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TotalFinance SPRING 2021

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

Retail Reimagined

Why Points & Data Mean Value

ALSO IN THIS ISSUE:

❱ Open Banking Insights ❱ The Business of Payments ❱ Equipment Finance Trends PM40050803

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Payments & Transactions

Treasury & Capital

Asset-Backed Finance & Leasing

Marketing, Content & eCommerce

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Spring 2021 Volume 1 Number 2 Publisher / Corporate Sales Steve Lloyd steve@totalfinance.ca Contributors Chris Catliff, President & CEO, BlueShore Financial Bob Dowd, Chief Executive Officer, moneycorp Americas

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Table of Contents

Farm Credit Canada Fleet Complete Marius Galdikas, CEO, ConnectPay

Banking

Mark Halpern, CFP, TEP & CEO, WEALTHinsurance.com®

4 The Open Banking

MoneyTransfers.com Ritchie Bros. Dr. Anthony Scriffignano, SVP, Chief Data Scientist, Dun & Bradstreet

On the cover

Opportunity: Inside the Major Benefits

18 Disruption in Banking

Industry: 2021 and Beyond

Stephen Shaw, Chief Strategy Officer, Kenna White Clarke Group 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:

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SME Perspectives 6 The Road to Recovery:

Supporting Canadian Small Business Owners

Loyalty & Transactions

Payments

8 Retail Reimagined

20 Five Industry Trends

An Interview with Shawn Stewart, Senior Vice President, Customer and Triangle, Canadian Tire Corporation

Ontario Interactive Digital Media Tax Credit

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Affecting Payments in 2021

22 Five Trends Shaping

the Recovery of Global Payments

24 Top Five Data and

Equipment Finance

Analytics Trends to Power Growth in 2021

15 Pandemic Tops the List

26 More Than 30 Percent of

16 Ritchie Bros. Highlights

27 The Impacts of a Drop

of Disruptors to Watch in 2021, say FCC Economists

Final 2020 Top Equipment and Truck Categories in Latest Market Trends Report

17 Fleet Complete’s 2021 Made possible with the support of the Ontario Media Development Corporation

Outlook Report Reveals Key Insights on Shifting Telematics Industry

Canadians Would Favour a Cashless Society

in Cash Use

Wealth Management 28 Why Philanthropy

is a Good Investment: It’s not always obvious

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BANKING

The Open Banking Opportunity:

Inside the Major Benefits Staff + White Clarke Group

pen Banking is an emerging technology that can help you to grow your business by improving customer experience and retention while reducing operating costs. It aids in creating a straightforward and easy interactive digital experience for customers rather than simply presenting account balances. Before we look at the practical applications, what is open banking?

Defining open Banking Like other new technology concepts, such as Big Data and

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Machine Learning, there are various definitions for open banking. The explanation offered by Open Banking Limited (UK) is a useful starting point: Open Banking is a secure way to give providers access to your financial information. It opens the way to new products and services that could help customers and small to medium-sized businesses get a better deal. Essentially, allowing other third-party companies to build software and processes utilizing customer financial information presents added value to your services as a banking provider.

So what could open banking contribute to your bottom line?

Use Case 1: Smart onboarding Traditionally, onboarding new customers is a time and process-intensive exercise. Regulatory requirements to combat terrorism, money laundering, and fraud make the process even more expensive. According to a 2020 article in the Banking Journal, “retail client acquisition in a physical, siloed world costs an average of $280, [while] shifting to digital onboarding reduces the cost to $120.” Open banking

could reduce the cost and time required for account onboarding even further. Instead of asking customers to fill in dozens of form fields, open banking technology could allow customers to copy their information over from another service. On the back end, Canada has started to introduce open banking via “interoperability of ID networks, like Verified.Me and VON.” Similar ID technologies are also available in Germany, demonstrating examples of lenders using third-party services for verification purposes.

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BANKING Smart onboarding is not a new concept, but open banking has the potential to make it faster and cheaper. Customers’ expectations for an easy, convenient experience accelerated in 2020, and lenders who move quickly to simplify account opening may gain an advantage over less sophisticated competitors.

Use Case 2: Faster payments Lenders now have to contend with payment technology companies like TransferWise, Stripe, and PayPal, so being able to provide a fast, secure, and low-cost payment service to customers is critical. Some experts in the field advocate for “instant payments”, which would represent a significant advance over wire transfers and cheques that take days to settle. However, the availability of such instant services varies from region to region. The Faster Payments system in the UK states that “payments are usually available almost immediately, although they can sometimes take up to two hours.” Offering faster payments to customers benefit lenders in a few ways. First, delivering faster payments helps to distinguish your company from the competition. Second, offering faster payments helps banks maintain a high “share of wallet”, and discourages customers from switching to non-bank payment service providers like Apple, Google, PayPal, and Stripe.

Use Case 3: Accelerate credit and underwriting processes According to the ABA Banking Journal, less than 20 percent of visitors to bank websites

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complete their applications. Complex credit and underwriting processes may contribute to this situation. Open banking can speed up the credit process in a few ways, such as the potential to deliver better credit score insights and data. Experian Boost, launched in early 2019, gives individuals the opportunity to use open banking to read their credit history in more detail than traditional checks, taking into account payments such as regular bills, credit cards and phone contracts. It offers customers a better understanding of their creditworthiness and empowers them to improve their credit profile proactively. For financial institutions, open banking can drastically accelerate the speed of the decision making process. By reviewing transactional data, rather than just the usual credit agency flags, lenders get a much better picture of a customer’s creditworthiness and risk level. This qualifies many applicants for finance that otherwise may not pass credit checks, as well as giving a more accurate data set on which products and deals to offer.

Use Case 4: Business and personal financial management Low levels of financial literacy among personal and business borrowers are a significant challenge for financial institutions across many industries. In the UK, for example nine out of ten consumers feel that they are undereducated in terms of personal finance, according to research published in Business Insider. Without a basic knowledge of their financial situation, customers will struggle to manage their credit

effectively and are more likely to incur debt or have more trouble paying it off. Improving financial literacy starts with an accurate understanding of your current situation. That’s why personal finance digital services like M/ int, which has 15 million users, and Personal Capital, which has an estimated 1.7 million users, have become popular. The main obstacle for these services is that they often require bank login details to access information. This practice raises security questions — for example, if a banking customer hands over their online banking username and password to a third-party, you then have to question whether there are sufficiently robust cybersecurity protections to keep that data safe, and also what guarantees they have in place to assuage any customer concerns. These services are not run by lenders, and customer loyalty to their bank may decline if they feel they are getting better financial insights and features from a third-party. It is also a critical reason for the surge in successful challenger banks in the past few years, such as Monzo, Revolut and Starling, which all offer clear insights for customers build around solid self-serve applications. Incumbent banks have been left to catch up. It is worth assessing how third-party services make use of such features to develop ideas relevant to your own offerings. Similarly, you might consider adding new features to help your customers to visually understand their spending and indicate whether they are making progress towards their financial goals, such as a savings milestone or progress

towards paying off loan. The same capability also matters for small and medium-sized businesses that may lack a full accounting and finance team. You could present oversights dashboards to business owners to see all of their loans, savings, and other financial activities from one unified place, making the need for additional services platforms redundant. Offering financial management services to customers in this way can improve customer loyalty by giving customers one-stop shopping for their financial information. Operationally, that also means less of a burden on service staff as more information is freely and directly available to customers.

What’s next? Overall, the growth of open banking technology can help you to save time and money when you onboard new customers. It offers the type of speed that corresponds with same-day delivery expectations created by large retailers — a huge attraction for both new and existing customers — to create rich digital experiences. As well as educating and assisting customers in meeting their financial goals, it also promises lenders faster verification and identity checks, more in-depth information available to underwriters, and a bigger picture of an applicant’s financial history and affordability. White Clarke Group uses open banking as part of its customer direct module to empower our business customers, helping them to improve the quality of data they collect. The article is based on information from the firm.

