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TotalFinance March / April 2020

C a n a d a’ s m a g a z i n e f o r f i n a n c i a l e x e c u t i v e s

Changing Times in Finance

also in this issue:

❱ Payments ❱ Equipment Finance ❱ FinTech ❱ Cyber Threats PM40050803

Are You Ready for the Next Transformation in Personal Banking? CONSUMER-DIRECTED FINANCE PLAYERS ARE ON THE VERGE OF CREATING AN ECOSYSTEM OF FINANCIAL SERVICES TECHNOLOGY THAT WILL PUT CANADIAN CONSUMERS IN CONTROL OF THEIR FINANCIAL DATA. Consumer-directed finance isn’t just coming— it’s already here. As the federal government carefully lays the foundation of the new framework in Canada, financial institutions, neobanks, and their technology partners are already one step ahead. These service providers and partners are crafting innovative new solutions that engage Canadians through intuitive, customer-centric, data-driven banking experiences.

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With wider access to third-party transaction data and easier ways to move and manage money, Canadian consumers will soon discover more personalized products and investing options. It’s a movement that will transform personal banking in Canada. The +Open Banking Platform by Portfolio+ provides the underlying technology to make this transformation happen. Contact us or visit portfolioplus.com to learn more.


March / April 2020 • www.totalfinance.ca

Table of Contents Total Finance



6 Transitioning Online: How Small

Businesses Navigate eCommerce

8 New Ways to Pay, New Security Approaches

29 The Future of ATMs 30 The Changing Face of Canada’s Accountancy

10 March / April 2020

Payments Business 10 Why Connected Banking is the Future



Table of Contents March/April 2020 Volume 1 Number 1 Publisher / Corporate Sales Steve Lloyd steve@totalfinance.ca Managing Editor Brendan Read brendan@totalfinance.ca Contributors Hamed Arbabi, founder & CEO, VoPay John D’Apolito, regional vice president, business network sales, OpenText


Paul Fabara, chief risk officer, Visa

14 Payments Business


12 Making the Open Banking Transition 14 Why Turn to Digital Decisioning?

Direct Marketing 17 Become an Intelligent Enterprise

Only a small percentage of Canadian businesses are leaders. Here are their insights.

Simon Fairbairn, director of solution development, Ingenico Banks & Acquiring Dana Krechowicz, senior sustainable finance manager, HSBC Bank Canada

Yves Paquette, co-founder & president, NOVIPRO Richard Perri, chief financial officer, ADP Canada Marta Rzeszowska, director of product, online & mobile payments, Moneris Solutions Raju Vegesna, chief evangelist, Zoho Bill Waid, general manager, FICO Decision Management

Sam Masri, chief operating officer, SAP Canada Creative Direction / Production Jennifer O’Neill jennifer@totalfinance.ca Photographer Gary Tannyan President Steve Lloyd steve@totalfinance.ca For subscription, circulation and change of address information, contact subscriptions@totalfinance.ca Publications Mail Agreement No. 40050803 Return undeliverable Canadian addresses to:


FinTech 20 Twelve payment Predictions Which

Might Change Your FinTech Strategy

27 Cybersecurity More Important Than Ever

Circulation Department 302-137 Main Street North Markham ON L3P 1Y2 t: 905.201.6600 • f: 905.201.6601 info@totalfinance.ca www.totalfinance.ca

28 The Need for Secure Digital Identities Twitter: @totalfinance.ca

Equipment Financing


23 Capital Spending May Hit Record

Subscriptions available for $40.00 year or $60.00 two years. ©2020 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 Total Finance should be directed to the publisher.

26 Turning to Low-Carbon Solutions Ontario Interactive Digital Media Tax Credit



Made possible with the support of the Ontario Media Development Corporation

March / April 2020

Total Finance

Transitioning Online: How Small Businesses Navigate eCommerce By Marta Rzeszowska

Small business plays a crucial role in contributing to the national GDP.




n the next three years, worldwide retail ecommerce sales are expected to double, reaching $6.6 trillion and, according to BDC research, nearly half of all Canadian small and mid-sized businesses aren’t ready to capitalize. 1 With no online presence, many small businesses are letting their competitors — large and small — swipe their sales. Small business owners face countless challenges each day, from long hours to a shortage of retail employees. Customers can be fickle, trends change fast, overhead costs add up quickly and credit card fraud is a growing concern. Entrepreneurs can feel pressure from every angle and going online can intensify this. Building and maintaining an ecommerce presence takes work, however it is more crucial than ever for small businesses to have an online presence. Consumers are strongly influenced by what they find online, whether it’s thirdparty reviews or comparison shopping on other websites. Without an online presence, small businesses limit their ability to take advantage of powerful digital tools and risk being shut out of domestic and global growth. Moneris recently partnered with Bookmark, a Canadian small business website builder, to provide entrepreneurs with the tools needed to succeed and relieve some of the stress when transitioning their business online. Growing small businesses need support at every stage of their online operations – from creating their first website, to launching ecommerce and getting paid easily. They also need access to trusted resources that will help optimize their online investment, and in turn, increase sales. Small businesses play a crucial role in contributing to the national GDP and employing Canadians across the country. More than eight million Canadians – nearly 70 percent of the

total labour force in our country – work for a small or mid-sized business. Small business success is Canada’s success, and as they grow, so do their challenges. Fraud will also be a challenge for small businesses and it can be even more difficult to combat as a business moves online. Without a customer’s physical presence and card, properly validating an online user can be cumbersome, but there are solutions to support small business owners.

Update outdated ecommerce solutions Like a cell phone or computer, ecommerce solutions need to be updated to ensure they are current with today’s system requirements. Having a seamless ecommerce experience is key for small businesses and their customers. A solution like Moneris Checkout offers an easy way to add payment acceptance to their online store, but also offers seamlessly built-in fraud prevention. Moneris Kount Essential, for example, uses predetermined risk parameters based on a business’s size and industry to assess potentially fraudulent transactions in real-time. This seamless integration can provide peace of mind and the support needed for growing businesses.

Implementing fraud prevention tools Although some small business owners might think that ecommerce fraud prevention tools are an expensive or tedious feature that only the big businesses can afford, this isn’t the case. Implementing these tools is one of the easiest ways to minimize exposure to online credit card fraud, and there are many affordable — even free — tools that can be used with the flip of a virtual switch. Tools such as Card Verification Values (CVV) and Address Verification Service (AVS) are

March / April 2020

Total Finance baseline tools that can reduce the risk of fraud. These two tools are offered for no extra cost to a merchant and when processing Visa transactions CVV is required. Another tool is 3D Secure (3DS), a cardholder authentication feature offered by Visa, Mastercard and American Express. This feature, while not free, offers significant protection to a business as a transaction is validated by the card brands directly. Using this feature offers a lower interchange rate for Mastercard transactions (starting in May 2020) as well as shifts the liability for fraudulent transactions to the card issuer.

Limiting purchase amounts A common tactic fraudsters use to get the most out of stolen credit card information is to use it to make high-value purchases, even from stores that don’t typically attract big spenders. If an ecommerce store doesn’t have limitations on total purchase amounts, setting restrictions may be a simple solution that can end up saving

Using a layered approach ensures small business can tailor fraud protection. small business owners in the future. Small business owners should consider the average cost of their products, and average total bill for both in-store and online customers and use that to decide the highest purchase amount they can reasonably expect to be made online. Setting a purchase limit that’s slightly over this value will ensure customers can make reasonable online purchases.

Focus on your passion Using a layered approach to fraud prevention ensures that small businesses can tailor fraud protection to their unique needs. It allows owners to focus on what brought them to entrepreneurship in the first place — following their passion. Marta Rzeszowska is currently the director of product, online and mobile payments at Moneris Solutions.

March / April 2020

Marta Rzeszowska



Total Finance

New Ways to Pay, New Security Approaches A By Paul Fabara



s we begin a new decade, it seems fitting to reflect on changes our world has seen over the past 10 years. From how we consume media and the ubiquity of the smartphone, to the proliferating volume of data, offering opportunities for more personalized and seamless consumer experiences. In Canada, the modernization of payments has already begun with the launch of Lynx, enhancements to retail batch payments and the development of a delivery plan for Real-Time

Rail. But every change brings risks. And for payments they are the scale and frequency of cyber threats and breaches. We have seen significant advances in risk scoring for fraud prevention, encryption and industry specifications for securing new ways to pay to help protect the billions of transactions made by consumers. As we look to the next decade, the continued expansion of digital payments around the world will continue to present challenges and opportunities.

