Mar/Apr 2018

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

The new Interac

President and CEO Mark O'Connell
leads company in a changing industry
❱ International payments
❱ Tapping customer
feedback at the POS
❱ Roundtable: payment
cards developments

PM 4 0 0 5 0 8 0 3
 TableKey
of
Contents
theme

March/April 2018
Volume 9 Number 2
Cover story
Editor-in-Chief
Steve Lloyd
steve@paymentsbusiness.ca
Editor
Brendan Read
brendan@paymentsbusiness.ca
4
Publisher
Interac’s Mark O’Connell on the
Mark Henry new Interac and industry trends
mark@paymentsbusiness.ca

INTERNATIONAL PAYMENTS
Robert Fisher
robert@paymentsbusiness.ca
Contributors
Stephen Grainger; Dan Kelly; 8
Corinne MacMillan;
Michael Morin; Georgina Nelson;
Strengthening international payments
Marc-Andre Pigeon; Ryan Stewart;
Robert Vokes 10
Creative Direction The growing transparency of
Jennifer O’Neill
jennifer@paymentsbusiness.ca international payments
Photographer
Gary Tannyan 12
President How Chinese payments preferences
Steve Lloyd
steve@paymentsbusiness.ca
benefits businesses

VENDOR ROUNDTABLE
For subscription, circulation and
change of address information,
contact
subscriptions@paymentsbusiness.ca 14 Payment cards developments
Publications Mail

INDUSTRY UPDATES
Agreement No. 40050803

Return undeliverable Canadian

addresses to:
Circulation Department
16 17 18 19
302-137 Main Street North Opportunity- CFIB: Making Budget Canada,
Markham ON L3P 1Y2
t: 905.201.6600
rich the payments 2018: more be open to
f: 905.201.6601 payments market work flexibility, open banking
info@paymentsbusiness.ca
trends for small possible
www.paymentsbusiness.ca
Subscriptions available for $40.00 becoming businesses progress 21
year or $60.00 two years.
reality Industry
©2018 Lloydmedia Inc. All rights reserved. Events
The contents of this publication may not

HARDWARE REPORT: POS & MPOS

be reproduced by any means, in whole or
in part, without the prior written consent
of the publisher. Printed in Canada.
Reprint permission requests to use
materials published in Payments Business
22 Tapping customer feedback at the POS
should be directed to the publisher.
Next issue…
Made possible with the
support of the Ontario Media May/June Data Analytics • Payment Processors • Smartphones • Mobile
Development Corporation

march/April 2018 PAYMENTSBUSINESS 3

 Cover story

Interac’s Mark O’Connell

on the new Interac and
industry trends
By Brendan Read

P
ayments Business interviewed Mark O’Connell, president and
CEO of Interac Corp. to learn more about the new Interac with
the amalgamation of Acxsys Corporation and opportunities
going forward. He also shared his views of key industry developments
and challenges, including mobile, security, blockchain, open banking
and payments/marketing convergence.

Payments Business (PB): What will the new Interac mean for
merchants, credit unions, processors and for consumers and
businesses? What are your plans to meet their specific needs?
Mark O'Connell (MOC): Our new corporate structure, which has
created a single for-profit corporation called Interac Corp., means we
can be more flexible, nimble and timely with how we invest in our
products, partnerships and people.
We are investing more in our innovation potential, particularly in
ways that help deliver on the ever-changing customer expectations
in today’s digital economy, like mobile and in-app payments and
the continued evolution of our Interac e-Transfer platform. Canadian
consumers and businesses only stand to benefit from continued
enhancements to our products and services. We’ll continue to be
an economical low-cost payment acceptance option for Canadian
merchants, which is our competitive edge in Canada and good for
business. As a result, the payments industry across the board has
been supportive of our need for change into one corporation.

Mark O’Connell is president
and CEO of Interac Corp.
PB: What are the top opportunities that you see for Interac over
the next three years? How do you plan to capitalize on them?
MOC: Here are three of our key growth focus areas:
1. Exploring new use-case opportunities for our technology
For example, take the Interac e-Transfer. What started as a
successful peer to peer (P2P) offering has evolved into a platform
that can facilitate small and medium size business payments with the
introduction of the Request Money and Autodeposit features. These
good funds payments can be game changing to small businesses
from an accounts receivable perspective. In the same way Interac
killed the retail cheque a decade ago, we anticipate the end of
business to business (B2B) and business to person (B2P) cheques as
we make it easier to facilitate digital real-time payments through the
platform.