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SME PERSPECTIVES

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SME PERSPECTIVES

The Road to Recovery:

Supporting Canadian Small Business Owners

his has been an incredibly difficult year for businesses of all sizes, and owners of small and medium-sized enterprises (SMEs) have been especially impacted. SMEs regularly face numerous costs that account for a considerable amount of working capital, including suppliers, leases and mortgages, and payroll. Most of the time, SMEs don’t have the ability to cut costs on these important expenses, and as a result, have faced the challenge of finding the working capital they need to keep their businesses alive. According to a recent survey study from Amex, only (40 percent) of SMEs believe that with their current cash flow they can maintain operations for more than six months. And while many SME owners have creative ideas to fuel growth and feel inspired to reinvest in themselves and their businesses, they see access to funds from financial lenders as an essential factor in being able to do so. These impacts are not only limited to the health of Canadian businesses. Many Canadian business owners have had to make extraordinary personal sacrifices to keep their doors open during the COVID-19 pandemic, with almost half of SME owners (43 percent) having made personal sacrifices to protect businesses. The trade-offs have been significant with activities such as forgoing personal purchases and vacations, mortgaging their houses, businesses, and other assets to stay afloat topping the list. Despite these challenges, the resilience and optimism of small business owners continues to inspire us, as many SMEs adapted quickly and strategically to keep the lights on. “The past year presented challenges no one could have foreseen, but the optimism felt among Canadian business owners is a true testament to the agility and strength of entrepreneurs”, said Paul Roman, Vice President & General

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Manager, Global Commercial Services at American Express Canada. “After the global turbulence of 2020, Canadian SMEs are working tirelessly to get back on track and need our support now more than ever.” It’s not uncommon for moments of crisis to drive innovation, and we’ve seen this trend emerge among small business owners, who have creative ideas around growing their businesses. In fact, according to Amex’s recent survey, 34 percent of Canadian SMEs have resolved to find new ways to grow their business in 2021, such as expanding their digital footprint or ramping up their marketing. The eCommerce and digital space is more important than ever for SMEs to connect with their community and customers. And with the COVID-19 pandemic accelerating the rise in digital payments, fintech can certainly play a role in the recovery of small businesses. Fintech technology offers SMEs more options when it comes to accessing the cash flow they need, managing supplier payments and more. Furthermore, innovation in financial services also helps reduce barriers in lending, allowing small business owners to grow and thrive on the road to recovery. To pass on the key advantages of fintech innovations to customers, Amex recently partnered with global originations platform Linear to launch American Express Business Loans in Canada. Through Linear’s digital platform, eligible current SME customers can now access funding through a simple and quick application and approvals process for business loans. “Our partnership with Linear is really what sets us apart in what we can offer Canadian SMEs. Linear allows us to introduce unsecured loans to SMEs while harnessing the capabilities of its world-class digital platform to ensure

a quick and simple online application and approval process”, said Roman. Canadian small business owners have dealt with a lot of challenges over this past year and applying for a loan should not be one of them. Through Linear’s digital platform, a select group of Amex’s small and medium enterprise customers in Canada can now access unsecured funding from $5,000 to $250,000, with annual interest rates from 6 percent APR and payment terms between 6, 12, 18 or 24 months depending on their needs. This partnership with Linear also further showcases Amex’s commitment to backing Canadian SMEs by providing them with the business solutions they need to recover and is a transformational first step in establishing Amex’s leadership in SME lending in Canada. While the Card is still a key B2B payment tool for SME customers, Amex is looking to build its payment capabilities beyond-the-Card. While it’s difficult to know what the future holds during this time of uncertainty, Canadian SMEs are optimistic about the future and determined to do whatever it takes to ensure their businesses survive. According to survey findings, 48 percent of SMEs feel optimistic for what 2021 holds, while only 12 percent feel pessimistic, and 14 percent are unsure. It’s this optimism that inspires Amex to provide tools and services to help Canadian SMEs rebuild. “Supporting small businesses is core to our business strategy and we continue to highlight their importance to the local economy, connect them with more customers and provide them with multiple payment and cash flow tools to help them grow and prosper,” said Roman. Like Canadian SMEs, Amex feels optimistic about the future of small businesses in Canada and will continue to back these businesses with the cash flow and payment solutions they need to succeed.

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LOYALTY & TRANSACTIONS

Retail Reimagined

PHOTOS COURTESY CANADIAN TIRE CORPORATION

An Interview with Shawn Stewart, Senior Vice President, Customer and Triangle, Canadian Tire Corporation

By Stephen Shaw

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raditional retailers learned a harsh lesson over this past year. Slow to make the transition to omnichannel commerce, they had misread the slow gradual rise in yearly online spending as a sign of shopper disinterest. Until the pandemic hit. The abrupt surge in online shopping left many retailers scrambling to respond. As foot

Shawn Stewart

traffic dropped off sharply due to restrictions on in-person shopping, they were forced to close stores. Unable to make up the difference in eCommerce sales, many retailers were pushed to the brink of insolvency. This financial carnage may have been the tipping point for the reinvention of retail. The industry has finally woken up to the fact that

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LOYALTY & TRANSACTIONS shopping habits have radically changed. And as product manufacturers open up their own digital storefronts, the era of retail hegemony may finally be over. Retailers will need to evolve beyond their historical role as the primary distribution channel of merchandise. In Canada one retailer has stood out above all others in transforming its business model — the century-old Canadian Tire. In the past the company has fended off incursions by U.S. giants like Walmart and Target eager to muscle in on its turf. The company’s resiliency is partly explained by its geographical footprint — most Canadians live within a 15-minute drive of a store — but also by its dealer network which gives the company a strong tie to each local community. In 2019 Canadian Tire was recognized as Canada’s most admired brand in Leger’s annual consumer survey. It rightfully owns the honorific “Canada’s Store”, a far cry from the days when it was mocked as “Crappy Tire”. This past year, despite all of the havoc caused by the pandemic, Canadian Tire increased comparable year-over-year store sales by 11 percent across its banners. Ecommerce sales more than doubled, an impressive feat considering the company actually backed away from online selling at one point, until it came to its senses seven years ago and began to invest heavily in its digital and eCommerce capabilities. A big part of the company’s recent success is attributable to its embrace of digital-first marketing, thanks to its 10-million-member Triangle Rewards program. Launched in 2018, Triangle Rewards is the digital version of the famously popular Canadian Tire Money, once looked upon affectionately as Canada’s second national currency. The Canadian Tire Corporation (CTC) Executive in charge of loyalty and insights is Shawn Stewart who took over the role six years ago. Amongst his many accomplishments has been the stewardship of the Triangle program and the creation of an AI-driven recommendation engine which powers seven million weekly personalized offers.

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Stephen Shaw: Your CTC stores did amazingly well this past year in spite of the pandemic. What explains the lift in sales? Shawn Stewart: Customers came to us as a one-stop shop. The thing with the Canadian Tire brand is you can always find things you never knew you needed. But we’ve really developed our presence in the essentials as well. The strength of our dealers really helped because they were very easily able to launch curbside pickup and new capabilities that we didn’t have before COVID. And, in talking to customers throughout the pandemic, what we heard, loud and clear, was the strength of our brand, the love for our brand, and the appreciation for all the safety measures we were taking. Our eCommerce site was overloaded with volume, but we quickly got that right. And we actually acquired new customers, especially young adults, who joined the Triangle program for the first time during this period. We really focused from a merchandising standpoint on what we call “boredom busters.” So, people with kids, spending a lot of time in their backyards, buying barbecues, patios, toys. All those core categories were right in our sweet spot. And the number of bikes we sold was just out of this world.

Shaw: Were there merchandise categories that declined in sales?

Triangle Rewards grew from the well-known Canadian Tire money system

Stewart: The automotive business. People were staying at home and not driving as much. Although on the flipside, we have a segment that we call the “Auto Enthusiast” and they loaded up because they had time on their hands. They were tinkering around with their vehicles. So, a lot of DIY categories in that segment were up.

Shaw: Were there supply chain issues? Take bikes, for example. Did you suddenly find yourself having a tough time restocking? Stewart: In that specific case, our SportChek business was closed, so we had a bunch of available bike inventory. And we’ve always had great relationships with

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LOYALTY & TRANSACTIONS our vendor base, so that put us in a good position to be the number one supplier in all the top-selling categories.

Shaw: What permanent shifts in spending habits are you likely to see coming out of this pandemic? Stewart: We’ve mapped our categories of business to what we call internally “jobs and joys”. These are the everyday things that make up people’s life in Canada. And we talk to customers. We understand their sentiment, their confidence in the economy, their job security, their opinion around saving versus spending. And those are good indicators. But customers don’t always know what they’re going to do. And so, we’ve mapped out various scenarios. If demand continues the way it’s going, we’ve got a plan. If it tails off, we’ve got a plan. But we found our customer base is quite resilient. And we’re in a lot of essential categories, right?

Shaw: We’ve seen massive consumer adoption of eCommerce this past year that caught everyone by surprise. How does that factor into those scenarios? Stewart: We’ve definitely leaped forward a couple of years in eCommerce growth. But overall, we still feel our strength is the local store — the ability for shoppers to get what they want immediately. There’s real attachment to the brand. We’re not just another retailer in customers’ eyes. They want to support Canadian brands. Many grew up with us. We’ve also got the unique ability through the Triangle data to understand the channel shift — and not just what people are buying, but what they’re searching for. A huge focus for us is using the online channel to support in-store conversion because we can track the customer across channels and store banners. So, now’s the time for us to engage our customers. Another thing we’re focused on is bringing customers into our “owned audiences”. How do we get them signed up for our mobile app, for email channels?