March / April 2020

Total Finance

Here are five predictions to keep in mind as we enter the next decade.


Data breaches will force adoption of smarter and more dynamic security. Headline-grabbing data breaches seem to be never ending. The best defence is to assume your organization is a target and take proactive steps to defend against falling victim or enabling the use of stolen data in your systems. I believe we will see significant growth in adoption of payment tokens and the updated EMV® 3-D Secure specification globally. Payment tokens help make transactions safer by eliminating the transfer of actual payment data for eCommerce and mobile payments and can deliver a seamless yet secure digital payment experience. The updated 3-D Secure specification enables real-time exchange of 10 times more contextual data between merchants and financial institutions (FIs) to improve decisionmaking so both parties can better manage fraud in digital channels while optimizing sales.


More merchants and FIs will use digital identities. Traditional approaches to online payment like manually entering static passwords and payment credentials for every purchase offer incremental security for digital channels. Fortunately, digital identities make payments faster, easier and more secure when using computers, mobile devices, apps, wearables and future Internet of Things (IoT) devices. As fraud threats persist, digital identities can end the use of passwords, so consumers can shift to more secure methods of authentication such as face, fingerprint or voice recognition. European consumers will begin to experience Strong Customer Authentication (SCA), the European Union requirements for multiple layers of consumer verification for digital transactions. As many thousands of FIs and merchants meet these requirements in Europe, global companies may look to

March / April 2020

extend the most innovative authentication solutions to other markets. Consumers globally are demanding greater speed so merchants and FIs will have to respond with faster and safer ways to pay. This is one reason why Visa is exploring payment innovations ranging from biometric payment authentication and wearables to new mobile applications like digitally issued cards at the Tokyo 2020 Olympics and Paralympics Games.

Humans are often the weakest link and technology has been trying to solve this for a long time.


Real-Time Payments (RTP) will require a new approach to fraud prevention. Consumer expectations of speed and convenience have extended to business to business (B2B) payments and disrupted wire transfers and check payments with instant payments. However, speed and convenience cannot come at the expense of security. As payment volumes grow among RTP networks and peer-to-peer (P2P) applications, the seen (account takeover and phishing) and unforeseen vulnerabilities in the systems will have to be addressed as quickly, if not quicker than, the payments themselves. RTP providers and FIs will need to think differently and will likely collaborate with trusted partners in payment security to address the challenge.


AI will be used in the battle between good and evil. Akin to the democratization of computing power through personal computers, the growing use of artificial intelligence (AI) will continue to fuel new products and services in payments and have a significant impact on society. But AI will also introduce tremendous challenges due to its potential use

by threat actors. History shows that good intentions can be manipulated by nefarious individuals and groups. For example, the Internet splintered to become the surface web, dark web and deep web and social media is being used beyond its original intent to simply connect friends and family. The challenge of AI next year and beyond will require a collective effort across industries to limit the darker side of the technology to ensure it is used to deliver opportunities and improvements to society.


Users will continue to be the weakest links. Humans are often the weakest link and technology has been trying to solve for it for a long time — from spell check in word processors and email applications— to automatic braking in some of today’s cars. Advancements in payment security will continue to help drive down fraud as EMV® chip did for counterfeit fraud, but technology can only do so much as it still needs to be implemented by people and people make mistakes. More importantly, social engineering continues to evolve as it preys on the unsuspecting or those with their guard down. All it takes is one person to fall prey to put an entire organization or network at risk. Social engineering will continue because it works. We need to empower users with education and tools since they are often the first line of defence. People, businesses, and institutions thrive when barriers to progress are low, and trust is high. Preserving that trust requires driving innovation and choice and redoubling our commitment to security. There has never been a better time to help lead and drive change in payment security which can be a catalyst for growth. By drawing on the lessons from past years, we can both address future challenges and capitalize on the opportunities stemming from our increasingly digitized society. Paul Fabara is chief risk officer, Visa.



Payments Business

Why Connected Banking is the Future

I By Raju Vegesna

Banks might not have the skills to meet changing needs.

n 1994, in the heyday of Microsoft Windows PC, Bill Gates bragged that “banks are dinosaurs…we can bypass them”. With digital money increasingly found inside the smartphones of today’s consumer, it seems his 26-year-old prediction came true. Cash and traditional bank deposits are now competing with Big Tech “e-money” from the likes of Apple, Amazon and Facebook. While customers are embracing FinTech solutions for their convenience and ease of use, traditional banks are building their own digital strategies and leveraging traditional in-person touchpoints at branch offices. Big Tech’s strategy is to instead seize customer relationships within their online, mobile platforms and offer a seamless on-the-go financial service experience. As Bill Gates surmised, Big Tech would indeed challenge big banks. Despite Apple, Amazon and Facebook’s entry into financial services, let’s explore why “connected banks” are still likely to lead the digital economy of the future.

Legacy and trust Unlike Big Tech, traditional banks have existing relationships with customers that span years, if not decades. Through these long-lasting



financial relationships customers develop trust with their respective banks. Within this traditional model, banks introduce other banking products to customers that provide stickiness for all their financial needs. Subsequently, customers are unlikely to leave their banks and take their financial services elsewhere. Now let’s compare the same customer’s relationship with Big Tech: an industry fraught with privacy issues and breaches of trust. Do people really want to give Facebook access to their financial data? I think not. Given the speed at which this industry is moving, most banks simply do not have the money and time to create sophisticated digital platforms from scratch. The ideal scenario is merging the technology of Big Tech within the platforms of big banks. But banks are more likely to embrace technology from FinTech vendors that easily integrate into their own digital banking platforms: which may not necessarily be from Big Tech companies. New digital services should be built by FinTech vendors that understand banks’ legacy systems. By adding new technology within the constraints of specific banking platforms, these suppliers can add their expertise to existing

March / April 2020

Payments Business

digital banking ecosystems.

Acquisitions and upsells Banks are known to do “banking things” well, such as issuing large loans, risk intermediation and liquidity transformation. What they are not known for is innovation and, let’s face it, providing superior customer service. It is no wonder that most of the connected banking solutions occur through acquisitions, rather than being built internally. Banks understand that the expectations of the modern banking customer are changing. Banks also recognize that they might not have the skills to meet these changing needs. Acquisitions of FinTech start-ups allow banks to move into ecosystems beyond their traditional core of product and services. They can tap into their existing client base and operation capabilities to strengthen engagement in mobile payments and capture necessary data to provide a complete view of customers’ mobile financial and payment needs. In this scenario, banks can offer a curated and compliance vetted mix of

March / April 2020

traditional and third-party products and services. Aggregating all financial products through acquisitions provides customers with a one-stop solution for financial needs through a single, integrated channel from their trusted financial provider.

Compliance and regulation Regulation and compliance dominate the banking industry. It is no wonder why consumers go to their neighbourhood bank for mortgages, auto finance, credit cards and lines of credit. While Big Tech is excellent in recognizing consumer pain points and providing quick solutions, banks guarantee stability. Lest we forget the underlying reasons why Big Tech is pursuing entry into financial services. It is all part of their broader plan to touch more parts of their customers’ lives and businesses without relying on external vendors. In a “perfect Apple world”, iPhones are also Apple bank cards without any involvement of traditional banks. As FinTech companies, Big Techs like Apple, Amazon and Facebook are

unproven. Banks have a legacy of trust and consistency, especially when it comes to financial transactions through cash, credit and electronic payments.

Financial services of the future There is no doubt about the disruption facing the global financial and payment processing industries across the globe. Cryptocurrency, no-fee credit cards and new end-to-end payment processing are being introduced by Big Tech giants like Facebook, Apple and PayPal. The race to capture the digital wallet has energized innovation in the payments industry. The quest to offer better customer service for mobile financial services will determine success in all payment, transaction and card-based operations around the globe. Suffice to say, big banks are here to stay. Their legacy of trust, history of regulation/ compliance and strategic acquisitions will forever give them a strategic advantage over Big Tech in the global financial services industry. Raju Vegesna is chief evangelist at Zoho.



