serving in smaller communities across Canada. Credit union members are almost twice as likely as bank customers to live in communities of fewer than 10,000 people, at 22.3 per cent, reports the Ipsos Customer Service Index Survey. Meanwhile almost half of bank customers (46.8 per cent) live in large urban cities of one million or more people.

Credit unions are embracing change and the opportunity to deliver innovation.

Meeting customer needs There are various reasons why Canadians are transferring money abroad. These international payments include: • Buying overseas property or a holiday home abroad; • Paying for overseas tuition fees for a child or grandchild; • Overseas investments or divestments; • Sending money to friends or family who live overseas; • Paying for accommodations or luxury holidays overseas; • Supporting a family member who is travelling abroad; • Paying for a destination wedding abroad; • Overseas mortgage payments; • Paying for work to be completed overseas; and • Paying for bills abroad.

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But on their own, many credit unions don’t have the scale to develop their own products and services for many of their members’ needs.

In July 2018, Central 1 partnered with Agility Forex Limited to give credit unions a cutting-edge solution to continue to compete against potential new products and competitors.

Central 1’s venture capital corporation, C1 Ventures, secured a 28 per cent ownership stake in Vancouver, B.C.-based Agility Forex, a FinTech company that has developed the proprietary technology that enables a crisp user experience and efficient processing of transactions directly to customers. The strategic partnership supports Central 1 in meeting clients’ needs by providing innovative solutions.

Just over a year later, in September 2019, Central 1 launched International Transfers, a made-in-Canada solution for Central 1 clients. It gives Canada’s credit union members the ability to move money cross-border any day, at any time.

International Transfers gives credit unions a competitive advantage.

The launch of International Transfers has the potential to immediately impact four million Canadians as it gives credit unions a competitive advantage by enabling seamless cross-border, multicurrency payments that few large financial institutions offer in Canada. Currently available to all credit unions in British Columbia and Ontario, it is being expanded to other provinces.

Stacked against the competition that charges on average $25 per transfer, the new service provides credit unions with a zero-dollar base cost for transfers above $500 CAD, a low fee of $2.50 for lower transfers and no transfer limits.

In the two months since launching, International Transfers has received a tremendous amount of interest from credit unions that want to provide this valuable service to their members. To date we have delivered it to nine credit unions with an additional 21 progressing through onboarding process.

Central 1 and Agility Forex is now developing International Transfers for commercial clients — targeted to small and mediumsized enterprise clients — which are the credit unions’ “sweet spots”.

For many businesses the only option for paying suppliers aboard has been the traditional wire. This product will allow them to avoid wire fees and directly settle large payments into the accounts of their supplier quickly and easily.

The financial services industry is faced with a growing number of changes driven out of everything from payments, regulation and digitization. Rather than seeing this as a challenge, credit unions are embracing change and the opportunity to deliver innovation, competition and drive differentiation.

Brian Raine is vice president, Treasury and Portfolio Management, Central 1.

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Loyalty

Future-shaping trends Look for personalization, redemption options and "points as currency"

By Len Covello

T

he loyalty industry in Canada has left brands and consumers wanting more. The issue is that many of today’s loyalty programs run on unsophisticated technologies with little segmentation capabilities and zero personalization features. When it comes to loyalty redemption, customers want ease, choice and value, and they aren’t getting it.

A common misconception is that companies don’t want consumers to redeem their points, when, in fact, the opposite is true. Banks and retailers invest generously into their loyalty programs with the goal of driving engagement, as the redemption process is where they can really deepen that emotional connection with their customers.

The benefits are clear for businesses: customers who shop with loyalty points have higher conversion rates and purchase more than those who don’t.

Luckily for brands left frustrated by the state of their loyalty programs, key options are now making it easier and more affordable for them to engage their customers.

The loyalty industry is prime for disruption.

Here are three key trends that are shaping the future of loyalty in Canada:

1. New technology will increase personalization capabilities.

The world’s best loyalty programs all have one thing in common: they do an excellent job of using customer data to create personalized offers. For those brands playing catchup, there still needs work to be done.

Let’s use an example of a grocery store chain. Because grocery stores know exactly what their customers are purchasing, they should be able to send out item recommendations and coupons specific to each person’s needs. However, while the grocery store may know how to collect customer data, they may not 16

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have figured out how to use the data to develop personalized offers. While such an offer may seem obvious to make, most of the technology powering loyalty programs in Canada weren’t built with putting the customer at the centre of the experience.