Shaw: Like everyone else, I go to Canadian Tire for certain things.

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Digital apps allow for more sophisticated data collection

Once I was looking for a power washer and I used your mobile app to find the nearest location that carried the item I was looking for. It guided me right to the nearest location. Then I walked into this massive store and now I’ve got to figure out where to find it. So, is there still a gap connecting the experience end-to-end? Stewart: There’s definitely room for improvement. I actually think we have a best-in-class wayfinding feature called “Fast Find” in our Canadian Tire mobile app that many customers probably don’t realize we have. It’ll tell you if the product you want is in-stock and in which aisle to find it for each different store.

Shaw: With your mastery of certain merchandise categories, there must be an opportunity to make the instore experience more engaging than simply finding and buying a product. Stewart: No, absolutely. There’s a lot of decision support we could be doing in the pre-purchase and post-purchase shopping stages: how to use your barbecue, how to set up your patio, how to enjoy the

products you buy from us. We have a lot of great content. We just need to offer it up in a targeted, relevant way to enhance shopper knowledge and confidence.

Shaw: You’ve got 10 million members of your Triangle program. Amazon has Prime, of course, but not the store footprint you do. Could Canadian Tire soon rival Amazon in retail commerce here in Canada? Stewart: Yeah. But we want to play our own game. Certainly, the data we have is just incredible. Like I joke with the team, Stats Can should be calling us every month to know what’s going on. We know Canadians. If you know exactly what you want, Amazon’s fantastic. You search a SKU [stock keeping unit] and get what you want. We’re not going to compete the same way. We think our local differentiation, the strength of our store network, and the interaction with customers across channels is key. And we saw it more than ever during COVID. Customers wanted immediacy. And so we saw them coming in droves to the store. Amazon’s formidable. No question. But we’ve got to play our own game.

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LOYALTY & TRANSACTIONS

Shaw: Who do you view as your main competition these days? Stewart: Well, it depends on the line of business. Canadian Tire has a broad set of competitors. SportChek and Mark’s would be different. We’ve got a bank, too. On the credit side we’re fighting for top-of-wallet status. I guess you could say it’s just about everyone.

Shaw: That makes sense. The “everything store” has everybody as competition. Now, you’ve been quoted as saying that if you offer a killer digital experience, you may not need a loyalty program to understand your customers. As the guy running the loyalty program, what did you mean by that exactly? Stewart: If you look at the traditional definition of a retail loyalty program, its highly reward driven based on purchase frequency. You issue and redeem currency. “Canadian Tire Money” is an important part of our brand heritage, but the program’s got to offer much more than that. We’ve got great profile information on our customers — so it’s how we use

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Canadian Tire’s Triangle Rewards program is geared towards managing its portfolio of customers and banners.

that data. And it may not be in the form of loyalty rewards. Maybe its targeted discounts, or exclusive access to products. There are many different ways to create value for members that go beyond just having a loyalty currency.

Shaw: Most loyalty programs are promotional programs in disguise. Figures I’ve read suggest that fewer than half of loyalty members say it

makes them more loyal to the brand. Should loyalty programs become a gateway to a more meaningful experience? Stewart: Here we’ve stopped calling Triangle a loyalty program. We call it a “customer platform”. And I think words are important because when people think of loyalty programs, they think of the redeemable currency. As I was just saying,

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LOYALTY & TRANSACTIONS segment we call “the active family” who have young kids at home. They really over performed during the COVID period. So, we’ve started using segmentation to understand where our growth is coming from. How do we actually move customers across brands? For example, SportChek attracts a younger customer, and we want to grow that segment within the Canadian Tire brand. We know the entry point for them is often the camping business, so then we can build programs around that insight. It’s really powerful to understand the conversion paths that customers are taking.

Shaw: Do you find it hard translating customer strategy into insights merchandisers can relate to? Stewart: Yeah, it’s a process. Since Triangle launched, we’ve made a lot of progress. On thing that’s helped is empowering the merchants to access the data on their own, using internal BI tools. So, as they’re reviewing their annual plans, they’ve got the data. And then the second is proving the business value. So, actually creating some use cases, such as “Let’s use customer data to improve the pet business.” So, very mindfully bringing together cross-functional teams to pilot a program and then measuring the value. And that’s gone a long way as well. There is real power in understanding the conversation paths customers are taking.

the power of Triangle doesn’t need to be Canadian Tire money. I think Canadians love it. And we’ve seen, as we launched Triangle, the halo effect on our other brands, like SportChek and Mark’s. Many customers didn’t realize they were part of the same family of companies. We should be thinking of what can we do in-store? What can do from an e-com perspective? What might we do with partners? So, a value prop that goes beyond traditional rewards is hugely important for us.

Shaw: With so much customer profile and purchase data, how do you even think about segmenting a base as large as yours? What kind of segmentation model do you use?

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Stewart: We look at two different types of segments. One is a value-based segmentation: current and lifetime value. We model potential value on a five-year time horizon. And all of this is done at a CTC level, across our banners and assets. And the other is simply behavioral: what are people buying, their needs states, and the intersection between them. You run the models and you can get a hundred segments. We landed on thirty-seven.

Shaw: Thirty-seven? Not 35, or 40, but 37. Stewart: Yeah. It’s been incredibly useful for grounding the business in the customer. The 37 segments ladder up to macro segments. Our key target is a

Shaw: Part of your personal background was working at Air Miles for several years. What learning did you gain that was transferable to your current mandate? Stewart: The power of the network effect. Being able to see customers going from one sponsor to another. That has very much influenced our approach here. The advantage we have is the ability to use data in an unfettered way. And then just the power of the customer data. Finding a better mix between the mass and targeted channels — the ability to prove not just that targeted marketing works, but it’s scalable.

Shaw: Being able to cluster members by their affinities and interests, and then catering to those preferences,

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LOYALTY & TRANSACTIONS must represent a massive opportunity. Stewart: It is a massive opportunity. Particularly what we’ve seen in the pandemic. Home exercise, bicycling, the new hobbies that people took up. I think it’s perfect for our brand.

Shaw: Do you have point on reimagining all of this? Stewart: Our team is accountable for everything customer related. But we need to amplify the retail value proposition. And so, we work closely with the banner heads. And it’s exciting. I think everyone recognizes that we do need to go beyond selling products.

Shaw: How do you actually measure loyalty? Obviously, in part, behaviorally. But what about attitudinally? Emotionally? What are your composite loyalty measures? Stewart: We’re very good at tracking customer sentiment. We use net promoter score across all of our channels and endpoints. We track loyalty by segment. So, for example, we track a driver called “Cares About Canadians”, and that metric was off the charts during COVID, with the actions our dealers took, with our relief fund1. And then I would say more traditional financial metrics: lifetime value, repeat visit, retention rates, the number of active customers, how much each customer is spending. We’ve also got a panel of 180,000 Canadians that we lean on. I think it may be the largest proprietary retail panel in the world. And we leaned on that heavily during COVID. We also do these events called “coffee talks” where we’ll get 10 to 12 customers in a room for just a casual conversation that really helps to know how customers are thinking, and to develop empathy with the customer.

Shaw: You are collecting a lot of data. You must have created a “golden record”2 by now. Stewart: We’ve done a great job of building that central view. We tagged the

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web so that if someone writes a review, someone logs into the website, someone uses the mobile app three times a month, we know all of that. So yeah, it’s a powerful tool, particularly understanding the impact of our digital activity on in-store behaviour. It’s been really enlightening to understand how the online channel helps in-store conversion.

Shaw: How do take all of the data analytics you do and convert it into business language that other stakeholders, like merchandisers, can understand? Stewart: I’ll give you a great example. We launched a customer analytics tool — a BI platform that allows businesspeople to drill down to the category level, using the customer data. There was an end user at Mark’s who used this tool to develop an incredible, insightful view of their business. And we were not involved. So allowing people to just swim around in the data — not put too many controls around it. Just allowing the learning to happen. And Greg [Hicks]3, on our latest earnings call, was talking about the segments. And so, people hear that. They’re curious and want to learn about it. We’re providing the tools to allow them to do that. We’re in the background. Our team is doing all the plumbing and automation.

Shaw: Do you own the technology budget, or do you still have to work with IT to ensure that you have that right infrastructure in place? Stewart: It’s evolved. Three years ago, we would not have had data engineers on our team. And today we do. It’s become more of a symbiotic team working together. So, we don’t get into budget debates.

about overlaying high-value customer data to say, “This SKU is paramount to your best customer.”

Shaw: You talked earlier about looking across the full span of the customer relationship with multiple banners and brands. Has that changed the way strategic planning is done? Stewart: We think about managing a “portfolio of customers”, and a “portfolio of banners”. For example, if the “active family” is our priority segment, we need to map their needs to the “jobs and joys” we talked about. And we do white space exercises to identify gaps in the experience where maybe we need to extend assortments, for example. I think we’re actually in a much better position this year, particularly with Greg and Susan’s [O’Brien]4 leadership, because it encourages horizontal rather than vertical thinking.