4 PAYMENTSBUSINESS March/April 2018


2. Mobile and e-commerce
Canada is lagging in this space as compared with other countries
but is catching up, which means there is considerable opportunity
as this industry grows. Groceries and quick service restaurants are
mobile and e-commerce growth sectors. And Canadians’ financial
transactions are increasingly migrating to mobile.
In 2017 we saw 76 per cent of Interac e-Transfer transactions
deposited using mobile devices. Canadians have their mobile devices
with them at all times, and we want to make it easier than ever to
send or request money from anyone in Canada while on the go.
Currently, Interac Debit is supported in all the major mobile wallets
from technology providers and financial institutions. Moving forward,
we will focus on in-app payments by offering Canadians the ability to
pay in-app using their own money and at a low cost to merchants.
The Interac Token Service Provider (TSP) allows us to tokenize a
bank account number and create a device account number, which
is separate and unique to a mobile device. This allows a customer to
make purchases using Interac Debit on their device without sharing
or storing any financial information. For the merchant, this is a
key benefit because it eliminates the need to secure any customer
information they have access to.
We are also exploring opportunities for this same technology
beyond payments and into the digital identification and authorization
space. By using the TSP to tokenize and create an identifier in the
digital space, we can replace “make a payment” with activities like
“signing a document” or “registering for government services”,
using the same security architecture we’ve designed our processes
and technology around for years.
3. International
Another area of focus is strengthening our ability to help Canadians
as they transact cross-border and internationally. While we are
focused on the Canadian market, the change to our internal structure
increases our flexibility to partner with international payment providers
to facilitate seamless transaction experiences for Canadians abroad
(editor's note: see U.S. chip debit card sidebar page 6). We’re also
exploring international remittance solutions for popular corridors like
India through a partnership with Toronto-based start-up Nanopay,
for example.
PB: Conversely, outline the key challenges that Interac faces over
the next three years. What strategies are you considering to
resolve or manage them?
MOC: As the digital economy grows, security should be at the
forefront of business strategy, particularly as it relates to personal
information. We strive to keep as little personal information as possible
so as not to create a centralized collection of data. In fact, most of
our transactions have no personally identifiable information.
Protecting personal information in this digital economy is
paramount. A lot of this comes down to systems’ abilities to
authenticate users while protecting these credentials, which
is something we feel our investment in the digital identity and
authentication space can help address.
march/April 2018
Cover Story
Additionally, we are investing in resiliency and standards, while
working in close collaboration with FinTech companies alongside
of banks and regulators, in order to keep our security and fraud
prevention strategies one step ahead. Security is innate in how we
build our solutions and will continue to be moving forward, which is
one reason why our fraud rates are among the lowest in the world.
Developing a solution that delivers on customer experience without
sacrificing the bank-grade security we’re known for—two concepts
that are often at odds with each other—is our bread and butter.
PB: Sometimes even the best technologies fail. Outline what
happened with the e-Transfer outages last year. What steps have
been taken to resolve the issues and prevent future incidents?
MOC: Last year, we experienced a technical software issue that
caused significant degradation to the e-Transfer service, which we
made the difficult decision to take down to solve properly.
This experience drove home how important the Interac e-Transfer
service is to Canadians. They used the service over 660,000 times
a day in 2017. Canadians rely on the service to pay their rent, their
monthly bills and send funds to family members in need, and we
take this seriously.
We have and will continue to invest in added resiliency to our
infrastructure, so that Canadians and Canadian businesses can rely
on Interac e-Transfer to send or receive funds to anyone with an
email address or mobile phone and a Canadian bank account.
PB: How you see blockchain and alternative currencies like
Bitcoin? What roles do they have in the payments ecosystem?
What plans, if any, do you have to utilize and manage them?
MOC: We’re actually in the process of exploring a proof of concept
using blockchain, and it has been a great opportunity for us as an
organization to play around with the technology and learn how
it works. This is our first step in understanding how we could use
blockchain technology in payments at Interac and we’re really excited
about what we’re learning so far.
PB: Discuss the planned digital identity service and your role in
developing it.
MOC: Interac has been in the ID and authentication space for 35
years because we’ve always had to ensure that those individuals and
organizations making payments and transferring funds—and those
receiving them—are who they say they are. From PIN authentication
to e-Transfer authentication through a customers online banking
account to our ability to enable tokenized digital debit transactions
on mobile, authentication technology has been built into all our
solutions. This experience well positions Interac to offer a solution in
the digital identity and authentication space.
The same TSP that enables Interac to provision and process
mobile transactions is the cornerstone of our strategy. By providing
a layer of security through abstraction, the TSP divides a person’s
identity from a sensitive detail like a bank account number by issuing
a unique identifier as a proxy. That identifier is confirmed by the
individual’s service provider and the transaction is allowed. That
PAYMENTSBUSINESS 5
 Cover Story
same technology can be used to tokenize and create an identifier
in the digital space, replacing “make a payment” with activities like
“signing a document” or “registering for government services”.
PB: How you see open banking, including suggestions for a
Canadian version of the EU’s PSD2?
MOC: As the push towards payments modernization continues
in Canada, I hope that the collaborative efforts that our country
is known for will continue to be the name of the game. From our
perspective, we want to see innovation in our banking infrastructure
within the critical confines of the banking framework and regulatory
standards. We create the scheme rules and technology that allows for
the interoperable exchange of information not just with e-Transfer,