To manage this issue, we’re already seeing the rise of better technology and new SaaS-based loyalty program platforms.

This technology will improve the ability of companies to engage meaningfully with their members, in real-time, and without requiring any IT resources.

2. More redemption options will create happier consumers.

Ease of use, poor value and lack of redemption options have always been the top pain points and drivers of customer dissatisfaction in the loyalty industry.

That’s because typically loyalty programs are siloed, only allowing users to earn and redeem within the company’s own ecosystem, and they often come with restrictions that make it difficult for customers to redeem their hard-earned points. One common example are airlines or hotel chains setting blackout periods on travel or nightly stays, which ultimately restricts consumers' options.

However, many leading brands are now starting to get out of this mentality. They are creating strategic partnerships that put the customers first by providing them with more offers that allow them to redeem their points for more items or services that fit their specific lifestyles.

Bottom line: the brands that don’t offer more choice when it comes to redeeming loyalty programs will see their customers take their business elsewhere.

of currency" economy.

If the goal of a loyalty program is to create real, emotional connections with customers, then brands must focus on driving redemption to things that matter to their customers, no matter what the good or service is.

Many leading brands are now starting to recognize this and are deploying loyalty programs that allow their customers to liquify and convert their points to the loyalty currency of the customer’s choice that they can then use to redeem “outside” items or services. For instance, imagine being able to use your grocery store loyalty points to pay for your Netflix subscription or building up points at your preferred gas station and then redeeming them on Amazon.

“Points as currency” is the ultimate in personalization because the customer chooses what, when and from where to redeem. The more places a customer can redeem their points and the easier it is, the more emotionally engaged and delighted they will be with a brand’s loyalty program.

Faster, more frequent redemptions also offer the bonus of reducing the liability on a business’ balance sheet, and at a lower cost per point.

Final thoughts

3. “Points as currency” will create a new loyalty economy.

The future of loyalty in Canada is bright as the technology improves and as more loyalty-specific professionals enter the industry.

With new innovations allowing businesses to build loyalty programs cheaper, faster and with greater flexibility, it will soon be easier for brands to create genuine connections with their customers through personalized offers. Ones that allow Canadians, and loyalty members in the rest of the world, to use their points as currency for products and services that fit their lives.

The biggest trend that will shape the future of loyalty in Canada is the rise of the "points

Len Covello is CTO of Engage People.

November/December 2019

Events & Entertainment

Gaming: from play to pay

By Paul Parisi

T

oday’s gaming industry has evolved dramatically over the past few years.

According to the 2019 Newzoo Global Games Market Report, the global gaming economy is a major industry with over $150 billion in gaming revenue and an 11 per cent annual revenue growth.

With that growth comes great opportunity.

With more than 2.5 billion gamers around the world, the gaming ecosystem is approaching a market share comparable to that of professional sports. PwC predicts annual revenues in the Canadian online gaming industry to be $40 million with a compound annual growth rate (CAGR) of 22.7 per cent over the next five years. This points to an incredible potential for paid monetization of gaming content that remains untapped by many businesses and markets.

This explosive growth, in large part, is due to the industry’s diverse audience base. Most people still picture the average “gamer” as a pre-teen holed up in their parent’s basement. However, according to PayPal Canada’s Global Gaming Insights report, Canadian gamers are an average age of 35 years old and more than half of them (55 per cent) are women.

A critical point: these gamers aren’t afraid to spend. At PayPal, we are part of the solution for both consumers and businesses in the gaming world. In fact, gaming accounts for more than $12 billion in our total payment volume globally, an increase of more than 23 per cent year-over-year in 2017. Across the world, people use PayPal as their preferred way to pay for gaming content, with ease of use and speed driving their payment method choice.

Console versus mobile The landscape of gaming is changing in terms of platform preference too. 20-30 years ago, the gaming experience was

restricted solely to a console. Now, gamers in Canada play across an average of three devices and more than half (66 per cent) play games most often on mobile devices.

According a study by ACI and Newzoo, What Turns Players into Payers, mobile gaming alone is expected to become a $100 billion industry by 2021.

So, why is mobile so popular? 86 per cent of Canadians own a mobile device, according to the Consumer Technology Association, but convenience plays a critical role. Gamers have constant access to their mobile phones, enabling them to be able to jump in and out of the games throughout the day. Whether they’re playing Pokémon Go while commuting to work or getting in their daily Fortnite fix, mobile gaming can be accessed anywhere and at any time.