Shaw: Is there a need to find new talent, new skillsets, fresh thinking in order to accelerate your transformation? Stewart: Yeah. It’s a great question. And I’ll go back to what I said is this horizontal thinking approach. So, if I’m a merchant, or in marketing, I need to understand the customer journey, using the data we have. So, the ability to analyze and synthesize information is important. For a merchant, it might not be all about adding new product lines or brands. For a marketer, it may not be all about getting an offer in front of a customer. So, yeah, the use of information — being able to empathize with the customer — there’s no question: it’s all changed.

Shaw: Boy, over my long career, I can tell you that marketing and IT were never copartners in anything. How does AI fit into the picture?

Stephen Shaw is the Chief Strategy Officer of Kenna, a

Stewart: We issue seven million one-toone offers every week to customers and that’s completely machine learning driven. But it’s early days. So, for example, from a supply chain perspective, we’re thinking

1 The COVID-19 Response Fund donated $5 million to support relief and response efforts. 2 A “golden record” is the most accurate and complete version of a master data record. 3 Greg Hicks is the President and CEO at Canadian Tire Corporation 4 Susan O’Brien is the Chief Brand & Customer Office

marketing solutions provider specializing in delivering a more unified customer experience. Stephen can be reached via e-mail at sshaw@kenna.ca

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EQUIPMENT FINANCE

Pandemic Tops the List of Disruptors to Watch in 2021, say FCC Economists

he pandemic was undoubtedly the single biggest shock to the Canadian agriculture and food industry in 2020, and its impact will have some lasting effects, according to Farm Credit Canada’s (FCC) economics team. “A year ago, we were saying climate change, protectionism and automation had the most potential to not only significantly reshape Canada’s agriculture and food industry, but also disrupt the global economy,” said J.P. Gervais, FCC’s chief agricultural economist. “I think it’s safe to say the emergence of the global pandemic has added fuel to that fire of change and now tops our list of most significant trends to watch in 2021.” According to FCC’s twopart blog series, the upheaval caused by the pandemic continues to test global supply chains and disrupt trade patterns around the world, as countries apply various measures to stop the spread of the virus. It has slowed or shuttered momentarily food processing facilities, disrupted movement of Canadian agriculture commodities

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and processed food to several export markets, and significantly altered consumer buying habits, especially when it comes to in-home dining and grocery shopping. At the same time, geopolitical tensions added to the uncertainty brought on by the global pandemic, shifting trade flows. To make matters worse, climate change continued to wreak havoc in agriculture, spawning extreme weather events in parts of the world. All told, 2020 will go down as a year of major disruption on almost every front. However, as much as the pandemic has caused supply chain disruptions, it has also created an opportunity for Canada to further entrench itself as one of the world’s most trusted and reliable suppliers of food and agriculture commodities, according to Gervais. “The pandemic has only heightened consumer demand for locally sourced food, accelerating what was already a pre-pandemic trend,” he said. “At the same time, the needs of major food importers and our key export markets will grow even if economic uncertainty

continues to prevail in 2021.” There are clear signals pointing to strong domestic and global demand. He notes, for example, higher savings and pent-up demand that could drive growth in red meat consumption, which could be bolstered by the possible reopening of food services in 2021. Globally, weather challenges could strengthen import demand of major grains, oilseeds and pulses. Global supply chains are still signalling that Canadian exports are important. Highincome economies, such as Japan, the United States and the European Union, continue to have the potential to further tap into Canadian exports. China — given its size and growing economic strength — also holds potential for opportunities. “If the stars align and we are able to quickly turn the corner on this pandemic in 2021, we could see an economic rebound that allows us to mostly recover from last year’s 4.2 percent global economic contraction,” Gervais said. “By meeting the needs of importers during a pandemic, Canada has an opportunity to

further strengthen its position as one of the world’s leading agriculture exporters.” The big question remains how the health and economic fallouts from the pandemic will intersect with climate change and geopolitical tensions to impact agricultural production and trade this year. “While there are many challenges on the road ahead, there are also many opportunities for Canadian food producers and processors.” Gervais said. “The key is to have a good risk management plan to ensure your business remains strong and viable to take advantage of those opportunities as they arise.” By sharing agriculture economic knowledge and forecasts, FCC provides solid insights and expertise to help those in the business of agriculture achieve their goals. For more information and insights on what to expect in 2021 and beyond, visit the FCC Economics blog post at fcc.ca/AgEconomics. FCC is Canada’s leading agriculture and food lender, with a healthy loan portfolio of more than $41 billion.

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EQUIPMENT FINANCE

Ritchie Bros. Highlights Final 2020 Top I Equipment and Truck Categories in Latest Market Trends Report

n a year of uncertainty, with a health and economic crisis impacting most of the world, Ritchie Bros. made the shift to 100 percent online bidding in 2020, showcasing its investment in technology by driving recordbreaking demand and strong pricing for equipment and trucks. In fact, Ritchie Bros. latest Market Trends summary report, which is now available for download at rbassetsolutions.com/markettrends-report, shows U.S. truck tractor pricing up 15 percent year over year, while vocational trucks, lifting and material handling, and heavy equipment are up 10 percent, 9 percent, and 5 percent respectively, compared to same time period last year. Ritchie Bros.’ Market Trends application is an independent part of Ritchie Bros. Asset Solutions (rbassetsolutions. com), a cloud-based asset management and disposition system with a suite of tools and services to help customers better manage, analyze, and sell their assets. The March 2020 special edition Market Trends summary report highlights equipment categories that performed particularly well last year, including truck tractors, excavators, MFWD tractors, telescopic forklifts, and more. “When millions of businesses shifted to remote working, people started to

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shop more online, resulting in an uptick in shipments and a direct impact on the transportation industry,” said Doug Olive, Senior Vice President, Pricing, Ritchie Bros. “In 2020 Ritchie Bros. sold 18 percent more truck tractors than 2019 and median quarterly pricing was up in Q2 through Q4, with no signs of slowing demand. In fact, in December 2020, watch lists for truck tractors in upcoming events was three times that of December 2019. Ritchie Bros. also saw record volume and pricing for flatbed trucks, van trucks, and van trailers—all of which are tied to the ‘last mile transport’ trend which grew exponentially last year.” Olive added, “We also saw a significant rise in residential real estate construction in 2020 as remote workers looked to move away from city centers and/or decided to focus on home improvements while in isolation. Not surprisingly this has resulted in solid to strong pricing for all different types of earthmoving equipment, including multi-terrain loaders, which saw more volume and better pricing than 2019; as well as excavators and dozers, both of which saw slightly fewer units year over year, but with much stronger pricing.” Ritchie Bros. Used Equipment Market Trends summary report also includes mix adjusted used pricing indices, including comparison charts.

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EQUIPMENT FINANCE

Fleet Complete’s 2021 Outlook Report Reveals Key Insights on Shifting Telematics Industry

“U

npacking 2021 for Fleet Telematics in North America, Europe, and Australia” provides datadriven insights into the commercial vehicle industry, detailing trends gathered directly from stakeholders within the industry’s ecosystem. Fleet Complete, a global provider of connected mobility solutions for business fleets, assets, and mobile workers, has released its annual report Unpacking 2021 for Fleet Telematics in North America, Europe, and Australia, focusing on commercial vehicle industry trends and insights. Between October and December of 2020, Fleet Complete conducted a Voice of Customer (VoC) research study, focused on its fleet clients. With survey data captured from fleets of all sizes, the report reveals findings on both the supply and demand sides

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of fleet telematics industry, identifying key trends and changes in the market today. “Last year was all about adapting to the ‘new normal’ during the pandemic, placing a spotlight on fleets as essential services. This year, we continue to see growth leading to record market penetration, with customers demanding more of their telematics solutions,” explains Sandeep Kar, Chief Strategy Officer at Fleet Complete. The analysis in key markets indicates that fleets in North America, Europe, and Australia will add 3.2 to 3.9 million new subscriptions in 2021, representing 16 percent year-on-year growth. The top three factors for investing in fleet telematics solutions in 2021, according to the study, are: 1. Real-time tracking of vehicles and assets 2. Compliance and regulation 3. Enhancing fleet safety through driver coaching

Among newly added subscriptions in 2021, the industry will see a significant increase in, and customer appetite for, OEM connectivity (factory-fitted telematics hardware). The VoC also noted increased demand for video telematics, particularly from heavy-duty fleets: Seventy-three percent of surveyed light-duty fleets and 68 percent of heavy-duty fleets showed interest in either choosing only factory-fitted telematics or a combination of factory-fitted telematics hardware for some vehicles and aftermarket hardware for others; and 63 percent of light-duty fleet customers and 81 percent of heavy-duty fleet customers will evaluate video telematics or are already using a video telematics solution. Other notable shifts in customer views include the following: 1. Fleet vehicles are regarded more as a service than a product

2. Telematics insights are becoming more predictive than descriptive 3. Performance success revolves around owning vehicle data transactions rather than just owning vehicles.