but also with Inter-Member Network debit transactions and the
Interac TSP.
As the payment ecosystem evolves, Canadians’ security, privacy
of data and trust will be the guiding principles, which is why bank-
sponsored innovation will play a tremendous role. We see strategic
partnerships as integral to responsible openness and we feel we’re
well positioned in the middle of the Canadian payments industry to
broker these.
Here is an example. Our e-Transfer application programming
interface (API) will be released publicly later this year. It will give non-
financial institutions (FIs) access to core e-Transfer functionality while
maintaining FI settlement and risk oversight. This experience will unlock
tremendous innovation potential, as we’ve already seen through pilot
programs with university hackathons and innovation hubs where we’ve
allowed groups to use the API to achieve unique results.
PB: Do you think payments and marketing are converging
and if so how does Interac see itself helping your clients use
customers’ data?
MOC: While data is becoming increasingly important, security needs
to be at the forefront of everyone’s strategy, particularly as it relates
to personal customer information. When it comes to data, Interac
has strived to keep as little personal information as possible and
most of our transactions have no personally identifiable information,
which is a big benefit to merchants as they don’t need to worry
about securing this data. As we look forward to offering in-app
payments through proprietary mobile wallets, we’ll be able to offer
merchants visibility into certain types of data like purchase and
payment patterns, offering valuable trends at the macro level that
relate directly back to their business.
PB: What are your predictions for the future?
MOC: No one has a crystal ball to knows where the digital economy
is going. We can predict and make projections, but the truth is we’re
all waiting to see what will “win” with consumers in the future of
payments.
Our strategy is to be present in each area, from mobile wallets and
wearables to the Internet of Things and blockchain technology, so
we’re ready to help Canadians pay how they want, where they want,
when the want, with their own money.
6 PAYMENTSBUSINESS
Interac to expand U.S. chip debit card
Canadians visiting the U.S. will have more opportunities to pay with
their chip-equipped Interac Debit cards.
ICC Solutions and B2 Payment Solutions are respective cross-border
debit certification providers that now support chip testing for U.S.
merchants and acquirers and are validating Interac’s certifications
results, in accordance with Interac’s U.S. specifications.
“Millions of people cross the U.S. and Canadian border every
year for leisure, work and other activities,” said Edwin Lam, director,
international products at Interac. “We’ve seen an increased appetite
amongst U.S. merchants to better serve their Canadian consumers
when it comes to cross-border payments.”
“Working with our preferred chip certification vendors will help
us bridge the gap between our borders and to help merchants and
acquirers on both sides to ensure that Interac-branded debit cards are
working seamlessly at certified U.S. merchant locations in accordance
with Interac’s U.S. specifications,” added Lam. “Working with ICC
Solutions and B2 Payments Solutions will help us bring the Interac Debit
service’s chip and pin payments to more merchants across the U.S.,
offering Canadians a more secure way to pay across the border.”
“ICC Solutions is delighted to be selected as the preferred chip
certification vendor for Interac in the U.S.,” said Derek Ross, head of
sales and business development at ICC Solutions. “We welcome this
new opportunity to partner with Interac Corp., having successfully
worked together on chip projects during the migration to chip in
Canada. Our proven expertise in the provision of chip test tools and
services will enable merchants in the U.S. to experience an efficient
Interac certification campaign.”
“B2 is thrilled to be selected as a preferred chip certification vendor
for Interac Corp.,” said Bruce Murray, president of B2. “We have
worked with Interac for many years to ensure that acceptance terminals
and Interac-branded debit cards are thoroughly tested and certified
within Canada. We are happy to continue to partner with them as a
preferred vendor to ensure that terminals will be fully supported and
certified in the U.S. as well.”
The B2 and ICC partnerships will further enable Interac to strengthen
its relationships with U.S. networks, including NYCE. It will also
encourage more American merchants to accept Interac Debit. Interac
offers a lower cost option for U.S. merchants processing Canadian
transactions when compared to credit.
In turn, Interac Debit enables Canadians to know instantly what funds
they have available when making purchases in the U.S. The greater
convenience of Interac Debit will also encourage more Canadians to
minimize their use of cash when visiting the U.S.
“The Canada–U.S. corridors are strategically important for U.S.
merchants and acquirers, and we have an opportunity to facilitate
seamless cross-border transaction experiences for Canadians by
strengthening relationships with new and existing payment providers,”
said Mark O’Connell, president and CEO, Interac Corp. “Together,
we can build efficient payment solutions that consider the nuanced
compliance and regulatory requirements of both countries.”
March/April 2018
 international
Payments
Strengthening
international
payments
By Stephen Grainger
I
nternational trade is a major component of most
businesses’ revenues. However, cross-border
payment systems have historically failed to keep
pace with modern standards. Corporate treasurers
sending international payments have likened the process to a black
hole: they had no view over when payments are received by the
beneficiaries or the total costs involved.
Businesses are demanding faster settlement, greater transparency
and operational efficiency. Yet a lack of certainty over transaction
costs and foreign exchange (FX) fees, and friction in payments
processing are holding businesses back from reaching their potential,
particularly those that make multiple daily cross-border transfers.
8 PAYMENTSBUSINESS
Payments Canada and industry actions
There has been a recent drive globally amongst banks, infrastructure
providers, start-up FinTechs and regulators to meet these demands
and respond to the issues. They are upgrading their payment
infrastructures, strengthening security and introducing cutting-edge
technologies.
Canada is a great example of a country that is leading the
charge on this front. Payments Canada is overseeing a multi-year
modernization programme to improve the security, speed and
efficiency of its payments infrastructure. The implementation of
a new credit risk model, completed on March 12, 2018, marked a
major milestone in this journey.
But industry participants are also playing their part to address
March/April 2018
 International
payments