The uptick in mobile gaming creates a whole new audience of players who don’t necessarily identify as gamers at home playing on an expensive console but may instead spend hours on a mobile game that isn’t expensive to buy. Of the gamers surveyed by PayPal, mobile gamers skewed heavily female (71 per cent) opening this traditionally male-dominated sector up to greater diversity.

Where gamers shop Globally, active paying gamers shop across 14 different gaming platforms and nearly 30 different storefronts over the last three months, an incredible variety. Data from our Global Gaming Insights reveals that respondents in Canada and Australia purchased games from 28 different gaming storefronts, followed by Russia (27) and the U.S. (26).

The most popular online gaming storefronts selected by Canadian gamers were Google Play (30 per cent), Steam (26 per cent), Apple App Store (26 per cent) and PlayStation Network (25 per cent). Steam was resoundingly popular with Millennials, with

November/December 2019

35 per cent of Canadian Millennials and 31 per cent of global Millennials reporting they shopped there for gaming content. Twitch, the online gaming platform, is also gaining popularity with Canadians with 29 per cent of gaming video content (GVC) viewers in Canada watching it, versus a global average of 21 per cent.

Making paying seamless As the gaming industry continues to evolve, it gives the payments industry an opportunity to continue to serve up seamless and innovative payments to players. Payment processors, platforms, storefronts and games have an opportunity to establish strong brand loyalty within the gaming community by creating an easy payment process: something gamers unanimously identified as critical to the overall online gaming experience.

While gamers prefer a variety in options for shopping, seamless payment experiences at every level are critical for the ecosystem to thrive. Many gamers are put off by issues like long or cumbersome checkouts and lack of security. Specifically, women and gamers aged 18-34 are most likely to be affected by poor checkout experiences. Given that women make up nearly three-quarters of the Canadian mobile gaming demographic, reducing payments friction could lead to a significant uptick in conversion rates. This could involve bypassing unnecessary steps in online sales, such as selecting payment options, entering billing addresses and entering credit card details.

Gaming monetization presents a huge opportunity for businesses. Often, the purchase of a game is just the beginning of a longer monetization journey. In-app payments, accessories and pay-and-play models are ripe opportunities for recurring revenue along this journey.

Paul Parisi is president, PayPal Canada.

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Cash & Currency

Bridging the cash and digital worlds

By Molly Shea

T

he cash versus cashless debate has been wellargued for years now, with many people putting their eggs in one basket or the other: either making the case for a completely cashless society or arguing why physical currency is still valuable.

While you probably carry less cash than you used to, you might be surprised to learn that cash continues to be widely used in Canada, with 6.5 billion cash transactions made by consumers in 2018 according to Payments Canada: the highest of any payment type. On the other end of the spectrum, Canada is the global leader at becoming a cashless society, with an average of over two credit cards per resident, according to ForexBonuses.org.

Ready to go cashless?

There is a strong convenience and business argument for going cashless. However, when you look past Canada’s borders, you quickly realize that any conversations about a “cashless future” are out of touch with the realities of our global economy.

Data from the World Bank shows that small retailers transact $19 trillion in cash a year: nearly one-fourth of the global gross domestic product (GDP). And that’s not just in poor neighborhoods or low-income countries. In Europe, according to the global security company G4S, an estimated 79 per cent of all point of sale transactions were conducted in cash: which was actually up from 60 per cent in 2016.

Moreover, there are currently around 1.7 billion adults globally without access to a 18

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bank account, according also to the World Bank. This is especially true in developing countries.

An argument for financial inclusion In Canada, where the number of unbanked pales in comparison at a mere one million, estimates still show that another five million are underbanked, reports ACORN Canada.

These are people with a bank account but no credit: people who are unable to afford fees or high interest rates linked to products for low-income borrowers, or those who live in communities or neighbourhoods that do not have bank branches.

Canada also has an aging population with seniors who may not have access to intricate mobile phones or feel comfortable with apps and contactless terminals. Not to mention the large rural population of Canadians without access to reliable broadband.

As a country that prides itself on inclusiveness, is Canada really ready for a cashless society that effectively leaves millions of economically vulnerable people behind?

Uniting digital, physical worlds It’s no secret that globalization is breaking down barriers that previously impeded the movement of people and money. As families become spread across the globe, it’s crucial for companies to provide innovative means for families to remain connected.