These shifts will affect how solutions and services are engineered, and will dictate the importance of partnerships in the future, thus consolidating the industry ecosystem. The report includes a number of recommendations for various stakeholding groups within the ecosystem – fleet-owners, vehicle manufacturers, wireless telecom providers, the financial services industry, and telematics solution providers. These recommendations provide a data-driven approach to success for organizations within the commercial vehicle industry in 2021.

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BANKING

Disruption in Banking Industry:

2021 and Beyond T

By Chris Catliff

he past 12 months have been a crash course in disruption. The global pandemic has affected every industry, every country and every person. I have seen many ups and downs in the financial services industry during my 21-year tenure as CEO of BlueShore Financial, a boutique full service financial institution in Vancouver, BC, but the tests presented by COVID-19 are a first. The pandemic has been a significant catalyst for change. It brought unparalleled challenges for the financial services industry; however, it also positively accelerated the drive to develop new digital operating models, upskill workforces, and re-examine risk management playbooks. COVID-19 fast-tracked disruption by about a decade. What does this mean for future trends in Canadian banking?

A digital-human hybrid A 2019 Wells Fargo report predicts that 200,000 banking jobs in the US will be lost to automation and artificial intelligence in the next ten years. I expect a similar phenomenon will occur in Canada. As COVID-19 led to a cross-sector working-from-home ‘revolution’, as well as the temporary or permanent closure of many businesses, the news of financial services’ branch closures hit the headlines on a regular basis. But, I do not believe that the future holds a total closure of bricks and mortar businesses. While industries, including financial services, need to evolve and up their digital game, when it comes to people’s finances, the need for connection and human touch endures. Business intelligence, data, and artificial intelligence undoubtedly play a significant role in the financial services industry and will continue to do so in the future. Yet, there are elements of client servicing and care that “bots” simply cannot offer. Robo-technology cannot account for the whole person nor

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alleviate a client’s deep felt anxiety. Human advisors provide expertise, trust, and comfort when dealing with topics as emotional as one’s finances and security, particularly in times of global uncertainty. For example, in our 2020 BlueShore Financial Client Experience Survey, 62 percent of clients said their preferred method of interaction with their advisor is still a face-to-face meeting. While everyday banking is well suited for online transactions, intricate and complex financial discussions such as planning for retirement, intergenerational wealth transfer, or a child’s down payment on their first home, often require face-to-face, personalized advice from a professional. However, digital advancements will certainly continue to change the way financial advisors interact with their clients. At BlueShore, our strategy encompasses a “high-tech, high-touch” approach. In other words, we use technology to seamlessly enhance and strengthen, rather than replace, our deep relationships with clients. Today, clients say, “show me you know me.” With this in mind, we gather and harness data and use AI to provide personalized experiences and predict products and services clients may need, before they ask for them. Technology provides convenience and efficiencies, but there are times when human connection and expertise reign, so a digitalhuman hybrid model is something most financial institutions should work towards. Why not just do it all over Zoom, you ask? The pandemic has triggered new studies finding on-screen eye contact is very different to direct in-person eye contact. In-person eye contact divulges much of true intention and therefore trust, but this cue is most often missed in digital communication. Simply put, they may watch your face and you may watch theirs, but you do not look into each other’s eyes. Often, we look

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BANKING not at the other person but at the picture of ourselves. In addition, with digital-only communication, we miss the benefit of seeing one another’s body language. Face-to-face communication provides clear intention through body language and facial expression, and this is critical in providing reassurance. Reducing communication to two-dimensional faces means we miss non-verbal cues, complex nuances, and the mini-expressions required for meaningful communication. It’s true that as clients become more comfortable with online and digital banking options, the need for a large amount of bricks and mortar real estate will likely lessen for the financial services industry. It will not however, diminish completely. In fact, many branches were already shifting from fewer teller “transactions” to more “advice-giving” in their function and design. With the savings from a few select branch closures, financial institutions can invest further in their digital strategy to provide a more seamless digital and human hybrid experience for clients. Going forward, financial institutions that do not embrace digital disruption and technology advancements will be left in the dust.

Upskilling from the inside The global pandemic has shown senior leaders that finding new ways to build business resilience is critical for survival. With technology rapidly evolving, the way we work is changing, and organizations of all sizes must adapt and address workforce challenges and opportunities now, to future-proof themselves for later. Foundational to success here, is developing talent from the inside. A recent PwC survey observed that 75 percent of Canadian CEOs are concerned about the availability of key skills in relation to their growth prospects. According to the same survey, many CEOs have also admitted they’re behind in establishing upskilling programs that focus on developing a mix of soft, technical and digital skills. With the battle for top talent ongoing, now is the time to focus on retraining and upskilling the employees you already have to help drive innovation and growth,

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moving forward. Even if your organization has implemented new technology, it will only be as good as the employees who are able to successfully operate it, explain it, and use it to its full potential. While being tech savvy and having digital acumen are important skills to have, it doesn’t end there. The “softer” skills that organizations need, such as creativity, empathy, problem solving and leadership, are the traits that will help employees to think, act and flourish in an unpredictable and rapidly digitizing world. Talent remains key to strategic success today and in the future. Financial institutions will need to encourage and support further learning and development at all levels in order to thrive. Examples of upskilling from BlueShore Financial include our yearlong executive leadership development program that provides our management level employees with the skills required to successfully coach and lead their teams, particularly in the digital era. We have also implemented a Digital Ambassador program, whereby representatives from across the organization test new software and equipment before it is introduced to the broader organization. They become the experts within their teams to aid with the associated roll-out and change management in their areas.

Reviewing and adapting to risk The COVID-19 pandemic has paradoxically reminded us to be prepared for uncertainty. Businesses of every kind need to evaluate their risk exposure for possible unforeseen and unprecedented events. The good news for organizations with strong crisis management plans in place is that the pandemic has thoroughly tested these plans and shown any gaps using real and timely information. Now is the opportune moment to fine-tune these plans and incorporate lessons learned from your pandemic response. On the flip side, if the pandemic hit and your organization’s crisis plans were stale or outdated, consider yourselves reminded of the criticality of creating and updating these plans regularly, and of fire-walling your data. As digitization and remote work rapidly accelerated in 2020, traditional network

perimeters and boundaries between work and home life blurred. For many financial institutions, this was the first time employees were permitted to bring technology equipment home and access the corporate network remotely. Because cyber-criminals are especially active in times of global uncertainty, the need for increased diligence and cyber-security awareness is high. Hackers and cyber scammers are continuously trying to take advantage of the remote worker. Financial institutions need to continually evaluate risk exposure for the next unforeseen event. An additional area of focus for FIs is to review the diversification of your clients’ portfolios. While the goal of diversification is to prepare for market volatility, a good practice is to evaluate clients’ portfolios through the lens of their recent experience during the pandemic. Is the risk tolerance level still appropriate? Should it be lowered due to new financial strains or goals? Should it be increased in light of lower income and interest rates? The answers will depend on the client’s personal preferences, life stage, acceptance of a lower goal at retirement or acceptance of delaying their retirement. While these factors are traditionally evaluated regularly, the pandemic necessitates a deeper review of the client’s full financial picture, layered with more empathy than a robo-advisor can be programmed for. Re-built confidence about your future prospects from a newly-trusted advisor is worth the time of a branch trip. Moving forward, branches will not obsolete, but those who solely rely on them will be. In the future, the biggest bang will come from those institutions who create seamless banking experiences using the best “TNT” (talent and technology). Chris Catliff is President & CEO, BlueShore Financial. A 30 year veteran of the financial services industry, Chris Catliff has been the CEO of BlueShore Financial since 2000. As CEO, he has led the organization’s successful rebranding, technological innovation, and strong organic growth, including Assets Under Administration reaching $6.5 billion. Chris has a broad experience in leading and developing financial institutions through an emphasis on innovative service, engaged employees and premium client service.

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Five Industry Trends Affecting Payments in 2021

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PAYMENTS

By Marius Galdikas

he past year has been a rollercoaster for the payments industry, as it had to adapt to new challenges posed not only by the ever-changing needs of the consumer but by the pandemic as well. To shed some light on what the future has in store for the industry, here are my insights about what trends and solutions are likely to thrive in 2021.