Payments Business

Making the Open Banking Transition By Hamed Arbabi


he rise of FinTech companies around the globe opened the Pandora’s box on the question of who owns the financial data and what will they do with it? The way that the current financial services ecosystem operates in Canada, and in most countries, other than notably the U.K., is that the banks, not their customers, own customers’ financial data. At least not yet. Moreover, this financial data, such as balances and transaction histories, are often unorganized and siloed, so much so that it limits a bank’s ability to access and use them in a meaningful way. Even when the information is accessible, a bank’s IT infrastructure often cannot compete with innovative FinTech startups that are more agile and hyper-focused on solving specific financial challenges. Consumers (especially Millennials) now expect — and demand — the same level of choice, control, user experience, security and innovation that they receive from other industry’s products and services. Consumers are, as a result, fuelling a major disruption in the financial industry, turning partially (if not wholly) to bank alternatives. To help smooth the transition into a future with superior financial services, a collaborative model between financial institutions and FinTechs aims to bridge the gap between data, banks, consumers and technology. It’s called open banking.

Open banking is a set of objectives for how banking should work. What is open banking?

Hamed Arbabi



Open banking is a much bantered and hyped term. So, what is it, exactly? Open banking is a collaborative model or set of objectives for how banking should and could work. As my company’s FinTech partner Flinks puts it, it’s “The promise of access to data across platforms and institutions.”

March / April 2020

Payments Business In this new banking model, banking data is shared between major banks and third-party players, such as FinTechs. But ultimately, open banking gives consumers control over their own financial data. The consumer — and only these individuals — decides how, when, where and whom to share their financial data. For example, if they decide to purchase a flight online using their debit card rather than with their credit card, they can grant access to their financial data for that particular use case. In an open banking ecosystem, the consumer’s major bank would allow the third-party application to access their information.

up from 4.2 million in August 2018.

Open banking in Canada and the U.S. The Canadian government announced in 2018 that it would explore the merits of open banking. Since then, legislation has been slowmoving for various reasons, including privacy and security concerns and its potential impact on the stability of the Canadian financial system. Likewise, 2018 research in the U.S. suggests that customers have trust issues when it comes to their financial data. Almost nine in ten American consumers said they are concerned with sharing their financial data with third-party services. Yet 56 percent would like to control the access to their information: which is inherently baked into the set of guidelines of open banking.

Open banking is coming whether we like it or not. Open banking in Europe and the U.K. Open banking regulations came into effect in Europe in 2015 in an effort to bring innovative, new businesses to the financial industry and lessen some of the hegemony of European banks. In 2016, the U.K. used this same set of rules to force major banks to collaborate with FinTech companies. This meant that if and when a consumer requested or allowed a FinTech to access their financial data, the bank must allow it. Perhaps unsurprisingly, open banking use-cases are gaining momentum in the U.K.. According to reports from the Open Banking Implementation Entity, there were 110.5 million successful use cases of open banking APIs (application programming interfaces) in August 2019,

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all parties involved. “That is their biggest challenge,” said Andrew McFarlane, Accenture’s managing director, Canadian Payments Practice Lead and Global Open Banking Lead. “Can [banks] be innovative and offer new products and services, or will they stay cautious and be unable to face down FinTechs and challenger banks that are waiting for the start of open banking?”

Open banking payments FinTech companies, such as VoPay, bridge the gap between major banks, consumers and businesses. They offer technology that allows businesses to accept, collect and send direct bank payments just like credit cards, meaning they can

instantly access all available funds for consumers while reducing of costly nonsufficient funds (NSFs). These tools validate bank account information without having the customer’s bank account details ever be visible. Unlike traditional bank account payments, they generate and share a token, rather than actual bank information, for every linked account. This gives the consumer the security and privacy of knowing that no account details are shared and gives the business greater assurance of getting paid. It’s time to adapt and adopt. Or risk getting left behind. Hamed Arbabi is founder and CEO at VoPay.

Adopt and adapt According to Accenture’s open banking report, open banking is coming whether we like it or not. Already, nearly one-third of banking customers already use FinTech apps. As with all disruptive technologies, there are early market adopters, mainstream adopters and skeptics or late adopters. Regardless of where along the adoption curve consumers fall, banks must position themselves to empower customers with the choice to adopt or not and make it a seamless transition when they do. Open banking — and the future of financial services — requires collaboration, cooperation, innovation, security and trust between



Payments Business

Why Turn to Digital Decisioning? A By Bill Waid



cross industries companies are waking up to the fact that customer experience (CX) is the pillar on which their fortunes rest. Consumer expectations are on the rise as they demand highly personalized engagement and in real-time. Fortunately, there is an overwhelming amount of data available which can be leveraged to better meet those expectations. Studies like from Qualtrics have found that investing in CX initiatives can up to double their revenue in as little as 36 months. As the financial services industry strives to meet consumer expectations, traditional banks and challenger FinTechs are turning to advanced analytics and digital decisioning in order to gain market share. According to Forrester, “A key challenge of digital business is deciding what to do in the customer’s moment of need — and then doing it. Digital decisioning software capitalizes on analytical insights and machine learning models about customers and business operations to automate actions… for individual customers through the right channel.”

Ideally, organizations are able to gain customer insights and act at the exact right moment. The core requirement to achieving this goal is access to greater amounts of data, from disparate sources and in a timely manner. With this data, financial institutions (FIs) can automate key decisions around many interactions and continuously improve those decisions with fresh insights. There are several areas where digital decisioning can be applied.

Streamlined onboarding Digital decisioning can enable and expedite online account opening, from chequing and savings to credit cards and loans. It’s not unusual for customers to never step into a brickand-mortar location in the onboarding process. Automating routine processes not only reduces cost it also supports customers who increasingly prefer digital interactions. By using additional consumer data beyond credit payments and scores, such as savings and nonloan payments, banks are able to better identify creditworthy consumers.

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Payments Business Speedy response Consumers are used to 24/7 real-time access and support from the retail sector and often expect the same from other industries. With digital decisioning, banks can offer products of interest to a customer at any hour of the day, whenever they access their account. With more data, banks can make faster and more accurate decisions. Customers are looking for banks that proactively identify their needs and are prepared to offer those solutions with self-service options. Ideally, your customers should be a few clicks away from an automated approval.

Improved fraud detection As real-time payments continue to grow in use with customers accessing and sending funds from a variety of devices, we’ve seen new forms of financial crime targeting mobile payments. Thankfully, FIs are leveraging antimoney laundering (AML) machine learning models and analytics platforms, such as Falcon X, to streamline both fraud detection and AML processes. As a result, banks improve efficiencies by merging fraud and compliance while protecting their customers by detecting and preventing criminal activity before real-time transfers occur.

Additional products and services Consumers can also be presented with ways to improve their financial health — from tips on improving their credit scores — to tracking spending or saving for retirement. FIs can use digital decisioning to show personalized suggestions for tools, accounts or even advisory services to help achieve their financial goals. Forrester senior analyst Vijay Raghavan said: “By using predictive analytics and machine learning, insights are now dispensed in real time, with a focus on helping customers look ahead by providing alerts and recommendations on what to do next or even acting on behalf of the user. By 2022, leading wealth management firms will be doing the same, using digital decisioning software to make asset allocation, investment selection and tax recommendations to investors. Investors will be able to bank, save and invest, monitor their financial goals and receive

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intelligent advice from digital decisioning software through a single interface.”

Connecting the business A decision management platform is the connective tissue for FIs to transform data into insightful decisions while automating value-creating actions. This platform approach creates efficiencies with a connected asset repository that is used across the business, from retail banking to credit cards to mortgage loans. Within this collaborative environment, IT, data scientists, analysts and business users have visibility into where decision assets are being used, how they impact decisions and how they’re being improved. The platform aligns all stakeholders on how best to use the data to get the most relevant customer insights that will drive the right actions. FIs can also re-purpose decision and analytic assets because the platform creates a core set of customer insights that can be used for different decisions. When one decision is successfully automated, it is easier and faster to apply that model and automate additional decisions. This

can reduce the cost for future initiatives. By re-using the assets and models, the more initiatives that are launched, the more growth you can drive with a smaller, incremental expense. Banks and FinTechs can accelerate time-to-value and claim a vastly better revenue-to-expense ratio. Re-purposing decision assets also increases consistency across the organization and throughout the customer life cycle. As a result, customer interactions will share a unified voice across all line of business. Customer expectations are going to continue to evolve driven by choice. Digital decisioning enables FIs to not only deliver, but perhaps overdeliver on the CX. Financial institutions are banking on access to unparalleled types and volumes of data, driving real time, highly relevant and personalized insights in order to ultimately grow their market share. Any organization that isn’t moving toward this goal will be left behind. Don’t let it happen to you. Bill Waid is general manager, FICO Decision Management.