Every year, more than 300,000 people move long distances to Canada, reports Immigration.ca. Many of these new Canadians send money back home to help their family pay for anything from food

and education to medical expenses and crisis relief. In fact, according to Statistics Canada, Canadian residents born in Official Development Assistance-eligible countries sent more than $5 billion in cash transfers in 2017.

As physical barriers are broken, consumer expectations have similarly shifted. We now live in an age where speed, convenience and trust are paramount. People want to quickly send money to friends and family around the globe with minimal effort. They want a more personalized approach, more ways to send money to unlock potential and more ways to grow their businesses.

Therefore, those in the financial industry need the digital know-how to unlock new global markets, expand access to their products and services and create new choices and more opportunities for people.

Consumers want options — they always have and always will — so it’s incumbent on our industry to continue to work together to develop technology and close the gap, allowing for easier and more convenient movement of money globally. Similar to our recent collaboration with TD Bank, we need more alliances between established companies that utilize each other’s expertise to meet customers’ growing needs.

Let’s embrace the complexity of a world where cash and digital payments coexist far into the future and create inclusive innovation that offers consumers solutions regardless of where they live on the financial services spectrum.

Molly Shea is head of Americas Network, Western Union.

November/December 2019

Cash & currency

Libra: the AOL of crypto?

By Daniil Saiko

T

he earliest iteration of email was a fringe application, only used by tech-savvy engineers and hobbyists.

That changed with the introduction of AOL, which took the Internet and email from fringe to mainstream.

Despite the mass amount of media coverage, cryptocurrencies are in the same position as the pre-AOL Internet. Generally, only used by people deeply involved in the technology or speculators, there is still no form of digital currency that is widely understood and practically used by the general public. But there are cases where crypto technologies are commonly used, such as in countries with authoritative regimes.

Now the world’s largest social media company, Facebook, is attempting to become the “AOL of cryptocurrency” with its first offering, Libra.

What is Libra?

Libra is a new cryptocurrency designed for a mass audience. Libra’s mission is to “enable a simple global currency and financial infrastructure that empowers billions of people”. It is built on a blockchain system and is backed by the Libra reserve, which employs a basket of global currencies, government securities and bonds to maintain a stable price for its tokens.

Facebook has been very strategic in its planning of Libra, cherry-picking cuttingedge ideas from crypto space leaders like Bitcoin and Ethereum, and leveraging the open source and broader community knowledge in Libra. The company envisions multiple real-world applications for Libra, from peer-to-peer payments to online and bricks-and-mortar shopping.

Libra is not decentralized To make Libra happen, Facebook has set up the Libra Association, a not-for-profit

membered organization headquartered in Geneva, Switzerland. It has published a white paper, An Introduction to Libra.

There were 28 initial founding companies involved in the development of the central code base for Libra. Members came from various industries including technology, payments and not-for-profits, with notable founding members like Uber Technologies and Women’s World Banking.

Contrary to many claims, Libra is federated and not decentralized. While some aspects of the application will be open source and decentralized, the Libra Association will still control the fundamental code base and what will get deployed to the user base.

Libra’s two-token system For a crypto economy to be successful there needs to be an underlying incentive system to keep the network running. In the case of Bitcoin, digital mining rewards users for the use of their computer processing power through the monetary gain of Bitcoin itself. This process helps validate transactions, which, in turn, encourages further transactions to happen. Libra’s two-token system attempts to solve this by creating separate incentives for consumers and investors.

The first type will be the Consumer Token. Users will buy Libra with their local currencies, which will be held in the Libra Reserve. If they decide to cash out, the Libra will be destroyed, and the users will receive the equivalent value back in the currencies of their choosing. This means there will always be 100 per cent of the value of Libra in circulation, allowing the cryptocurrency to maintain its own unique value independent of sovereign currencies.

The second is Libra’s Investment Token, which will be exclusive to the founding members and other accredited institutions that have invested a minimum of US$10 million. The token entitles holders to a

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proportion of the interest earned on the assets in reserve, after the Libra Association pays for engineering research, grants to nonprofits and other operating costs. This creates an incentive for Libra’s founding members to make the application more popular and grow the amount of money held in reserve.

Not without controversy Libra comes with some serious concerns from regulators and governments, with some calling for a complete ban or stringent oversight. At a recent G7 meeting French Finance Minister Bruno Le Marie stated that a “private company shouldn’t have the possibility to create a sovereign currency.”

There are also fears that the digital currency could be used for money laundering, fraud and other financial crimes.

Many companies have also left Libra, including Visa and PayPal, following regulatory scrutiny of the project and warnings from politicians that the Libra could pose a threat to the financial system.