BaaS will continue gaining traction Banking-as-a-Service, or BaaS, offers the provision of banking processes, meaning, it allows to embed financial services into any company. Using BaaS enables to focus on product innovation, rather than infrastructure development, as the required banking stack can be integrated via API-driven platforms. Sometimes referred to as “embedded finance”, the service creates an opportunity for any tech company to become a fintech in a shortened timeframe. Embedded finance paves the way for creating financial products, as companies do not have to start the process from scratch: build a banking infrastructure and only then start innovating. For some, BaaS is the only way they could start developing products in the first place, as laying the groundwork before that requires a solid investment. In both cases, BaaS allows to delegate a lot more resources towards product innovation. The interest in BaaS will continue to grow, as it could help tech companies to gain a significant advantage against their competitors.

Market players in-pursue of more regulation Companies operating in under-regulated sectors have started to appeal to policy makers for increased regulation. A good example of the phenomena in the payments market is the crypto industry, which has voiced its concerns, hoping to receive clear and unified standards that

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would help them mitigate some of the market resistance. Having a clearly defined regulatory framework would help industries, currently viewed as more ambiguous, to position themselves as reliable allies and pave the way for stronger partnerships with other market players. Not to mention it would help to diminish associations with fraudulent activities, reassuring current and potential clients. The drive towards stricter regulation is likely to arise from other industry players as well, which is a quite welcome change, as it could bring more harmony into the entire payments’ ecosystem.

Decreasing third-party reliance Data breaches due to external vendor vulnerability, as well as a few widely escalated incidents that called into question their reliability in general, are forcing companies to re-think the risks of having third-party suppliers. This has encouraged payment providers to search for solutions that would help take matters into their own hands, e.g. move more operations in-house, and lessen dependency on any intermediaries. Such incidents give an incentive to reconsider having third-party suppliers. Setting up capable in-house solutions allows providers to retain more transactional control and increase overall fund security since fewer parties are involved in the payment process.

Enhanced use of biometrics Using biometrics to confirm the buyer’s identity and approve transactions are among the rising trends in the market that are expected to evolve throughout the coming year. For consumers, the option to approve purchases by face, palm, or fingerprints would allow avoiding password overload, as all payment services in-use could be secured by a single personal feature. It would make the entire process faster, too. Moreover, this provides an extra layer of security, as personal features are harder to

replicate by scammers. In addition, a recent study revealed that 56 percent of shoppers would prefer using a biometric sensor on their payment card instead of a PIN, hinting at the increasing appeal of such solutions for consumers as well.

Increasing payments flexibility As consumers are unsure about what the future holds, market players are bending over backwards to mitigate their pandemic-related concerns, thus offering flexible solutions to better accommodate their expectations. This has led major market players, such as PayPal and Chase, to step into the new “buy now, pay later” market, which gives customers the option to pay off a purchase over a period of time with zero-interest and fixed-rate monthly instalments. The concept of flexibility encompasses not only delayed payment options but the rise of new payment platforms as well. For instance, WhatsApp, commonly known as a messaging app, is working on launching a payments service in India to increase inclusion in the digital economy, while Google is laying the groundwork for Plex — a mobile-first bank account integrated into GooglePay. There is no doubt that consumer needs are constantly evolving. That said, the pandemic has greatly influenced which aspects have grown in importance throughout the past few months. Going cashless acted as a springboard for novel payment platforms, while future income worries encouraged providers to introduce pay-by-month model. With a fair amount of uncertainty expected to carry over to next year, this is only the beginning of novel solutions, designed to adapt to consumers‘ changing habits. Marius Galdikas is CEO at ConnectPay, an online banking service provider for internet-based companies, offering a wide range of payment solutions, including SEPA and SWIFT payments, IBAN multi-currency accounts, Mastercard online card payments, and merchant accounts.

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PAYMENTS

Five Trends Shaping the Recovery of Global Payments I By Bob Dowd

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t is no surprise that the global payments industry accelerated substantially in 2020. As the pandemic birthed arguably one of the biggest digital revolutions to date, more and more businesses are realizing the importance of having a global payments partner. Multiple factors have been the stimulus driving half a decade’s change in just a few months. Acceleration of digital adoption, preference for real-time payments, investment in AI and automation, and M&A’s have been the leading factors that pushed the industry to transform. However, the most prominent change can be attributed to developing customer preferences for speed and ease of use at competitive rates. In addition, stronger demand for data security enhancement and fraud prevention by customers increased the momentum of innovation which forced new players to enter the market. Advances in technology such as SWIFT GPI, DLT and others have also been the key drivers in the rapid growth of the industry. Our research shows that the payments industry’s total addressable market is $3.6 Trillion USD in core markets, with $245 Billion addressed by specialist players. The market has grown at 8 percent p.a. driven by specialists taking share from banks which gradually experienced decline due to COVID-19. However, the industry is expected to bounce back and return to preCOVID rates between 2021 and 2025, which means that the next five years will be crucial for

players in the global payments space. In order to secure their market share, specialist players will have to garner deeper understanding of market volatility and performance, primary customer preferences and the strategies they can implement to remain competitive. The top five trends we predict that will influence the growth of the global payments industry in the coming years are as follows:

Evolving customer needs will set the benchmark

The provision for fast, seamless, and trackable payments will become table stakes rather than a differentiator for payments providers. For example, moneycorp online offers its customers the ability to not only make payments online in multiple currencies, but also store payment and recipient details, manage exchange rates, and track transactions all in one place. The function of making payments will become part of a broader value proposition, linked through API technology to other elements of business such as their ERP, CRM, and Accounting systems. Customers will become more sophisticated in cash flow and risk management which will in turn impact how they manage their finances and choose their payments partner.

Enhancing technology to drive commoditization and reduced prices Our research suggests that half of

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businesses have their FX provider’s system integrated into their ERP software. This is a clear indication that technology is adapting to meet increasing customer needs as the majority businesses prefer payments providers whose technology fits seamlessly into their existing business model. Real time payments (RTP) are also gaining popularity and are becoming commercially viable in a number of regions. As per the latest FIS report, 54 countries now have active real-time payments programs, up from 40 in 2018 and nearly four times as many as in 2014. Long term technology is likely to shift to alternative rails such as Distributed Ledger Technology. Payments providers will need to be able to function across alternative rails to ensure costs are optimized and service demands fulfilled. Increased efficiency will continue to drive down prices and enable reduction in service costs.

Intensifying competition for every element of the value chain

The ecosystem addressing cash flow management has proliferated in recent years. Today, full-service players have a competitive advantage as they provide SMEs a ‘one-stop shop’ for all their

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business needs. B2B disrupters are successfully carving out a new niche for themselves using an end-to-end value chain model that satisfies the customer’s need for customized solutions. Increasing competition from fintech players is also making a significant impact on the industry as few global payments providers are now opting to onboard third-party payments solution providers as their partners, thereby further enhancing their value proposition. The payment gateway market was valued at USD 17.2 billion in 2019, and is expected to reach USD 42.9 billion by 2025. Convergence will be at the core of the transformation of the payments landscape, through 2021 and beyond.

Increasing cooperation between jurisdictions

Customer demands for an interconnected international payments landscape will flourish. However, the political challenges of doing so globally will make the ability of a global payments provider to offer their services in multiple geographic locations extremely important. We are witnessing common standards of this being implemented in pockets due to the complexities of international standards and regulations. However, we are seeing a rapid uptick in co-operation

between international businesses and regulators alike.

Differentiators will become commonplace

Specialist players will maintain a significant hedge in the short term as they will continue to serve the underserved segments, such as SMEs, a faster, cheaper and secure payments platform. However, eventually this will become the norm and other sources of differentiation will be needed like niche corridors, industry specific integration, and liquidity management to set your services apart from the rest. In a nutshell, the key strategic areas of focus for optimizing the value of business for all payments providers would be a combination of three vital elements — owning the customer relationship with specific client segments (e.g. SME’s), focusing on efficiency to drive down costs and constantly innovating to drive differentiation around products and services. To create a new generation of payments providers, studying emerging trends is the most important innovation task. Those that cling to old ways will be left behind. Bob Dowd, Chief Executive Officer of moneycorp Americas.