historical issues. SWIFT took a significant step in this regard with Encouraging innovation and competition
the launch of SWIFT gpi, a pioneering initiative that sets the new It is important to have a choice when sending cross-border
standard for cross-border payments. Developed in collaboration with payments and banks are increasingly collaborating with third parties
more than 150 banks, the service allows global banks to credit nearly to share ideas, best practices, policies and technologies to find
50 per cent of payments to end beneficiaries within 30 minutes, and new and innovative solutions. They are working with their clients,
almost all payments within 24 hours. their internal product, technology and operations teams and with
For corporations in countries such as Canada and the U.S., which specialist FinTech firms.
have harmonized cross-border payments, foreign exchange and By working closely with our customers to address their clients’
compliance regulations, payments now often reach the beneficiaries’ requirements, SWIFT has seen a surge in both gpi adoption rates and
accounts within seconds. These near real-time payments greatly number of transactions. SWIFT gpi traffic already accounts for nearly
increase customer convenience, help companies grow their 10 per cent of total SWIFT cross border payments and over USD $100
international business, improve supplier relationships and achieve billion is being transacted daily across more than 220 international
greater treasury efficiencies. corridors. In addition, more than 50 payment market infrastructures,
This is particularly welcome news for Canadian businesses; in including Payments Canada, are enabling gpi payments. It is this
2017, Canada exported almost USD $300 billion worth of goods collaborative approach and willingness to work together that has
and imported more than USD $280 billion1. The ability to receive enabled us to innovate, evolve and meet the needs of our customers
even a small proportion of this value within seconds or minutes can for over 40 years.
transform a corporation’s cash flow and trade cycle. In fact, tens of
thousands of SWIFT gpi payments are being sent between Canada Stephen Grainger is managing director, head of North America for SWIFT. SWIFT
is a global member-owned cooperative and a leading provider of secure financial
and the U.S. per month and this figure is growing.
messaging services, SWIFT’s messaging platform, products and services connect
more than 11,000 banking and securities organizations, market infrastructures and
Addressing payments tracking corporate customers in more than 200 countries and territories.
Ask any business that makes or receives cross-border payments about 1
https://www.census.gov/foreign-trade/balance/c1220.html#2017
the challenges they face, and a lack of transparency and traceability
are likely to be high on their list. When they send payments, they
want to know what is happening with it and when it has been
received.
Historically, there has not been a payments-tracking mechanism
that allows treasurers to track when a payment has been received
by the seller or supplier, as each bank can only guarantee and share
information on its own leg of the payment. Given the levels of trade
flow that takes place between Canada and the U.S. the inability to
track payments has long been a source of concern for businesses in
these countries.
A faster, more transparent and consistent cross-border payment
process would lead to better customer relationships. The SWIFT
gpi Tracker allows banks to follow the status of a payment in real-
time and provide that information to their corporate client. The
technology is analogous to tracking the delivery of a parcel from a
warehouse to a customer, with the additional benefit of knowing
that it has been opened and inspected. The tracking service is cloud-
based and accessible via application programming interfaces (APIs),
offering banks efficient and cost-effective connectivity which they
can integrate into their corporate offerings.
A real-time view of payments means Canadian banks can provide
businesses with improved cash management services. Companies can
be informed immediately when payments are received via automatic
status updates from their banks, which helps them optimize their
cash flow. In turn, banks receive fewer queries and have told us their
enquiry-related costs are reduced by as much as 50 per cent when
they use SWIFT gpi. This is a major service improvement to end-users
and a considerable cost saving for the industry.