Keys to success By relying on automated, digital decisioning driven by advanced analytics, innovation is progressing at a rapid pace around the financial services world today. To achieve the most out of digital decisioning there are five keys that will open the doors for financial institutions to success. 1. Adopt a unified, scalable decision platform across the enterprise that optimizes and monetizes the use of people, data and analytics. 2. Create personalized customer treatments while addressing economic, business and regulatory challenges. 3. Empower business users to create and manage the strategies, rules and analytics that drive decisions and actions: without IT intervention. 4. Re-use connected decision assets across the customer lifecycle to improve decisions, while making them transparent and explainable. 5. Validate decisions before they are put into production, with dashboards displaying predicted and compared-to results. By applying these principles, banks can improve agility, deliver profitable decisions at scale and innovate faster, while reducing risk. Using digital decisioning and advanced analytics, we’ve had customers experience: ◉◉ Increased revenue: one financial institution grew bookings by 29 percent; ◉◉ Increased profits: one lender improved profits for personal lines of credit by 300 percent; and ◉◉ Reduced risk: another lender used just 31 days of data to improve risk predictiveness by 45 percent.



September 22-23,2020

Direct Marketing

Become an Intelligent Enterprise Only a small percentage of Canadian businesses are leaders. Here are their insights.


ver the past half-decade Canada’s business leaders have been hearing the message loud and clear about the need to establish a digital transformation strategy. And to their credit, 85% of Canadian enterprises have now developed one, up from 76% in 2017, according to a new SAP study conducted in partnership with IDC Canada, A Vision & Pathway to the Intelligent Enterprise. However, simply having a digital strategy is no longer enough. Leaders must now be able to execute on it. Facing shifting customer demands, emerging global competition, a growing skills shortage and a quickening pace of innovation, Canadian businesses need guidance on how to progress on their digital transformation journeys. With the SAP-IDC study now in its fourth year, we wanted to examine the characteristics that distinguished more digitally advanced organizations, so we could provide insights that other leaders can emulate on their paths to becoming an intelligent enterprise (IE).

Defining the intelligent enterprise So, what is the intelligent enterprise? It is a strategy that allows enterprises to transform data into action across all lines of business in order to drive process automation and innovation that, in turn, unlocks new areas of growth and delivers exceptional experiences. To identify how far along Canadian organizations are in their transformation to succeed in the digital economy, IDC Canada developed this four-stage progress scale: Observer > Participant > Challenger > Leader Of the 303 Canadian organizations we surveyed, only 12% are currently identified as IE Leaders. While these IE Leaders are well ahead

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of their peers in the adoption of innovative technologies, our study revealed that the real “secret sauce” to undergoing a successful digital transformation was succeeding in the human side of business. With that in mind, here are three key learnings that you can use to advance your organization’s digital agenda:

By Sam Masri

1. Establish a solid IT foundation. Executing on a digital strategy means that organizations need to be agile and have the foundation in place to sustain changes in demand for computing capacity, real-time analytics and digital customer service. Building block technologies, such as cloud infrastructure, productivity collaboration tools, data management and analytics tools, and newer innovative technologies such as the Internet of Things (IoT), artificial intelligence (AI) and machine learning enable an organization to become an IE. Our survey revealed that IE Leaders are more likely to be ready across all these technologies, particularly cloud server and storage and productivity collaboration solutions. Innovative technology adoption is foundational for organizations that are looking to take the next step in their digital transformation journeys.

2. Ensure that senior leadership is fully engaged. Beyond the technology itself, a mindset or culture within the organization is required to become an IE. Specifically, the level of engagement among senior leaders and the clarity to which the digital strategy is articulated, contributes to success. The SAP-IDC study found that 80% of IE Leaders have executive management



Courtesy SAP Canada

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Canadian companies need to become intelligent enterprise leaders in order to succeed in today’s markets.

enthusiastically engaged in digital strategy execution, compared to a mere 9% of the IE Observers who are falling short in their transformation efforts. Those results echoed a finding from our 2018 report about the significance of “digital change agents”: leaders who, with vision and energy, are able to gain consensus both within and across teams and through different levels of their organizations. For without this enthusiasm, organizations ultimately fail to shift the culture of teams that ultimately execute the digital strategies.

3. Focus on the human side of the business. There are four critical and related elements of the IE. They are customer experience (CX), employee experience, product experience and brand experience. Together, these are referred to as experience management, which is the human side of business. Experience management is essential to becoming an IE. According to our study, CX is the second most common measure of performance of digital strategy and is clearly linked to financial performance.



Keep in mind that over two in three (68%) IE Leaders believe that a stronger CX had significantly improved financial performance within their business over the previous year. For this reason, it’s no surprise that 59% of IE Leaders plan to increase their focus on the CX versus 44% of IE Observers. Additionally, 73% of IE Leaders will increase their focus on employee experience next year, compared to only 44% of IE Observers. This means implementing digital programs, resources and tools to track employee engagement, performance and well-being. Human resources and employee engagement programs are of course nothing new within most organizations. However, advanced enterprises are now recognizing the importance of linking customer and employee experience, with almost nine in ten (89%) IE Leaders saying it is very important or critical to improve both at the same time as compared to just 44% of IE Observers.

attributes that can help your organization get on the right track. Take bold steps. Establish a clear vision and strategy for the business and communicate that clearly throughout the organization. Invest in the foundations: cloud and analytics form the basis for any organization’s ability to scale up and derive business value from data. Advancements in the areas of machine learning/AI and IoT will come after the building blocks are in place. Effectively deploy these technologies. Empower your teams to use the intelligence and insights to impact the business positively. Ensure experience management is included in strategy and has a holistic view by tying CX to employee experience. Finally, Build agility into the talent plan. The most progressive organizations succeed by anticipating change skill requirements and changing the mix of employees and training programs as needed.

Taking the next steps

Sam Masri is chief operating officer, SAP Canada.

While there may be multiple pathways to becoming an IE, there are several common

March / April 2020


Twelve Payment Predictions Which Might Change Your FinTech Strategy

W By Simon Fairbairn

ith almost 40 years in the industry, the collective payments expertise of the Ingenico team is unparalleled. So, as the new year begins, Simon Fairbairn, Director of Solution Development at Ingenico Banks & Acquiring, considers 12 key payment predictions for 2020.

This is brilliant, but it means fraudsters will inevitably innovate their techniques, too. As a result, in 2020 we will see banks enhance their security and implement measures to protect customers, such as payment delays, SCA, 2FA and Confirmation of Payee.


Digital Payment Rewards Alongside enhanced security, monetary savings and ease of use, digital payment rewards will increasingly become embedded in payments as a value-added service. These types of loyalty initiatives provide opportunities to engage directly with customers and are useful

Fraudsters Innovate Too In 2019, Authorised Push Payment Fraud (APP Fraud) rose by 40 percent, costing the UK ÂŁ616 million. Thanks to PSD2 and Open Banking, we will continue to see more new players in FinTech.




March / April 2020

Fintech to increase customer allegiance with brands. With innovative payment terminals on the rise, such as Android, that offer enhanced applications and collect more consumer data, customers will expect more personalized offers. Organisations will deliver them in 2020.


More Data, More Powerful AI Often thought of as just for use with fraud prevention, artificial intelligence (AI) has enormous potential to improve the payment ecosystem for banks, processors, merchants and, ultimately, consumers. Together with companies using AI to analyse certain patterns and algorithms in data to detect fraudulent activity, retail payments will also use this technology to enhance digital interactions in voice commerce and mobile banking.


New Smart City Payment Options For the last few years we have seen the beginnings of frictionless towns and cities across the globe. The TfL tube system and contactless buses are a prime example of an effective cashless system — since its inception over 1.7 billion frictionless journeys have been enabled. In 2020, cities will implement new smart payment options by joining forces with the right partners and platforms to counteract new challenges, including ease and speed of implementation, disruption and data security.