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PAYMENTS

Top Five Data and Analytics Trends to Power Growth in 2021

The Expert Panel Commentators Anthony Scriffignano, Chief Data Scientist Gary Kotovets, Chief Data & Analytics Officer Rikard Candell, Director of Analytics Anthony Scriffignano

Gary Kotovets

Dr. Anthony Scriffignano, SVP, Chief Data Scientist, Dun & Bradstreet

hen Dun & Bradstreet surveyed a group of business leaders, they told us that data informed their decisions an average of 16 times a day but according to our research, nearly half of respondents did not have the right solutions or partners in place to help take advantage of their data. The widespread disruption caused by COVID-19 has only increased this reliance on data. As well as data on the spread of the virus itself, businesses and government agencies have been using data to monitor fluctuations in the economy, identify

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Rikard Candell

risks in the supply chain and get a view on which industries and regions are most impacted. As most businesses go into 2021 with trepidation and deal with continued economic turbulence, a team of experts from Dun & Bradstreet have identified their top five trends in data and analytics that they believe will be key to helping companies around the world to grow and thrive in the year ahead: 1. Embracing the Digital Workplace 2. Data-led Targeting 3. Predicting the Unpredictable 4. Governance and Ethics 5. Fighting Fraud and Economic Crime

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PAYMENTS 1. Embracing the Digital Workplace Gary: Working remotely has become the new norm and accelerated the digitalization of the way businesses are communicating, doing business and managing data. The transformation we’re seeing is dramatic. Interactions are becoming more digital and virtual with an exponential increase in the use video conferencing platforms. Data becomes even more valuable in a digital world to ensure that interaction is efficient and targeted appropriately. Anthony: We’re seeing the three D’s — disruption, digitization and displacement. We’re all working from somewhere else, or at least many of us are, and things are becoming more digital and at the same time, disruption is a massive challenge. This is the time to lean into this new way of working. It’s very exciting if we take the right mindset. Read our five tips for working from home

2. Data-led Targeting Rikard: If we look back to the early stages of the COVID-19 pandemic, a lot of companies prioritised mitigating risks. As a result, companies have spent less time on new business relations, which isn’t a sustainable approach. The risks don’t stop and start with the pandemic. So, attaining new business while working in a new way and trading without meeting clients in-person will need to be top of mind for companies this year. Anthony: We saw a similar shift in the 2008 financial crisis. Companies moved from trying to collect new customers, to trying to collect outstanding debt. Gary: Marketing and sales professionals in the B2B space will need to adjust and tweak their strategies to be much more targeted in who they reach out to and how they engage with their clients and prospects. There is a need for much more effective way to reach out and engage with customers — and that’s where data comes in. Rikard: Successful companies have been able to look at their portfolio and prospects and distribute their efforts based on what accounts make the most sense to target. What accounts have the greatest potential? Who is in the market

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right now and do they engage with us? Where can you allow yourself to spend more manual time and what can you automatically manage? Read more about how a data-led approach can support sales and marketing activities

3. Predicting the Unpredictable Gary: We’re seeing it’s become much more important to understand market changes and events and changes in the activities of businesses you deal with. This is due to the unpredictability of the crisis we’re in and the different impact on businesses depending on the type of industry or regions they operate in. Companies need to understand these changes and monitor frequently — this is critical to survival and doing business in these times. Rikard: I think this puts more emphasis on making sure data is robust and complete, but also the ability to combine traditional sources of information with new and more upto-date signals will help companies be proactive — rather than reactive — to disruption and thus gives more competitive edge. Anthony: It’s also very important to consider the pace of environmental change when it’s faster than data’s rate of change whenever we’re assessing the real world. If you don’t, you’ll get in trouble every time. Think about a camera taking a snapshot every minute. You’re going to see what happens at every stroke of a minute, but you’ll miss everything in between. That’s what’s happening right now with data and this hyper disruption. The disruption caused by COVID-19 is happening on top of election cycles, and trade renegotiation, and lots of other things that were happening to disrupt the environment, the ecosystem already. So that’s why we refer to this as a hyper disruption. It’s a disruption of the preexisting disruption. Check out our free COVID-19 Commercial disruption tracker

4. Governance & Ethics Anthony: It’s very important for anyone making decisions with data to ask what right you have to use this data. This needs

to be part of your data management approach. Any company that collects data must be cognizant and adhere to laws all over the world that are evolving all the time. Wider perspectives are also changing and people want things to be increasingly personalised but they also want privacy — so its important to strike a balance to ensure compliance, but also an ethical approach. This is a complex balance to achieve. Gary: I think the increase in digital and online engagement has definitely increased the pressure for businesses to govern how they engage and work with others, and will continue to do so. Customers and partners have increasingly high expectations that go beyond just regulatory compliance. It’s not just about providing ‘clean’ and accurate data. Businesses and individuals want data and analytics they can trust and use to make decisions. It’s more important than ever to be able demonstrate transparency and ethical practices, with environmental, social and governance reporting fast becoming a requirement of doing business. Companies will increasingly need to evidence that they are collecting and using data responsibly as part of standard tender processes.

5. Fighting Fraud & Economic Crime Anthony: Fraudsters know everything is changing and that organisations are distracted by that change. Now they’re not just patiently waiting for things to get back to normal before plying their pre-existing trade. They’re looking for new ways to be sneaky and they’re not worried about the data laws and ethics we’re worrying about. So new types of fraud are emerging in this new environment, and they’re emerging much faster than we’re able to see the trail they’re leaving behind. Monitoring data on your business identity is critical to protect your organization from attack. Gary: Businesses have less of a physical view into the companies they’re dealing with as a result of the exponential increase in digital interaction. Therefore, it’s become more critical to use data signals to identify red flags that may indicate that company you are doing or plan to do business with is involved in fraudulent activity.

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More Than 30 Percent of Canadians Would Favour a Cashless Society The argument for a cashless society has been around for a while, but the rapid rise of the Coronavirus crisis has intensified the debate again amid concerns about banknotes and coins transmitting the virus. In addition to this, the increasing decline of high street bank branches and ATMs has made the possibility of a cashless society in the next few years more likely than ever before. Interested in financial transactions, MoneyTransfers.com analyzed the latest data from YouGov to discover which countries in the world would most be in favour of a cashless society. Canada is in 11th place, as 32 percent of Canadians think going entirely cash free would be a great decision for their country. Furthermore, 49 percent of Canadians admit to paying in cash less often since the COVID-19 outbreak. MoneyTransfers.com found that India is in number one spot as an overwhelming 79 percent of Indians would like to have a cashless society in their country.

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In second position is Malaysia, where 65 percent of Malaysians are in support of having a cashless society in their country. The United Arab Emirates (UAE) and Indonesia are in joint third place, as 63 percent of citizens in each respective country believe becoming cashless will have a positive impact on their society and economy. Vietnam (60 percent) and Singapore (56 percent) are among the other countries where over 55 percent of citizens are in favour of transitioning towards a cashless society, respectively in fourth and fifth position. Interestingly the United States is joint 15th (alongside Sweden), as just 24 percent of Americans feel a cashless society would be a good thing for their country. At the other end in 17th position is France, where only 18 percent of French citizens would welcome their country being entirely dependent on electronic forms of payment.

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PAYMENTS

The Impacts of a Drop in Cash Use At least 13.9 million Canadians are at risk of digital exclusion due to a drop in cash use, including the elderly, homeless and mentally ill, research shows. Global Payment Trends reveals the financial and societal impact of ceasing to use cash, which has been accelerated as a result of the COVID-19 pandemic. The latest data shows that the use of cash as payment for online orders has dropped by 75 percent in the last year, now accounting for just 1 percent of all transactions. 235,000 people are estimated to be homeless in Canada, while a further 5.9 million Canadians may struggle to use digital payments due to old age. At least 13.9 million Canadians could be at risk of being left vulnerable in society due to an inability to use digital payment methods, despite a drop in the use of cash, new data shows. Analysis has revealed that if this reduced access to cash continues, 13.9 million vulnerable Canadians would suffer due to their dependence on physical payment methods — including 6.7 million people suffering with mental illness that may restrict their day-to-day activities. Global Payment Trends collates official data from payment reports and demographic statistics to reveal the potential societal repercussions of digital exclusivity, whereby coins, dollar bills and checks are replaced by eWallets, credit transfers and debit cards. Data reveals that cash use fell by 21.9 percent across North America as a percentage of point-of-sale (POS) transactions on

top of the online decline, while mobile wallets gained substantial popularity at the end of 2020 as a preferred contactless payment method. A noticeable decline in cash use around the world appears to have been accelerated during the pandemic, as the latest data reveals cash usage as payment for online orders has dropped by 75 percent over the past year and now accounts for less than 1 percent of transactions. This paired with the World Health Organization’s earlier concerns that the virus could be transmitted via banknotes could leave millions of people without vital access to cash. Among those who may struggle to make payments in a cashless society are the 6.7 million Canadians who are living with a mental illness that may impair their ability to manage or monitor their money, as outlined by the Mental Health Commission of Canada. It’s never been more important for policymakers to ensure adequate provisions are in place to support vulnerable people — especially given that a recent Statistics Canada survey found that Canadians aged 15-24 had seen a 20 percent decrease in their mental health quality during the pandemic — despite previously being the least likely to experience mental health issues. Helen Undy, Chief Executive of the Money and Mental Health Institute, said: “When you’re struggling with your mental health it can be much harder to stay in work or manage your spending, while being in debt can cause huge stress and anxiety — so the two issues feed off each other, creating a vicious cycle which can destroy lives. Ensuring that money advice is routinely offered to people using mental health services would increase recovery rates, as well as improving the financial wellbeing of the millions of people currently dealing with this terrifying combination of problems.”