march/April 2018 PAYMENTSBUSINESS 9

 international
Payments
The growing transparency
of international payments
By Corinne MacMillan
W
e live in the Information Age. Billions of
bytes of data are created every day and the
answers to almost all of our questions are
right at our fingertips. However, business payments,
especially cross-border business payments haven’t kept up.
Once a payment is sent it is still difficult for sender to track their
status. Most information is one directional on the current payment
rails. This lack of visibility during the payment journey to its destination
makes it difficult to identify where the problems are when they arise.
International payments issues
When errors happen, investigations are opened to try to find what
went wrong. But if there isn’t enough data available to be analyzed,
finding where the problems started becomes that much harder. For
the senders, it can be frustrating getting their payment providers to
provide the necessary information in a reliable and timely fashion,
leading to painful and time-consuming exercises.
International payments are even more complex, as they generally
entail foreign exchange conversions while the payments can hop
between many intermediaries along their journeys. Consequently,
when errors occur there are more institutions involved where the
problems could have started. International payments also tend to be
more expensive, as the intermediaries typically charge fees for allowing
them to travel through their systems. These fees sometimes are taken
from the payments, causing the amounts to be less than expected when
they reach their destinations. And the more stops that payments make
increases the amount of time that the payees wait to receive them.
With so many hands in the pot, the speed and accuracy of international
payments are severely affected. These experiences understandably
leave the senders and receivers frustrated. But allowing payments to
be more visible and reducing the number of intermediaries in the flow
of funds, payments can become more efficient.
Enabling efficient payments
The payments industry is working to close this information gap. New
technology is making it possible for payments to be more transparent.
They are creating a more data rich environment for senders and
receivers. Payment providers are uncovering new value by leveraging
faster payment rails and strengthening the communication to and
from the rails. They are using application programming interfaces
(APIs) to improve the speed of delivery and make the flow of funds
more transparent.
One driver behind these technology advances is the rise of the
10 PAYMENTSBUSINESS
FinTech firms. These companies are building new systems with API-
driven architectures, which allows systems to communicate more
seamlessly with each other. With all this data and a drive to provide
their clients with exceptional user experiences, FinTech businesses
are finding that they can offer more payment visibility for their clients
in user-friendly interfaces.
Blockchain technology is another technology driver. Let’s put
aside the discussion of cryptocurrencies that blockchain has been
very publicly linked to. For those who aren’t familiar with blockchain
and how it works, it is comparable to a document that has been
shared across a computer network. This network is designed to
update regularly, with those computers included in the network all
receiving the same updates.
For payment providers blockchain typically reduces the number
of intermediaries in the flow of funds, as the senders and receivers
typically have direct relationships on the chains. This environment can
then result in improved speed of delivery and accuracy of payments
amount upon receipt.
Suitable payment providers are key
Equally critical in facilitating international payments is partnering
with the right payment provider. There are several factors that
should be considered:
• To avoid problems with speed, hidden fees and a lack of visibility,
ask for as much information as possible about the providers’
systems. For example: does the provider have multiple channels to
intake payment requests, including a user-friendly interface which
highlights key information, such as value dates and bank holidays
in the destination countries?
• It is also important to see if there’s a module that provides the
ability to track the payment with real-time status updates as it
travels on its journey, and which payment rail it is traveling down.
By ensuring these standards are met, organizations can feel
confident when choosing a payments provider.
Organizations face daily challenges. But their payments system,
particularly for international payments should not be one of them.
As the payments industry catches up in terms of information flow,
aided by new technologies like blockchain and new payment rails,
the ease and speed of international payments will only increase. The
future of international payments lies with the firms that can provide
the most transparency.
Corinne MacMillan is chief technology officer, Cambridge Global Payments
March/April 2018
 International
payments

Cambridge pilots Ripple’s

digital asset international
payments solution
Digital assets offer a potentially superior international payments
solution than existing methods. The method promises to free up
dormant capital that is tied up when payments are in transit and
ensure more timely and accurate funds delivery.
Cambridge Global Payments is the latest such company that is
seeking to find out. It is piloting Ripple XRP digital asset payments
solution for cross-border payment flows. They are being handled
through Ripple’s blockchain-enabled xRapid liquidity management
solution. Cambridge is also exploring piloting xCurrent, Ripple’s
messaging and international transaction settlement software.
As part of the Fleetcor group of companies, Cambridge handles
$20 billion in international transactions annually for its 13,000+
global clients. Incorporating XRP in those flows will provide, the
company says, its clients with a cross-border payments experience
that is significantly faster, cheaper and more transparent than its
current solutions.
Cambridge works with businesses to facilitate critical and
secure payments for fuel, tolls, lodging and general payables
through its own proprietary payment networks in North America,
Latin America, Europe and Australasia.
These international payment flows allow for a streamlined
experience for customers that depend on Cambridge to
ensure their businesses stay healthy and expand. With xRapid,
Cambridge said it aims to provide an even better experience for
Want to know more about
those customers. your card programs?
Mark Frey, chief operating officer for Cambridge Global
Payments, is confident that blockchain powered solutions like Do you issue fleet cards?
xRapid can not only help Cambridge improve their customers’
payments journey, but also spur critical innovation in their
Manage transactions?
industry. Is it vital to keep on top of technology
“We are excited for the insights this pilot program is expected
to deliver and we will use that information to help both Cambridge which affects your mobile solutions?
and Fleetcor develop our use cases for blockchain in international
payments,” said Frey. “We strive to deliver best-in-class cross-
Sign up NOW for a free subscription
border payments services, with speed and transparency. We look to Payments Business magazine.
forward to exploring how Ripple can help us continue to improve
the customer experience using new technology.” Visit our website at
Ripple’s director of business development, Danny Aranda,
believes that partners like Cambridge recognize the revolutionary
www.paymentsbusiness.ca
potential using XRP has for financial institutions. and learn more about the magazine
“We’re focused on working with partners like Cambridge that
understand the benefits of digital assets and are serious about
using XRP to overcome the inefficiencies in the global payment
system,” said Aranda. “We look forward to collaborating
with Cambridge during this pilot to enhance the speed and Payments Business is a Lloydmedia, Inc publication.
transparency of cross-border payments for their clients.” Lloydmedia also publishes Financial Operations magazine,
Canadian Treasurer magazine, Canadian Equipment Finance magazine,
Direct Marketing magazine and Contact Management magazine.