Smarter Purchase Suggestions This year, Amazon generated 35 percent of its revenue from its recommendation model, which utilises customer data to deliver smarter purchase suggestions. By using data to personalize suggestions, retailers are truly listening to customers and continuously pushing the boundaries of shopping experiences. In 2020, we’re going to see more retailers following in Amazon’s footsteps, either in store or online.


Generation X Demand Payment Security A lot of the fintech revolution has been driven by millennials, for millennials. As this demographic seeks and demands

March / April 2020

new ways to pay, Open Banking continues to enable new players in the payment ecosystem for millennials as well as Gen Z, a third of whom are estimated to have opened at least two new accounts with a challenger bank within the past five years. While the focus has predominantly been on these young demographics, their older counterparts, such as Gen X, are being left behind. As such, in 2020 we will likely see Gen X demanding that the basics of their financial services, such as security, are prioritized over anything else which might cause a generational divide.


The Rise Of Social Commerce Social commerce is indisputably going to be the breakout trend for ecommerce in 2020. The line between social media and eCommerce is increasingly becoming blurred, driven by the sheer amount of time spent on social media apps. The rise is down to popular platforms, like Instagram and Snapchat, enabling short form video content, which 91 percent of consumers prefer over conventional static media. What once consisted of a static online shopping experience is becoming a much more fluid ecosystem defined by multiple threads of content media.


Digital ID Becomes King At its core, identity verification has always underpinned financial services in order to protect users and meet compliance demands. Efforts to help streamline identity procedures, such as the creation of long passwords, cause friction for customers. Many inevitably forget the long passwords they create and $70 charges by banks to change passwords cause frustration. In 2020, Digital ID will help eradicate these bugbears while providing numerous economic benefits and more secure identification for consumers.


Relentless Collaboration FinTech continues to be the buzzword in financial services, relating to the rapidly evolving technology that is fast revolutionizing the industry. However, in order to keep innovating within the industry we can’t rely on

technology alone; it’s a team sport. Throughout 2020, as Open Banking continues to offer more opportunities within the payments ecosystem, we must continue to collaborate with other players to keep innovating.


Make Payments With Cars The Internet of Things (IoT) is making devices smart. For many years we’ve heard about fridges that consumers can make payments on, but cars have been noted as the next big thing to be inter-connected. Research highlights that the automotive industry could be the most lucrative IoT platform, and by 2023 it’s estimated that 775 million cars will be connected through telematics or invehicle apps accounting for $63 billion in transactions that year. If these estimations are to be achieved, over 2020 we’ll start seeing IoT payments for petrol, tolls and food.


Banks And Card Payments Converge Due to Open Banking and PSD2, the ability to have a card or bank account payment in near-real time starts to enhance the possibilities for how a consumer may wish to pay at the point of sale in 2020. We will likely see consumers offered with the choice of paying by real time payment rather than by card; same outcome through a different route with a different charging scheme. This may extend to initiating a sequence of recurring payments, the first in real time, the remainder in a Direct Debit format.


Invisible Payments Invisible payments are dominating the payments industry with the likes of payments rings, Uber and Amazon Go, all of which are completely frictionless, with payment details stored inside the product. Across all sectors in 2020, businesses will need to keep up with convenience-led lifestyles, placing it at the heart of financial services product design. Simon Fairbairn is director of solution development at Ingenico Banks & Acquiring.





PNC EQUIPMENT FINANCE | Your CAPEX budget has never been tighter. We get it. That’s why numerous clients across the U.S. and Canada choose PNC Equipment Finance to power their future. Deep experience allows our team to offer leading asset-specific financing solutions, including loans, leases and lines of credit, to help you drive maximum ROI. If you’re looking for stability and flexibility from one of the nation’s largest financial institutions, know we have the energy to help you be ready for today.

To learn more, visit pnc.com/ef

PNC is a registered mark of The PNC Financial Services Group, Inc. (“PNC”). Equipment financing and leasing products are provided by PNC Equipment Finance, LLC, a wholly-owned subsidiary of PNC Bank. In Canada, PNC Bank Canada Branch, the Canadian branch of PNC Bank, provides bank deposit, treasury management, lending (including asset-based lending) and leasing products and services. Deposits with PNC Bank Canada Branch are not insured by the Canada Deposit Insurance Corporation or by the United States Federal Deposit Insurance Corporation. Lending and leasing products and services, as well as certain other banking products and services, require credit approval. ©2019 The PNC Financial Services Group, Inc. All rights reserved. CIB EF PDF 0519-0157-1260601

Equipment Financing

Capital Spending May Hit Record


on-residential construction and machinery and equipment (M&E) capital expenditures are projected to hit a record $275.5 billion in 2020, according to Statistics Canada, from $268 billion in 2019, and surpassing the previous peak of $272.1 billion registered in 2014. The 2020 capital investment intentions data, encompassed in the Capital and Repair Expenditures Survey, also marks four consecutive years of growth. The total capital outlays are expected to rise 2.8 percent in 2020, following a 1.7 percent increase in 2019, but off the torrid 9.8 percent increase in 2018. The $7.5 billion anticipated increase is expected to come from growth in capital construction (+4.5 percent to $178.6 billion). But this strong result will be partially offset by a projected small decline in M&E spending (0.2% to $96.9 billion). Capital spending by public sector organizations will be high, with an anticipated increase of 6.5 percent, following a modest increase of 0.8 percent in 2019. More modest growth in capital expenditures on privately held nonresidential tangible assets of 0.9 percent is expected in 2020, compared with 2.2 percent in 2019.

March / April 2020

Transportation and warehousing lead

Utilities, public admin to increase

Driving the overall capital spending is a record expected $44.3 billion outlay for the transportation and warehousing sector: 9.3 percent higher than that in 2019. For the first time it will become the leading sector for capital investment, surpassing mining, quarrying, and oil and gas extraction, which had been at the top of the rank since 2001. There are projected gains in capital construction (+10.1 percent) and capital M&E (+7.7 percent). Both private and public entities have been and plan to make investments. The largest contributor to growth is a 25.7 percent (+$2.4 billion to $11.8 billion) anticipated increase in transit and ground passenger transportation investment. Significant increases are also anticipated in air transportation (+$1.2 billion to $4.5 billion) and support activities for transportation industries (+$1.2 billion to $10.5 billion). The expected increases are largely concentrated in Quebec (+39.8 percent to $7.6 billion), British Columbia (+16.4 percent to $13.2 billion) and Ontario (+14.4 percent to $11.9 billion). Partially offsetting growth is reduced spending across the Prairie provinces as major investment projects come to an end.

Spending in the utilities sector is expected to increase by 9.1 percent to $33 billion in 2020, driven by increases in the water, sewage and other systems subsector (+30.5 percent to $7.6 billion) as major projects in British Columbia and Ontario get underway. Furthermore, increased investment in electric power generation, transmission and distribution in Alberta and Ontario will more than offset the completion of major projects in Newfoundland and Labrador and in Manitoba. Similarly, capital spending in the public administration sector is expected to grow by 2.3 percent (+$783 million to $34.4 billion): a turnaround from a drop of 0.6 percent in 2019. Spending increases in local, municipal and regional public administration (+$2.3 billion to $18.3 billion) are expected to more than offset declines in federal government public administration spending (-$1.5 billion to $4 billion). Non-renewable resource extraction outlays to drop Capital outlays in the mining, quarrying, and oil and gas extraction sector are anticipated to continue their decrease, albeit at a slower rate. Statistics Canada reports that it expects to see 1.4



Equipment Financing percent decline (-$636 million to $43.7 billion) in 2020, after reporting drops of 8.3 percent (-$4 billion) in 2019 and 4.3 percent (-$2.2 billion) in 2018. The anticipated decline in 2020 is largely attributed to lower spending intentions in the metal ore mining subsector (-$1.1 billion). In contrast, the oil and gas extraction subsector, which represents about 77 percent of the anticipated spending in 2020 for the sector, reported an expected increase of 1.3 percent. Within this subsector, the non-conventional oil extraction industry anticipates gains of $1.1 billion in capital spending, which is partially offset by

the expected decrease of $633 million in the conventional oil and gas extraction industry.

with 12 in 2019 and 17 in 2018. Quebec is expected to increase its spending by $474 million (+9.8 percent) in 2020, offsetting anticipated declines in Alberta, Manitoba and Ontario.