◉◉ Canada rank 11th, as 32 percent of Canadians would welcome transitioning to just electronic payments ◉◉ Furthermore, 49 percent of Canadians have paid in cash less often since the COVID-19 outbreak ◉◉ India is the country most in favour of a cashless society as 79 percent of Indians believe going cashless would have a positive impact on their country ◉◉ Interestingly, just 24 percent of Americans think going entirely cash free would be a good thing for their country

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A total of 25,823 individuals were surveyed for the research, 1,009 from Canada. A full breakdown for the number of people surveyed per included country is attached within a separate Microsoft Excel file. The exact question respondents from each respective country were asked is “Do you think it would be a positive or negative if your country became cashless, meaning only electronic forms of money will be accepted?” Electronic forms of money refer to debit cards, credit cards, Google pay, Apple pay and other forms of electronic payment.

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WEALTH MANAGEMENT

Why Philanthropy is a Good Investment:

It’s not always obvious T

By Mark Halpern, CFP, TEP, MFA-P

SPRING 2021

he COVID-19 pandemic added new levels of stress and uncertainty to the lives of most Canadians. No corner of society worldwide has been left untouched by the effects of the pandemic, especially the non-profit sector. The pandemic hit charities on all fronts. The weakening economy cut donations while government restrictions on social gatherings shut down fundraising events. Even as charities cut costs, close offices, and lay off staff, they are being stretched further as demand for their services soars. Raising money is more challenging than ever in these difficult times, so communicating effectively with donors is more important than ever. Fundraisers should improve communications with donors and make them aware of many strategies available to help make giving easier. Given the opportunity to support a favourite charity instead of sending their tax dollars to the government, your donors will be inclined to invest in good causes and also save a lot of tax. When people understand they won’t run out of money — in fact, they will probably have more of it when they die than they have today — they realize the need to look after future taxes now, keeping money in the family instead of remitting it to the tax department. We like to show people how to use that “never spend” money, that won’t impact their lifestyle, to preserve their wealth for their family and charities they are passionate about. Many people donate to charitable causes to affirm their own values, like compassion for those in need, or a personal connection with a specific charity or cause. Donors often weigh the costs and benefits of giving, including intangible benefits for themselves, like the positive feeing one gets from being charitable, or looking good to others. There is another great reason for people to

give. It lowers their tax bills. When someone explains to them how to give generously and save on taxes, they become keenly interested in hearing the strategies available. There are many ways for donors to be generous, from a gift in their will or a bequest where a charity is named in their will, naming a charity as a beneficiary of their estate, donating marketable securities, or buying tax-exempt life insurance. No two situations are exactly alike so there are no cookie-cutter solutions. All the moving parts working in harmony allow donors to be both philanthropic and tax advantaged. Consider these strategies to improve donors’ finances:

Use marketable securities: A recent case A successful business owner had a $2 million income tax liability. Most of his assets were illiquid and he didn’t want to use cash on hand to pay the taxes. He had a stock portfolio worth $10 million, with a very low cost-base, so he was ‘pregnant’ with significant capital gains and understandably reluctant to sell any shares as that would trigger an immediate and additional tax liability. We helped him create a Donor Advised Fund (DAF) at a Community Foundation. He donated $4 million of his stock to the DAF which created a charitable receipt of $4 million to offset the entire $2 million tax liability. Donating those securities to charity saved a further $1 million of capital gains taxes he would have incurred if had he sold the securities personally. His DAF is legally required to annually distribute a minimum of 3.5 percent of its value to any number of registered Canadian charities. The professionally managed DAF earned a return of 10 percent on $4 million last year, or $400K. The interest earned by his DAF is non-taxable. We used a portion of that interest

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WEALTH MANAGEMENT income, $200K, to fund the premiums on a new $10 million Joint and Last To Die Life Insurance policy, owned by his DAF. His $2 million tax liability was entirely eliminated and became a charitable donation. Additional capital gains taxes payable of $1 million on the sale of the donated shares was turned into charity. A total charitable gift of $14 million was created. He will be remembered for creating a generous charitable legacy instead of giving a large sum to the tax department.

Benefit from life insurance while the are alive Most people think the only benefit from a life insurance policy occurs when they die. This example illustrates how you they can benefit from life insurance while still alive. Harold, a retired accountant in his mid-60s had a $500,000 life insurance policy he didn’t really need. He wanted to donate the policy to his alma mater, so we arranged for an independent actuary to determine its current value. Because Harold was now uninsurable (due to some health issues), the actuary valued the policy at $290,000. Harold donated it to the university, received a charitable donation receipt for the entire $290,000 value, and saved about $145,000 in taxes. Going forward, he could have continued to pay the insurance premiums and received charitable tax receipts for the amounts paid, lowering his taxes in the future. He really didn’t want to continue paying the premiums on his gifted policy, so the school (as happens is many such situations) found a generous donor who agreed to pay all the future premiums. The donor paying those premiums receives an annual charitable receipt for his donations, and along with Harold, was recognized by the university for their generosity.

Tax tip Most Canadians donate to charity using cash, credit cards or a cheque. In truth, that’s the least efficient way to be philanthropic. If you have invested in the stock markets over the past 10 to 15 years, you undoubtedly have some appreciated securities with ‘pregnant’ taxable gains. Simply donate some of those shares and receive a charitable receipt for their full

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(appreciated) value and pay zero capital gains taxes on them.

Donate corporately Donating personally provides you with an approximate 50 percent tax savings, but to get a bigger bang for your buck, donate funds corporately and enjoy a 100 percent corporate deduction. A corporation using marketable securities for a donation also doesn’t have to pay any capital gains tax. In this instance, the gains on the donated funds are credited to the company’s Capital Dividend Account (CDA) and can now be withdrawn tax-free and used for whatever purposes you want. Take the example of a marketable security with an original cost base of $10,000 that is now worth $50,000. Donating those shares produces a corporate deduction of the entire $50,000 value, eliminates capital gains tax of $10,000 on the sale, and adds a $40,000 credit to your Capital Dividend Account which you can now extract from your company tax-free.

Selling their business? Save taxes If they are about to sell their business, this would be the year they will probably have their largest tax bill — the prefect time to consider making their largest charitable donation. They should consider donating to charity the amount of funds that will offset all or part of their tax bill and then use the credit that would be available in the Capital Dividend Account to buy some corporate-owned life insurance. Doing so will allow them to donate generously, reduce or eliminate their taxes, and the corporate-owned life insurance will ensure that their family is covered and reimbursed fully for all of their charitable good will.

CPP philanthropy Create a large charitable gift using funds supplied by the government. A husband and wife, both 65, received CPP benefits totalling about $26,000 a year. That money gets taxed, invested and re-taxed again. They live in Ontario, didn’t need those funds to pay their bills, and pay tax at the highest marginal tax rate of 53.53 percent. Using just the CPP benefit “never spend money” to pay the premiums, we structured a joint-and-last-to-die life

insurance policy in the amount of $1.4 million. Their favourite charity is the beneficiary and will receive the insurance payout on the death of the second spouse. Alternatively, they could make the charity a beneficiary and create a donation receipt of $1.4 million, saving their estate about $700,000. CPP Philanthropy™, presents additional ways to use those CPP benefits to fund your charitable aspirations and save a lot on taxes.

RRSPs and RIFs If you are single, divorced, widowed or never married, the tax department will scoop up to 54 percent of your RRSP or RIF savings when you die, and probate fees can gobble up another 1.5 percent in Ontario. If you designate a charity as the beneficiary of some or all of your RSP or RIF, you can effectively eliminate the tax liability.

Our passion We love helping generous people who don’t like high taxes. They much prefer to support their favourite causes using the money that would otherwise be going to the tax department. Our strategies allow that to happen.

Create your own family legacy Donating to favourite charities can be emotionally fulfilling and financially rewarding, reducing your current or future tax load. It can also enable you to save more for those near and dear to you while creating a family legacy that will carry your name for many years to come. Please keep in mind that the above strategies are not an “all or none” propositions, and not designed for do-ityourselfers. Get professional help from experienced to navigate your available giving options. Don’t hesitate to contact us for a no-obligation consultation on your personal situation. Mark Halpern is one of Canada’s top life insurance advisors, a Certified Financial Planner (CFP), Trust and Estate Practitioner (TEP) and CEO of WEALTHinsurance.com®. He helps successful Canadians in the areas of life insurance, estate planning, tax minimization and philanthropy, often converting tax liabilities to charitable gifts.

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FOUNDATION THE FUNDRAISING REPORT The Business & Spirit of

January/February 2021 | Vol.

2 | No. 7

Tips, Idea

Philanthropy in Canada

s + Insights

To Fill Your Donation Jar

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