march/April 2018 PAYMENTSBUSINESS 11

 international
Payments

How Chinese
payments
preferences
benefits
businesses
By Michael Morin
From cash to cashless

M
y first trip to China was in March 2003. As
a newcomer I had very few reference points
to build from.
But I ended up staying in China for over 10 years
and got to know the country very well. And as a result, I have
seen how China’s payments system have changed to where, like
the country itself, it is leading the way with innovations that other
nations are following.
One of my earliest memories (apart from eating a scorpion kebab),
was accessing my funds in Canada through Interac. It was such an
undertaking that there was only one spot where I lived, in Beijing,
near Jianguomen in the city centre. I cycled for 50 minutes to get
there every Sunday. It also happened to be the location of the only
Starbucks that I knew of.
I remember learning to look for the Interac sign at every ATM. I
would eye to find another one where I could withdraw conveniently. I
still remember that feeling of relief when I saw a familiar symbol from
back home. But by the time Interac became prolific in China, I had my
own bank account and banked the same way as anyone else.
12 PAYMENTSBUSINESS
China has had an interesting path from creating paper money to
cashless payments, mostly skipping credit. When I first arrived,
everything was paid in cash. With the advent of smartphones, I
started seeing more and more apps and that was when WeChat
was created.
WeChat became an all-in-one lifestyle app. People could “go
dutch” with it, they could book doctors’ appointments with it,
they could call each other, chat, send photos and share moments.
Meanwhile Alipay had always been in payments and continued with
its own app for payments across China.
The last time I was in China, in 2016, everything was paid by Alipay
I have seen how China’s payments
system have changed to where it is
leading the way with innovations
that other nations are following.
March/April 2018
 International
payments

Arch Rivals
WeChat Pay is taking market share from Alipay

74.92% 74.31% 71.51%

80% 68.40%
63.41%
70% 55.40%
50.42%
60%

50%

40%
23.03%
20.60%
30%
13.18% 15.99%
11.43% 38.12%
20% 32.10%
10%

0%
2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3

Alipay WeChat Pay

Source: Analysys

or WeChat Pay, apps that enable consumers to scan quick response
(QR) codes to make payments. WeChat reported that has over 902
million users while Alipay has over 520 million users, according to
data reported by expandedramblings.com.
Chinese systems arrive in Canada
In 2017, I discovered that these methods of payment were coming to
Canada and my excitement was palpable. I begged for a chance to
work with those bringing this technology to Canada.
I had seen how convenient and prevalent these payment methods
had become in China. To top it off 2018 is the Canada-China Year
of Tourism. Chinese families travelled more, had more disposable
income than ever before and they had a thirst for high quality items.
There are more Chinese families sending their children to study
in Canada. There are also many entire families that are relocating
permanently here.
Canadian merchants can now attract their new Chinese customers
by understanding their payment preferences. The value of third-
party payments is expected to be over [USD] $12 trillion (RMB 81.6
trillion) according to Forbes.1
Competition is healthy. Visa versus Mastercard, Coke versus Pepsi
and Alipay versus WeChat Pay. Accounting for 91 per cent of the
third-party payment landscape, reports the Financial Times, both
Alipay and WeChat Pay are looking to expand throughout Canada to
continue serving their end users, but also to establish their footprints
in North America.
OTT Pay Inc. is looking to the future of payments, but also at how
to make the customer experience convenient, secure and enjoyable
through intuitive, smart and safe payments, currency exchanges and
other financial products that we are licensed to offer our clients. We
offer the services in English, French, Cantonese and Mandarin.
In early 2017, OTT partnered with the payment giants with the
intent of continuing to provide convenience to its customers. By
providing newly arriving people a familiar way to pay for their goods,
we believe that we are helping merchants attract a new market to
their locations in a very welcoming way. OTT has always been about
integrating newcomers to Canada.
Canadian merchants benefit from the brand recognition of payment
systems used in the tourists’ home country and the merchant benefits
from the extra business. As a result, leading brands including the
CN Tower, Ripley’s Aquarium, the InterContinental Hotel Montréal,
Oxford Properties, Cadillac-Fairview and over 1,500 other merchants
are partnering with OTT Pay. The markets are sending a clear signal
of what is to come and the importance of being ready for it, but also
the opportunity to tap into a new blue ocean.
Michael Morin is public relations manager for OTT Pay, Inc. OTT Pay is a member of the
OTT Group of companies that strive to make life less complicated by offering payment
services, recommendations to their customers and inclusive participation in the new
economy. OTT Pay Inc. is a proud partner of Toronto Tourism, Tourisme Montréal
and Kingston Tourism, helping them to win Chinese tourism and long-term Chinese
consumers.
1
www.forbesindia.com/printcontent/48759 , November 29, 2017

march/April 2018 PAYMENTSBUSINESS 13

 Vendor
roundtable

Payment cards
developments
the movement away from lending on credit cards. Finally, we are
seeing a shift from single products offerings to more holistic-focused
customer solutions.

Greg Noga (GN): We see people move to mobile means of

Brett Mooney, senior vice president,
credit cards and unsecured lending,
Scotiabank.
By Brendan Read
Greg Noga, senior assistant vice
president, sales and marketing,
Canadian Western Bank.
payments, such as mobile wallets and branded payment apps, like
the Starbucks app. We also are seeing increasing consumer use of
stored value i.e. pre-paid cards. They also are using credit cards for
smaller transactions that they had predominantly debited.
We have also seen increasing requests from consumers for
individualized or branded debit cards, like there is in the credit card
industry. We would expect to see loyalty and affinity programs
become more prevalent for debit cards to mirror credit cards.