Manufacturing outlays to increase Manufacturers anticipate a 1.2 percent increase in capital spending in 2020 to $22.4 billion, due to a 3.1 percent increase in spending on capital M&E. Non-residential capital construction is anticipated to decline 3.6 percent in 2020, following increases of 14.5 percent in 2019 and 47 percent in 2018. Out of 21 manufacturing subsectors, 11 reported an expected increase in total capital outlays for 2020, compared

B.C. to lead, Newfoundland and Labrador to fall British Columbia is among the provincial leaders contributing to the national increase anticipated in 2020. New capital spending is expected to increase $3 billion (+7.8 percent) for a total of $41.8 billion. Notable advances in investment also took place in 2019 (+21.1 percent) and 2018 Sample Head (+10.5 percent).

Capital spending on non-residential tangible assets, industrial sectors 2017




2019 to 2020

millions of dollars

millions of dollars

millions of dollars

millions of dollars

% change

Total, non-residential construction and machinery and equipment






Total, private capital expenditures






Total, public capital expenditures






7,733.2 50,565.6 31,525.2 6,244.8 15,366.8 3,600.5 6,607.9 28,953.8 12,496.7 3,617.9 13,387.8 2,448.1 548.9 1,681.8

8,942.6 48,399.5 28,923.0 6,987.1 21,219.0 4,629.6 6,544.5 35,588.6 13,423.1 3,167.5 16,519.1E 2,901.6 1,014.1 2,052.4E

8,826.8 44,376.4 30,197.4 7,605.3 22,147.8 4,892.7 5,993.0E 40,500.7 13,688.4 3,635.1 17,508.5E 2,907.9 1,119.3 2,072.5

7,894.8 43,740.6 32,955.9 8,121.5 22,420.3 4,762.5 5,983.0 44,260.9 13,847.4E 3,508.2 17,122.5E 3,090.3 1,186.8 2,400.9

-10.6 -1.4 9.1 6.8 1.2 -2.7 -0.2 9.3 1.2 -3.5 -2.2 6.3 6.0 15.8

10,582.9 8,114.8 2,610.7 3,610.9 1,073.5 29,134.3

11,950.1 8,664.6 2,876.1 4,188.7E 1,635.4E 33,770.2

11,413.8 9,453.1 3,096.4 3,732.2 1,236.7E 33,569.2

11,204.4 10,311.2 2,902.4E 4,192.0E 1,242.2E 34,352.0

-1.8 9.1 -6.3 12.3 0.4 2.3

Industrial sectors Agriculture, forestry, fishing and hunting Mining, quarrying and oil and gas extraction Utilities Construction Manufacturing Wholesale trade Retail trade Transportation and warehousing Information and cultural industries Finance and insurance Real estate and rental and leasing Professional, scientific and technical services Management of companies and enterprises Administration, support waste management and remediation services Educational services Health care and social assistance Arts, entertainment and recreation Accommodation and food services Other services (except public administration) Public administration E use with caution. Note(s): Data may not add up to totals as a result of rounding. Source(s): Statistics Canada, Tables 34-10-0035-01 and 34-10-0037-01.



March / April 2020

Sample Head Equipment Financing Capital spending on non-residential construction and machinery and equipment, provinces and territories 2020 (millions of dollars) plus 2019 to 2020 % change

Canada 275,499.9 2.8% Yukon 540.8 -13.3%

British Columbia 41,822.8 12.9%

Northwest Territories 843.1 15.3%

Nunavut 1,099.9 -35.6%

Alberta 59,563.2 7.8% Saskatchewan 15,043.4 0.4%

Newfoundland and Labrador 6,436.5210.9 -11.8%

Manitoba 9,000.6 -7.3% Ontario 86,146.8 4.1%


Prince Edward Island 737.9 -2.3% New Brunswick 3,846.1 -2.2%

Note(s): Data may not add up to totals as a result of rounding. Source(s): Statistics Canada Table 34-10-0035-01.

Increased spending is nothing new for British Columbia, said Statistics Canada; 2020 marks the fifth consecutive year spending is set to increase. Gains in the transportation and warehousing sector (+$1.9 billion) and the utilities sector (+$861 million) will easily offset, it said, reduced spending in the agriculture, forestry, fishing and hunting sector (-$185 million) and the mining, quarrying, and oil and gas extraction sector (-$109 million). Meanwhile capital investment in Quebec has been growing since 2014 and shows no signs of slowing down, with a planned spending increase of

Quebec 46,442.2 7.3%

7.3 percent to $46.4 billion in 2020. Spending in the province is anticipated to increase by $3.1 billion in 2020, with $2.2 billion coming from the transit and ground transportation subsector. The manufacturing, utilities and accommodation and food services sectors are also expecting increases in 2020. In Ontario, capital spending is expected to increase by 4.1 percent to $86.1 billion, following an increase of 1 percent in 2019 and an increase of 18.6 percent in 2018. Spending is anticipated to increase in several sectors, namely transportation and warehousing (+14.4 percent to $11.9 billion), utilities (+10.1 percent to

Nova Scotia 4,202.2 1.4%

$11.8 billion) and public administration (+6.7 percent to $12.7 billion). But the manufacturing sector is expected to decline to $102 million (-1.2 percent) in 2020, after a decrease of $489 million (-5.3 percent) in 2019. In sharp contrast, Newfoundland and Labrador is anticipating the largest provincial decline in spending in 2020 (-$834 million to $6.2 billion), following an increase in 2019 (+$396 million to $7 billion). Utilities (-$475 million) and the mining and quarrying, except the oil and gas subsector (-$389 million) represent the majority of the decrease expected for 2020.

CANADIAN EQUIPMENT FINANCE | SPrINg 2018 | canadianequipmentfinance.com

March / April 2020



Equipment Financing

Turning to Low-carbon Solutions By Dana Krechowicz


griculture and mining are on the front lines of climate change. Why? First, they depend on predictable climatic conditions to ensure stable outputs and operations. Climate change is making it harder for farmers and mining companies to predict operating conditions, which adds additional risks and costs to their businesses. More powerful storms, rising temperatures, droughts and floods and higher risk of fire and pests can damage both their natural and hard assets. Second, agriculture and mining companies are both making their businesses more resilient to climate change and they are investing in carbonintensity-reducing technologies. At the same time, we’re also starting to see abandoned mining pits be repurposed for renewable energy generation in the forms of solar farms and, in some cases, for hydroelectric pumped storage. Third, these sectors are an important part of the solution. The agricultural sector can make a tremendous contribution to combatting climate change by sequestering carbon in healthy soils. Meanwhile mining provides the metals and minerals that are necessary inputs for low-carbon technologies, such as solar panels and electric vehicles.

Onsite energy and electrification In particular, two low-carbon technologies are starting to take root in agriculture and mining, as well as in other resource sectors. These are onsite renewable energy production and equipment electrification. None of this is new: farmers have historically relied on wind power to pump wells, while mines have used electric trains to transport materials and workers, particularly underground. But these methods have fallen out of use in favour of grid power and diesel-powered equipment. “Agricultural producers are early adopters of new ideas and technology and



as a result we expect to see more interest from agriculture sector clients. A good example of this is solar — not just as a power or backup power solution, it’s more than that — there are now solar powered sensors, fence chargers, drying, irrigation and ventilation equipment and greenhouse heating,” states Pete Molenaar, senior vice president and head of Commercial Banking, Western Region for HSBC Canada. While some of these technologies may not be widely adopted yet, they are becoming accessible and affordable and can lead to substantial operational energy cost savings. Whereas solar-powered or electric tractors are in their infancy, mining equipment electrification is again becoming a major trend. In an industry where on-site renewable energy generation is becoming increasingly mainstream, according to the Rocky Mountain Institute, its movement towards equipment electrification is equally impressive. Newmont Goldcorp recently opened an all-electric mine in Ontario. This “mine of the future” features digital mining technologies and processes and electric rubber-tired vehicles. In the case of another mining company, HSBC Canada supported it in its acquisition of lithiumion battery-powered scoops and trucks for its underground gold mines through leasing and equipment financing covering 100 percent of the cost of the assets.