Furthermore, for Libra to break into the mainstream, users will need to be confident that their money and data are secure.

Facebook has a long road ahead to make Libra “the” currency of the future. It will need to clear numerous hurdles, most of which are less technological in nature but rather in the forms of government regulation and public perception to instill trust in consumers. It will have to constantly reinvent itself to keep up in the innovative and ever-changing payments industry.

Facebook has built a company with an over two billion-strong loyal base of users.

Along with the right investments, it’s next feat could it be revolutionizing the way we purchase our coffee, split dinner cheques and send money across the world.

Daniil Saiko is director, Product & Sales Engineering, Cambridge Global Payments.

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Features

Combatting fraud with centralized data

By Stacy Gorkoff

T

he Greek philosopher Aristotle once said, “The whole is greater than the sum of its parts.�

When it comes to guaranteeing that every payment transaction completes as expected, this statement could not be more accurate.

For retail banks, independent ATM deployers (IADs) and payment processors, transactions are the lifeblood of their businesses.

Mission-critical functions, such as ATM driving, card issuing and merchant acquiring, require that every transaction gets routed and processed as expected. Any disruptions in payment service level delivery can have a significant impact on the customer experience (CX), reputation and profitability.

But ongoing mergers, acquisitions and the expansion of alternative and card-not-present payment services have made end-to-end visibility across the payments infrastructure challenging. Today’s 20

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transactions often traverse multiple systems, networks, switches, real-time card rails and payments channels: with each piece being managed in individual silos. A fragmented management approach makes it tougher to isolate fraud attacks before major damage is done, and almost impossible to efficiently, and effectively, maintain enterprise-wide operational control.

Breaking down the silos This is why we are starting to see more financial organizations looking to adopt solutions that help to break down the barriers of operational and infrastructure silos. In an effort to combat increasing complexity in payment ecosystems, there is a major trend towards network operations, application support, channel systems management, fraud and security teams collaborating on everything from infrastructure design to incident response.

The Network Management Megatrends 2018: Exploring NetSecOps November/December 2019

Features

The trend towards enabling collaboration is fuelling the need for a new breed of cross-functional, network-based data acquisition and monitoring solutions.

Convergence, Network Automation and Cloud Networking report, published by Enterprise Management Associates (EMA) in April 2018, uncovered the two most common root causes of complex IT service problems that drive cross-domain responses. These are network infrastructure issues (40 per cent) and security events (37 per cent).

Addressing them, the aforementioned teams are exploring new ways of working together to drive efficiency, reduce operational costs, speed up fraud detection and support the unified goal of delivering the best end-to-end CX possible.

The trend towards enabling collaboration is fuelling the need for a new breed of cross-functional, network-based data acquisition and monitoring solutions. These applications centralize real-time payment data acquisition and provide the ability to customize dashboards, rules-based alerts, analytics feeds and machine learning to make this data easily accessible by any team that needs them. These adaptive solutions are designed to pick up on system performance issues or compromises in real time, while also analyzing the risk of every individual payment transaction flowing across the enterprisewide payments infrastructure: regardless of which channel they originated from.

Enhanced key processes Some of the key processes enhanced by a cross-functional solution such as INETCO Insight include, along with best practices: • Continuous performance monitoring across the enterprisewide payments infrastructure.

Consolidate transaction-level performance monitoring across all channels to understand what happens to a transaction before it makes it to the switch, when it reaches the switch and after it leaves the switch. A centralized view into the real-time performance of self-service devices, networks, legacy systems, third-party application connections, host authorization points and multiple switches (i.e. active/active environments) translates into an average reduction in transaction failures of 25 per cent; • Faster research and problem isolation.

Implement customizable, real-time alerts that provide a list of the transactions that triggered the alert. Within two to three clicks, you are reviewing a detailed profile containing all the response and request timings, network-level communications details and application-level message data for each flagged payment transaction. Share this centralized view amongst your operations, switch support and channel systems teams to avoid blamestorms and quickly identify who owns the problem: it can result in an average 65-75 per cent faster mean-time-to-repair (MTTR) rate; November/December 2019

• Optimized data acquisition and on-demand payment analytics.

Optimize data acquisition and decode all the application-level messages and network-level communications information found within each transaction for customizable analytics dashboards.

The rich intelligence found in each transaction supports the production of customer usage reports, helps to identify new business opportunities and speeds up decisions around channel performance, profitability, capacity, device placement, availability, UI changes, cash forecasting and card program offerings by 50-75 per cent; • Real-time payment fraud detection and improving the security of the payments switch.