W
hat are the key changes, trends and challenges being faced
in the card industry? Payments Business discussed them
with Brett Mooney, senior vice president, credit cards and
unsecured lending, Scotiabank and Greg Noga, senior assistant vice
president, sales and marketing, Canadian Western Bank.
Our conversation looked at developments such as digital commerce,
open banking, mobile, new lending options, personalized cards and
non-card payments hardware and methods.
Payments Business (PB): What are the top changes that you
seeing in the card industry?
Brett Mooney (BM): We are seeing many changes to payment
form factors. As regulations change and with ever-increasing digital
innovation, there are more options than ever before.
Digital commerce and open banking, such as the European Union
PSD2 and application programming interfaces (APIs) continue to
open new opportunities for consumers to experience payments.
These include tokenization, mobile in-app and P2P [peer to peer]
payments and card on file solutions which could help simplify and
enrich their lives.
We are also seeing a major evolution in lending patterns, given
the lower technology costs of entering the payments industry and
the role of non-traditional lenders. There are new lending options,
including installment loans, deferred payments, point of sale (POS)
lending, P2P and social/marketplace lending which could result in
PB: What are the driving factors?
BM: The needs of customers are evolving, and we as an industry
need to evolve in how we continue to meet their needs. They are
looking for payment mechanisms that integrate with their daily
lives, centered on frictionless experiences and more robust personal
financial management tools.
Customers are increasingly looking to have their payment solutions
incorporated into an overall picture of their financial health and for
financial services organizations to help support their financial goals.
Both technology and software are also key drivers. These drivers
continue to shape everything that we as consumers do in our day-
to-day lives. We have always and will continue to look at ways to
help customers become better off as they seek to simplify their
experiences and payment needs.
GN: Client experience. Starbucks has made their app a “cool”
experience and younger generations are drawn to great experiences,
particularly on their phones. Phones are now easier to access with
fingerprint or facial recognition. Consequently, there is less reliance
on passcodes.
Credit card use for smaller payments gives consumers more
opportunities to earn reward points and some of the more interesting
rewards programs use gamification to enhance the experience.
Branded and individualized cards allow consumers to feel unique

14 PAYMENTSBUSINESS March/April 2018


and/or affiliated with their favourite brands and more emotionally
invested in them.
PB: How are you responding?
BM: Firstly, we are pivoting to become a technology-focused entity
that provides financial services. This change and transformation is
permeating all levels, products and markets in which we operate.
Technology will remain a key part of our business strategy, with
a focus on the increased use of mobile, data, analytics and artificial
intelligence (AI). We are committed to building a sound operating
model that will consistently deliver great end-to-end solutions for
all our customers.
Secondly, we are investing significantly in digital. At last year's
Digital Investor Day, we committed to becoming a digital leader in
the financial services industry. We articulated our work-in-progress
digital strategy and committed to several aspirational goals.
Scotiabank's approach to digital is about getting the fundamentals
right while also transforming experiences and the products we
offer through new innovations. Our digital targets speak to the
fundamentals of increasing digital sales, digital adoption and
decreasing day-to-day branch transactions.
Thirdly, we are actively working with FinTechs and opening new
innovation centres accelerate our innovation strategy. Our approach
is to connect to the diverse global ecosystem of start-ups, venture
capitalists and incubation hubs to help drive global digital banking
transformation. To further deepen innovation we have opened
five “digital factories” in our primary markets: Canada, Mexico,
Chile, Peru and Colombia. They develop and deliver leading edge
technological solutions to our customers.
Lastly, we’re rewiring how we approach solving for customer
needs. We are leveraging robust analytics, new approaches to
customer research and design thinking to establish more relevant
customer-focused solutions versus traditional banking models.
GN: We are looking at options such as instant card issuance to
personalize debit and credit cards for clients, as well as expanding
our standard card line to offer different designs. We are investigating
forms of client affinity and loyalty options for debit and other account
products to reward clients for using our products.
Our app and full online banking platform overall (mobile and PC
based) are under review and targeted for considerable upgrades
over the next year, with a deeper view on enhancing the client
experience.
PB: Do you expect that non-card hardware (e.g. phones,
wearables) will replace the traditional payment/credit card
within 10 years?
BM: We will absolutely see changes. Plastic is merely the historically
associated form factor and a software enabled future is shifting how
we interact with payments.
The proliferation of non-card hardware is a first step in integrating
payments into a customer’s daily life and allowing them to pay
how they want to pay. We are already seeing payment factors
march/April 2018
Vendor
Roundtable
built into everyday objects like jewellery for example and a shift to
instant issuance of credentials for immediate use and tokenization
advancements.
GN: “Replace” is a strong word. But, yes, I do believe phones and
wearables will make considerable inroads into the payments space
and phones in particular, in the nearer term.
PB: Do you see any changes in the security features impacting
the way cards are manufactured?
BM: With the integration of payments into non-card-based products,
the shift to digital and biometrics will change how consumers
interact with payment mechanisms. It will become increasingly more
important to determine how payment providers address the security
of personal information and enable trusted experiences to drive
mobile adoption. Scotiabank prides itself on maintaining the highest
standards across privacy and data security to ensure that we protect
our customers.
GN: For me, the major friction point with a debit card is the PIN. That
is why I think the “Tap” technology has been so broadly accepted.
This is where people are going with their phones: using the
touch of their fingers or facial recognition to open and scan their
phones over tap-enabled POS machines or, quite soon, at near-field
communication (NFC)-enabled ATMs. Very slick.
Consequently, the need for a physical card will wane in this
space: as long as “tap” and phone security continues to prove to be
sufficient and the experience easy. In terms of manufacturing cards,
I’m seeing interesting security features embedded in cards such as
randomly changing CVVs (card verification value), which are similar
to soft tokens.
I’m sure other technology enhancements will come to improve
security and hopefully to eliminate the need for a PIN. While these kinds
of cards are expensive to produce today they may not be in future.
PB: What is your advice to merchants and sellers to help them
manage these developments?
BM: Taking a customer-centric proactive approach in payments
is imperative. Embrace innovation and try to effectively integrate
payments into simplifying your end to end customer experience,
such as card on file and one-touch payments.
GN: Stay close to your merchant payments provider and talk to your
financial institution. Ask about the trends they see in payments
and educate yourself on payments trends and technology and how
these could impact your business. Stay current in emerging mobile
and app technology and how you can offer payment options for
clients to improve their experience and be cost-effective for you as a
merchant. Closely watch your competitors and other merchants and
sellers to see what they are doing for payments.
Finally, don’t just view accepting online and card payments as a
“necessary evil." But instead as a way you can differentiate your
business and separate your client experience from the competition.
PAYMENTSBUSINESS 15
 Industry
Updates
Opportunity-rich payments
trends becoming reality
By Ryan Stewart
T
he payments industry has been discussing the
potential opportunities of the Internet of Things
(IoT), open banking, increased security and
blockchain for the last few years. Now, in 2018 these
trends are no longer simply predictions, but are coming to life.
IoT propelling omni-channel
Omni-channel has been a payments buzzword since at least 2011.
As consumers’ shopping habits have transformed across mobile,
online, and in-store, the payment experience needs to be seamless.
However, “going omni” is not easy; some of the largest brand names
closed shop in 2017 after failing to bridge their channels.
IoT tightly ties these three channels together. A prime example of
how IoT could power omni-channel is Amazon Go. Consumers walk
into the grocery stores, pick food off the shelves and get charged as
they walk out without checking out. While this level of sophistication
may be out of reach currently to everyday merchants, IoT is here to
stay. Omni-channel solutions will only become simpler and more
accessible moving forward.
Europe opens door to open banking
North America is a considerable way from embracing open banking.
But the industry is watching with anticipation as the European Union
rolls out the Payment Service Directive (PSD)2. As European banks
open access to data and payments, FinTechs are looking for their
slices of the market.
The sheer power of opening this level of information can transform
the consumer experience by giving FinTech companies the data they
need to create the next generation of payment solutions that are
built around optimizing customer experience based on this specific
information. FinTech providers will be able to take this information
and provide compelling, nimble solutions on finance, payments and
authentication. These new solutions will change consumer behavior
and will have rippling effects to our financial ecosystems.
PSD2 will empower European payment initiation services providers
to innovate payment solutions while account information service
providers will disrupt authentication services. Those businesses that
can link startup innovation with traditional financial and banking
systems will win, with consumers riding the win along with them.
You can expect a more curated and personal consumer banking and
overall financial experience in the years to come.
North America's regulators will have a close eye on PSD2 to see if it
is a successful model. If it proves to truly benefit consumers and drive
16 PAYMENTSBUSINESS
innovation, and issues such as security and standardized application
programming interfaces (APIs) can be answered effectively, our
government regulators and industry participants will start the
conversation on how we can bring open banking here.
Upping the security
As the industry takes on open banking and real-time payments, there
will be parallel line of increasing security, while reducing friction with
3D Secure 2.0 and Network Level Tokenization.
With 3D Secure 2.0, there will be an opportunity to leverage the
benefits of multi-level data validation without hindering the checkout
experience. 3D Secure 2.0 delivers ten times more data, according to
VISA, than previous versions, including information on device channels
and payment history. This gives merchants and issuers greater contextual
data that they can use to verify transactions. Also, 3D Secure 2.0 works
with biometric authentication and one-time passwords, eliminating the
need for long sign-up processes or static passwords.
Network Level Tokenization will hit its stride in 2018 as it protects
sensitive cardholders’ data at the card brand level. There is less
opportunity for fraudsters as card details need not be revealed,
swiped or entered in each checkout experience. Lost or stolen cards
are more efficiently identified and re-issued.
Blockchain
With media and consumers buzzing about cryptocurrency, it is
blockchain that will quietly be leading the way to revolutionizing
payments. There were several pilots in 2016-2017 that tested
blockchain’s ability to send money in real time, increase security
and reduce transaction errors. This year it will bridge into the
mainstream as FinTech players and financial institutions start to
disrupt payments, authentication and due diligence checks by using
blockchain technology.
Blockchain might still be a long way before consumers adopt
it. However, merchants will welcome real-time payments and an
almost endless amount of other benefits to the financial value
chain. Blockchain’s distributed network creates a trust chain that
can’t be broken. We have a digital, auditable, history of truth that
no longer requires intermediaries. This brings speed, more access to
public data, and lower costs from everything from multi-currency
payments to land title disputes that could now be auditable without
legal headaches. You can control the data so it’s all public; semi
public/private or all private.
Continued on page 20
March/April 2018