Benefits and financing Though current adoption rates of lowcarbon technologies have been minimal, they are expected to grow in the future, as companies look for ways to cut costs and carbon emissions and as more technologies hit the market. For example, while electric equipment may currently cost more up front, the investment results in substantial cost savings, such as by eliminating the need for new ventilation systems deep underground. It also improves employee health and safety — and staff recruitment

and retention — by eliminating diesel fumes and particulate matter. Even so, the initial cash outlay required to outright purchase some of these technologies (despite the money they will save) may be a barrier for some business owners. There also is the unfamiliarity with the equipment reliability, repair cycles and upkeep. Financiers also need to get up to speed on low-carbon technology specs including their expected lifespans to gain comfort with these solutions. However, in the end, client demand is the key driver. “Leasing and equipment finance has always brought inherent sustainability benefits as companies upgrade to more efficient equipment. But now companies are going one step further and are exploring which carbon reducing technologies are viable and commercially available in the market, and we’re keen to be at the forefront of this trend,” says Grant McFarlane, national head of Leasing and Equipment Finance, HSBC Canada. The acquisition of these assets can soon even be financed with a “green lease”, which HSBC Canada plans to introduce to the Canadian market, and will be aligned with the Loan Market Association’s Green Loan Principles. Green-labelled financial products such as green leases (as well as green bonds and green loans) help companies tell their sustainability story to their stakeholders and the market in a more compelling way. Climate change and increasing pressure on companies from their investors, customers and employees to green their operations will mean more and more companies exploring lowcarbon technological solutions. Leasing and equipment financing will play an increasingly important role in helping businesses finance low-carbon solutions in a cost-effective manner. Dana Krechowicz is senior sustainable finance manager, HSBC Bank Canada.

March / April 2020


Cybersecurity More Important Than Ever By Yves Paquette


t a time when data breaches are the matter of the moment, our fourth annual NOVIPRO/Léger Portrait of IT Trends could not be more relevant. But while the data gathered in the study reveals a shift in some trends, the pace at which companies are changing their approach to cybersecurity clearly needs to gather speed. The most significant revelation is not a comforting one. For despite the current landscape, Canadian financial services companies don’t seem to feel the urgency to protect themselves and ensure the security of their data. The survey, a status report on IT in Canadian businesses, was conducted over a one-month period in the fall of 2019 and involved 496 respondents from medium and large Canadian companies, 300 of whom were IT decision-makers with the balance from other fields. The data gathered offered a strong picture of current attitudes towards cybersecurity, particularly in the banking sector, where breaches have repeatedly made headlines. With finance being a conservative, tightly regulated field with rigorously enforced standards, this may explain why the IT infrastructure of so many financial sector companies were described as merely functional. I’m referring here to statistics that show a laxness on the part of such companies. For example, only 25 percent of financial industry respondents described their company’s infrastructure as “state of the art.”

Awareness not enough Overall, the survey shows that organizations have a better and better understanding of the risks associated with cybersecurity. But it’s not enough to be simply aware. There need to be concrete actions to defend oneself against all kinds of attacks. And this responsibility doesn’t just

March / April 2020

concern IT teams; it needs to be a priority for all decision-makers. That said, even in the context of widely publicized leaks, not all companies in the financial services sector have made proactive changes. A full 38 percent maintained their existing practices. This wasn’t the worst of the lot; 39 percent of health care organizations kept the status quo. In contrast, agriculture businesses showed definitive prudence, with 60 percent having revised their cybersecurity practices. And that’s a good thing—and worth emulating by other especially financial businesses— because attacks are on the rise. More than one in three companies (37 percent) claimed they’d been victim to a cyberattack in the last year: a significant increase over the 28 percent cited in last year’s survey. But out of the 40 percent of companies in the financial services sector that were targeted, 57 percent confirmed that the threat came from inside the organization. Our director of technology solutions, Éric Cothenet, recommended that organizations bring in sound processes and methods of governance to make employees aware of IT threats. “Threats from inside an organization are very real,” he said. “Problems often occur unintentionally, with too few employees trained to identify risk.”

Companies making halting steps Companies are taking baby steps to avoid data breaches. While the general public surely wants them to be giant steps, this is better than nothing. In 2018, nearly one in four companies (74 percent) trained their employees on cybersecurity in 2018 and more than half want to do so again next year. And although one in two companies did not review their practices after the news of high-profile breaches and data theft, almost all of them took at least one action to prevent further breaches. These included malware protection, data encryption, network intrusion monitoring

and other preventive solutions. Despite these moves toward process improvement in cybersecurity, it was disturbing to learn that companies are generally not all that transparent. Just over a third (38 percent) of respondents would notify their customers in the event of a cyberattack, whereas less than half (49 percent) would have done so in 2018. Organizations in Quebec (39 percent) and Ontario (40 percent) were the most likely to reach out to their customers. These low figures are worrisome. Particularly given that 61 percent of these organizations were holding critical and confidential customer data such as credit card numbers and Social Insurance Numbers. It’s certainly not all doom and gloom. In addition to the cybersecurity training that most companies are putting in place with employees, the perception of IT is changing. In 2016, it was considered a strategic partner by only 21 percent: a figure which rose dramatically to 41 percent in 2019. In 2016, 47 percent of respondents threw IT into the “investments” category: less so in 2019 with only 28 percent seeing it as such. Indeed, IT has become so much more strategic in the minds of many. An expert who commented on our report, Alina Dulipovici, who is associate professor of Information Technologies at HEC Montréal, said that companies need to quit thinking of information assets as a sunk cost. “It’s actually a strategic investment that helps achieve business objectives,” she said. “Not only that, companies would benefit from doing more to make their employees—and even their business partners—stronger links in the information asset protection chain by raising their awareness of security risks.” Fortunately for consumers, whose precious data is constantly hanging in the balance, indicators suggest that change is underway. Yves Paquette is co-founder and president, NOVIPRO.




The Need for Secure Digital Identities By John D’Apolito


rust, security and confidence in partners are the fundamental underpinnings of supplier/ procurement relationships, especially today’s digital supply chain. For without current information, such as potential red flags or insights into ethical practices, partners will be cautious. These trading relationships require secure digital identities. Enhanced digital identities are about securing data and building trust with other entities in a supply chain, whether they are suppliers, buyers or financial institutions. Secure digital identities, which are often coupled with digital access management platforms, then become the foundations for fast, secure, low-risk transactions, including trade, finance and payment authorization. This is accomplished by storing trading information in a completely auditable and immutable digital ledger. In digital supply chains, this secure foundation is tied directly to an organization, which means any financial transactions from that organization are recorded into the ledger. The process allows organizations to quickly build a foundation of trust with financial institutions and lenders. Supply chain organizations can be granted faster access to financing, and even preferential rates based on their performance characteristics.

Reducing risks Building secure digital identities into supply chains is not only about transforming financial processes. It’s also about managing disruption. This is essential in notably the automotive and manufacturing industries, where critical delivery items are required to keep production moving efficiently. Today’s supply chains are less like chains and more like networks. Purchasing organizations can trade with thousands of suppliers, and disruption in supply chains can mean delays and lost revenues throughout the network.



Secure digital identities are tied to an organization’s public financial data. They can help mitigate risks in a network by allowing purchasing organizations to find trading partners that best fit their risk profiles. The actual trade ledger, which can be seen in some cases as a type of immutable record of the contracting/payment tool, lends itself very well to commercial finance, and in the automotive space; consortium-owned tools can be a composite identity for financing arrangements. With the digital trade ledger, each participant can determine their ownership percentage, banks can lend at different rates and payments can be segregated for audit and compliance purposes. The concept of a secure digital identity doesn’t necessarily have to be an individual or even an entity profile. With better monitoring technology and near-real-time data, purchasers can see further into their supply chains for risky behaviour from suppliers. Those that may be flagged include poor credit ratings, tax disputes or trading partner appearances on sanctions lists. Not only does this visibility assist manufacturers, suppliers and financial organizations operating in global trading networks, it can also help these enterprises mitigate business risks and better manage ethical supply chains.