Add real-time risk scoring for every individual transaction, integrate card blacklists and provide instant detection of missing links indicative of “man-in-the-middle” malware attacks, message field tampering, unexpected declines, stand-ins, chargebacks and reversals. The ability to capture end-to-end transaction data across all payment channels and apply rules-based alerts, behavioural algorithms and machine learning models means suspicious transactions and payment outliers can be identified, investigated and blocked at the transaction level: in milliseconds; and • Compliance and independent transaction audits.

Add independent, out-of-band capture of every transaction journey, complete with logs that retain all network and application message format data. Customized and industry-specific protocols such as ISO 8583, ISO 20022, NDC+, XML and JSON can be decoded in real-time, over every link of an end-to-end transaction path and logged for compliance, reconciliation and research: without impacting the payments switch.

In summary, putting the right data acquisition and monitoring solutions in place is vital for any bank in its pursuit to enable collaboration. Solutions that support centralized, real-time transaction data collection and cross-functional adaptation are key when it comes to building a collaborative environment. By establishing a unified view across all payments, payment processes and payment related systems, teams will have the power to deliver solutions at a new speed and scale, while continuously improving the CX based on real-time insights into the service and fraud security aspects of every payment transaction.

Stacy Gorkoff is vice president of marketing and channel development for INETCO Systems Limited (www.inetco.com).

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Features

Five reasons to automate invoices

By Anthony Loiacono

A

ll businesses are not created equal and neither are their accounting needs. There is no onesize-fits-all way to structure an accounts department.

However, there may be an easier way to handle certain accounting tasks, such as invoicing, which can be automated to reduce the amounts of staff-hours and save money.

So, why should businesses consider automating the process for handling invoices?

1

A one-step payment process.

The invoice automation platform is an endto-end solution that sorts, processes and stores all payables information in one secure location. Users benefit from blending the various steps of the invoice-to-payment process into a custom solution, combining data processing with validation, approval routing and system integration, reporting and foreign beneficiary management, in order to execute payments in a smooth and timely manner.

These programs work by extracting information directly from invoices, spreadsheets, PDFs or whatever documents a business might use, meaning no manual entry is required. All invoice images and any related information is then stored within the program, offering the ability to make future payments anytime quickly and easily.

This means no need to log into a banking platform to send wire transfers or worry about mailing cheques. Simply upload your invoices and the platform takes it from there.

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2

4

Money & time saved.

Invoice automation is great news for businesses that have been slowed down by low productivity, high invoicing costs, lack of in-house international banking expertise and the added risk of currency fluctuations.

All of these issues and the money they cost — not to mention the hours of unnecessary labour — can be forgotten with invoice automation.

Cambridge’s Invoice Automation Solution, which is powered by Global Exchange, is a prime example of a secure platform that works to significantly improve the time consuming and costly invoicing and international payment process. It can help businesses by speeding up processing and adding more control in ways that are not possible in a manual, paper-based process.

3

Fully customizable.

Invoicing isn’t one-size-fits-all anymore, even when it is automated. Many businesses fear that if they use an automated program it will not be able to fit their specific needs.

That couldn’t be further from the truth.

Invoice automation is tailored to fit each business specifically. Automation platforms are fully customizable and can work off whatever materials are provided and within whatever timeframe is needed. Many automation platforms also offer customized reporting, which can help with internal processes, income review and projection.

Fixed pay dates & exchange rates.

There are no surprises when you use an automated service for invoicing. Businesses can choose to pay invoices immediately or set a future payables date, depending on cash flow.

Moreover, some programs, such as Cambridge’s Invoice Automation Solution, also offer a fixed exchange rate for six months, so you don’t have to worry about currency fluctuations or rush to pay vendors.

Such programs are also privacy protected, so businesses are fully protected when sending money to foreign vendors.

5

Making room for new important tasks.

Invoice automation can also help businesses by speeding up processing and adding more control in ways that are not possible in a manual, paper-based process.

With that will also be support for the changing role of the accounting department, allowing accounting professionals to switch focus from daily administrative tasks to policy and regulatory tasks, quality assurance and analysis.

Invoicing will always be a key part of any business in order to make money.

So why not make that process as easy as possible? Automated invoicing keeps track of everything for businesses, saving time, money and providing peace of mind.

Anthony Loiacono is managing director, Global Exchange (www.gexchange.com).

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