Impacts of ethical supply chains This last point is becoming increasingly important. More than ever, consumers are aware and interested in the source of the products they buy. Purchasing decisions often take into account the processes and means through which products are created. A study from research firm Euromonitor International found 65 percent of consumers say they try to make a positive impact on the environment through everyday actions, like purchases. Organizations that monitor suppliers for economically, environmentally and socially responsible business practices can see a tremendously

beneficial impact to their bottom lines. This would include vehicles and would also apply directly to larger capital equipment financing activity/purchases for farming and construction machinery. Many organizations operating supply chains have supplier codes of conduct, but far fewer of them have the ability to enforce them with total visibility. But digital supply chain networks grounded in secure digital identities are providing new ways to gain visibility, which allows businesses to operate with more certainty that their supply chain partners are ethical. Some of the information now available includes compliance information about sanctions, social and environmentally responsible behaviour and history of work with small- or minority-owned businesses. For many organizations, the ethical nature of a supplier/profile, or any relationship between buyer and seller can be seen as complementary to an overall risk profile. This also includes behavioural trends and transaction history, like payments made on time.

Providing a new assurance level Organizations working in today’s digital supply chain networks require a new level of assurance from their supplier partners. Secure digital identities provide businesses with an innovative way to build trust. They give trading partners immediate visibility into publicly disclosed information around financials, ethical and responsible practices and risk of disruption. As they build their foundation of trust, they gain faster access to capital through connected lenders and financial institutions. Secure digital identities are more than a way of ensuring minimal disruption in a business. They provide the means to transform and increase the efficiency of financial processes within modern supply networks. John D’Apolito holds the position of regional vice president, business network sales at OpenText.

March / April 2020

Total Finance

The Future of ATMs A

ccording to new research by deposit ATMs, rather than less functional Over two thirds of deposit terminals are RBR, the number of automated stand-alone terminals, with 52% of expected to recycle notes by 2024 and the deposit terminals (ADTs) installed the world’s ATMs expected to accept technology is now taking off in markets worldwide grew by 4% to reach a record automated deposits by 2024. where it had previously been overlooked, 1.4 million in 2018. In a busy world where The USA will see the largest increase in such as in the Americas. Even where the time is of the essence, both business and deployment, with 40,000 additional ADTs functionality is not immediately utilized, retail customers no longer expect to have installed over the next five years. Rising banks are purchasing these machines to to queue for the teller to make everyday customer demand and financial inclusion allow them the flexibility of switching deposits. Banks report that deposit initiatives will also drive new installations on the recycling function at a later date ATMs are an efficient tool when the business case is for keeping their customers established. 1. Over half of ATMs to offer automated satisfied, while also enabling Sam Blackwell, who led deposit by 2024 them to migrate transactions RBR’s Deposit Automation from the teller and achieve and Recycling 2019 research, cost savings. commented: “Although the 2. Banks around the world continue to upgrade RBR’s research reveals technology has been available their self-service estates to meet increasing that automated deposit for decades, the number transactions have been of deposit ATMs installed customer demand for efficient, real-time growing rapidly over recent worldwide continues to deposit transactions years. Excluding China, where demonstrate healthy growth. a meteoric surge in mobile Banks are now expected 3. Automated deposit terminals are becoming payments has stifled cash to pivot further towards usage, automated deposits recycling as the ratio of indispensable at bank branches globally grew by 10% in the other withdrawals to deposits core markets covered in the narrows and CIT costs grow, report, contrasting with a fall in cash in Brazil and India, which will both see an presenting increased opportunities for withdrawals in many of the same markets. extra 34,000 ADTs by 2024. cost savings”. Customers increasingly appreciate the benefits offered by automated deposit Focus shifts further towards cash Credits: These figures and insights are based on recycling such as reduced queuing, instant account RBR’s study, Deposit Automation and Recycling crediting and out-of-hours availability. Cash-recycling technology, previously 2019. For more information about this report or to perceived by many banks to be too discuss the findings in more detail please email Sam Strong potential in both emerging expensive or complex to implement, is Blackwell (samuel.blackwell@rbrlondon.com) or call proving to be an increasingly viable option and developed markets +44 20 8831 7315. RBR is a strategic research and The vast majority of markets covered in for banks across the world. Recycling consulting firm with three decades of experience in the study continue to show potential, ATMs have been shown to reduce CIT banking and retail automation, cards and payments. with the number of terminals worldwide costs and many banks now rank recycling It assists its clients by providing independent forecast to increase by 14% by 2024 to over as a basic functional requirement when advice and intelligence through published reports, selecting new deposit terminals. 1.6 million. Growth will be generated by consulting, newsletters and events.

March / April 2020



Total Finance

The Changing Face of Canada’s Accountancy By Richard Perri


he ancient mantra “the only certainty is uncertainty” is proving true for Canada’s accounting sector. It is experiencing both market disruption and pressure on workplaces to evolve business models to remain competitive in today’s environment. As a leading human resources and payroll technology provider, ADP Canada wanted to take a deeper dive into the challenges faced by accounting professionals. The ADP Research Institute launched the Millennial Accounting Survey to get this cohort’s take on client expectations, the impact of emerging technology, today’s talent shortage and the unique perspectives shared when multiple generations work together under one roof. Here’s what we found out: 1. Talent is rare and hard to find.

As we enter 2020, uncertainty continues to grow among accounting firms. This uncertainty stems from two key challenges: a lack of new talent entering the industry and limited succession planning. According to Millennial accountants surveyed, 56 percent said there just aren’t enough new accountants to replace those retiring and 60 percent noted it’s hard to find the right talent. Additionally, 70 percent saw firm succession planning as a top challenge. So, what do you do when more accountants plan to retire in the next 10 to 20 years than ever before, according to K2E’s Accounting and Bookkeeping Operations Survey, and 34 percent of active CPAs are under the age of 40? How do we encourage young graduates to enter the field and entice senior accountants to show them the ropes? 2. Technology is changing accountancy.

Technology is changing nearly every industry, and ours is no exception. Automation, for example, has enabled



accounting to become more efficient, and new software developments are simplifying more and more accounting tasks. When asked what this might mean for the accounting industry, 66 percent of Millennials agreed that accounting software will allow non-experts to do traditional accounting work. While this erosion of work causes many to assume that the accounting industry as we know it may be in danger, Millennials don’t see it that way, with 69 percent noting that they don’t think automation will eliminate the need for professional judgement. Additionally, Millennial accountants feel technology will continue to present opportunities in areas where the average person will need assistance. For example, 61 percent of them believe that clients will be using cryptocurrency within three years. So, it’s not that accounting professionals won’t be needed. It’s just that their role is just changing.

only 28 percent were interested in traditional tax or audit. This mindset highlights a need for proper training in these areas of accounting services. Many Millennials noted that they did not feel they had the skillset to deliver the consulting and advisory services their firms offer, meaning perhaps the industry could do more around training resources in these areas. Third-party providers for HR, payroll and other human resources management (HRM) services can also be leveraged to help fill this gap in talent. These providers can help widen the aperture of opportunity, revenue and profits for accountants looking to offer nontraditional services. They are a costefficient way for accounting firms — both large and small — to overcome talent, infrastructure and resource barriers to providing nontraditional services.

3. Client needs, and skillsets, are changing too.

What can the accounting industry do to tackle these challenges? Well, it’s time to embrace the uncertainty and move forward with a sound recruitment, retention and succession strategy. It’s important for seasoned accounting professionals to understand that the new generation of accountants may need different types of skills to succeed. Accounting programs that include courses that focus on soft skills will be more helpful and impactful in setting us up for success. Firms should be offering professional development courses or seminars that help current accounting professionals hone these skills and, in the case of smaller firms, looking to third-party partners who can complement and augment their skillset in areas such as HR or payroll. After all, the future of the accounting industry depends on them.

While basic accounting services are still important, Millennials noted a greater need for soft skills on accounting teams. For example, communication skills are just as necessary as computer operating skills or math skills because clients expect accountants to also act as consultants. According to those surveyed, approximately 76 percent think that changing client needs have pushed accounting firms to move beyond traditional services. Moreover, 90 percent indicated that they felt their firm should offer consulting and advisory services to stay competitive in the marketplace. So, does this shift in job description increase the complexity in talent attraction and retention? Surprisingly not, according to the survey. When asked about working in a more consultative capacity, 91 percent of Millennial accountants expressed interest, whereas

Looking ahead

Richard Perri is chief financial officer, ADP Canada.

March / April 2020

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