CFIB: Making the
payments market work
for small businesses
By Dan Kelly
I
am frequently asked about the payments
industry’s relationship with Canada’s small
business community. It is a story I’m only too
happy to share, including many of the scars and
victories of over a decade of work.
A decade ago, Canadian merchants were somewhere between
bewildered and angry when it came to electronic payments. While
merchants had grumbled about the costs of accepting credit cards
for many years, all hell broke loose when Canadian banks started
mass-issuing premium credit cards in the mid-2000s. Cards like Visa
Infinite and Mastercard World or World Elite (some before they even
had defined brand names) were being shipped out to Canadians,
most of whom simply believed they were getting replacement cards
with a few extra points thrown in for good measure.
Shortly thereafter, the phone lines at the Canadian Federation of
Independent Business (CFIB) offices started ringing from merchants
wondering why their take from their credit card sales appeared lighter
every month. And after significant research and several surveys to
determine the route causes, a major battle was brewing between
merchants and consumers on one side and the card brands, issuing
banks and card processors on the other.
Merchants told of us of deceptive practices used by some in the
industry to trap them into terrible processing deals, with rising fees
and massive exit penalties. They said they had no way of knowing
which card would cost what amount and had zero power to do
anything about it even if they did figure it out. And serious threats
were on the horizon for Interac Debit too, which is one of the few
low-cost, flat-fee forms of electronic payment that merchants and
consumers favoured.
As a result of these worries, merchants and their associations,
including the CFIB, started to push back. Meeting after meeting with
payments industry leaders and the federal government started and
weren’t always a lot of fun.
But something remarkable came out of it. A uniquely Canadian
approach—the Code of Conduct for the Credit and Debit Card
Industry—was adopted that began to change the marketplace for
the better. With the Code—first proposed and drafted by the CFIB
—merchants gained some power in their dealings with card brands,
banks and acquirers. The Code also provided a principles-based
march/April 2018
industry
updates
platform to help resolve problems and it has repeatedly shown its
worth in the years since its introduction. The Code also lessened the
damage caused by high exit penalties, split contracts, unplanned fee
increases, and opaque contracts and monthly statements.
The Code has been kept current with amendments to cover new
payments players and technologies like mobile payments. A few
years later, the Code was joined by another voluntary approach: a
negotiated plan to reduce Visa and Mastercard interchange fees by
an average of 10 per cent. While this was welcome relief for firms
of all sizes, the best part was a five-year commitment that average
rates would not go up, thereby allowing a degree of price certainty
merchants hadn’t had for a decade.
But where are we today? Are merchants finally armed with enough
market power to negotiate prices and improve terms and conditions?
While it is too soon to pop champagne and declare victory, I believe
there are strong signs the power balance has improved for the better.
In 2017 my association signed a ground-breaking deal with
Mastercard, which gives our 110,000 small business members access
to the same rates that some of the largest merchants in Canada pay.
When we looked at our transaction volume through our exclusive
processing deal with Chase-Paymentech, we were surprised to find
that our small business members collectively process over $12 billion
in electronic transactions, including over $3 billion in Mastercard
transactions alone. As a result, Mastercard interchange fees for our
small firms dropped by an additional 12.5 per cent and Mastercard
World transactions got a 22 per cent cut. Priceless!
And this was followed by a brand-new deal we just signed to reduce
American Express fees for small firms by almost 50 per cent. Instead
of paying 3 to 3.5 per cent to accept Amex, small firms using our new
deal delivered by Chase will pay 1.8 per cent for many transactions.
This should help expand Amex acceptance among SMEs, creating
more opportunities to use the card for Amex cardmembers.
So, after years of heavy lifting, I believe the market is beginning to
work for merchants of all sizes. Have all the problems been solved?
Certainly not. Some merchants continue to look enviously at some
markets where rates are regulated and lower than what is charged in
Canada. Many continue to report confusion over their contracts and
statements. An increasing number of chargebacks, where merchants
Continued on page 20
PAYMENTSBUSINESS 17
 Industry
Updates
Budget 2018:
more flexibility, possible progress
By Marc-Andre Pigeon
T
he federal government’s Budget 2018 features
several initiatives that may achieve its stated
goal of “Strengthening and Modernizing
Canada’s Financial Sector.” The Canadian Credit
Union Association (CCUA) has helped shaped them through our
involvement in the second stage of consultations on the federal
financial sector framework, pre-budget consultations and the federal
credit union caucus.
Bank terms flexibility
Provincially-regulated, deposit-taking institutions, including credit
unions, will be provided with the flexibility to use generic bank
terms, subject to disclosure. We asked the federal government to
review the Bank Act restrictions to find a reasonable solution so that
credit unions could continue to use terms like online banking that
Canadians easily understand to explain their financial activities.
We initiated this advocacy effort after the federal Office of the
Superintendent of Financial Institutions (OSFI) issued an advisory that
adopted a very strict interpretation of the Bank Act provisions. We
were deeply concerned that it could have resulted in criminal charges
against credit union officers and directors for use of the terms
“bank,” “banker” or “banking” by their credit union. The CCUA
estimated that strict adoption of Bank Act requirements would have
cost our sector upwards of $80 million.
Credit union disclosures
The federal government has signalled its desire to further engage
with our sector to ensure that consumers are aware of the type of
financial institution they are dealing with, whether a bank, a credit
union or a FinTech and by whom they are regulated. The government
is looking to introduce disclosure standards that can be adopted
uniformly across the entire financial services industry and would
note which entity provides deposit insurance.
We will be working with credit unions to minimize any additional
cost or red tape that flows from new disclosure requirements.
New retail payments oversight framework
Budget 2018 addresses three separate payments-related issues, two
of which will directly impact credit unions.
The first issue relates to the federal government’s proposed retail
payments framework. For the first time, the federal government
said it would be extending prudential and market conduct oversight
regulations to provincially-regulated credit unions and other
18 PAYMENTSBUSINESS
provincial financial entities.
The framework will anchor the consumer-facing side of payments
transactions and is aimed primarily at activities by new and future FinTech
companies. We advised the federal government that this new framework
must be careful to avoid duplicating existing provincial market conduct
rules that are already in place for the credit union system.
The federal government said it will continue its consultations on the
proposed oversight framework. It has committed to introduce legislation
to support these goals once their consultations are complete.
Second, the federal government is proposing a review of the
Canadian Payments Act to ensure that Payments Canada is well-
positioned to fulfill its public policy objectives. The review will focus
on Payments Canada membership and governance and will have
important implications for how the credit union system engages in
the new payments infrastructure. CCUA expects the consultation
on this review to start late in the spring and has already initiated
conversations with Payments Canada.
Third, Budget 2018 proposes the introduction of a legislative
framework to address an unlikely failure of systemically important
financial market infrastructure (FMI) used to facilitate the clearing,
settling or recording of payments, securities, derivatives and other
financial transactions.
The current infrastructure includes the Large-Value Transfer
System (LVTS), CDSX, the Canadian Derivatives Clearing Services
(CDCS), the CLS Bank and SwapClear. This new framework will be
in place in the case of an unlikely system failure. This proposal is not
directly relevant to credit unions but could have knock-on effects for
the group and for other direct payment participants.
Open banking, consumer protection
There is a proposal to review the merits of open banking to assess
whether it would deliver positive results for Canadians while still
maintaining consumer privacy, data security and financial stability.
The CCUA advised the federal government to look at open banking.
A further notable commitment in Budget 2018 follows from
the federal government’s work on a comprehensive review of the
consumer protection framework. The budget proposes to introduce
legislation that would strengthen the Financial Consumer Agency
of Canada (FCAC)’s tools and mandate and continue to advance
consumers’ rights and interests when dealing with banks. The
government has promised to develop this legislation through
targeted consultations with stakeholders, including the provinces
Continued on page 21
March/April 2018

Canada, be open to open
banking
By Robert Vokes
O
pen banking is a swiftly moving force in
the financial services ecosystem, sweeping
through Europe and expanding globally,
including Canada.
In the 2018 budget the federal government announced a review
of the merits of open banking, with the goal being to determine
whether it would deliver positive results for Canadians.
As it takes hold, open banking will revolutionize the way banking
and business are done, for individuals, corporations, retailers
and for the financial institutions themselves. The changes will be
vast and profound: think of the way Uber and Lyft have changed
transportation, Netflix has altered TV viewing habits and Amazon
has changed retailing.
The Revised Payments Service Directive (PSD2) impacts
The push toward open banking is being driven by regulatory changes
in the European Union (EU)(which includes the United Kingdom
at this time). A new EU regulation, the Revised Payments Service
Directive (PSD2) took effect in January 2018. It lets consumers share
their financial data securely with banks as well as third parties.
PSD2 requires European banks, with their customers’ permission,
to make their account information available to other companies,
organizations and institutions without going directly through the
banks. This access makes it easier for consumers to transfer funds,
compare products and manage their accounts and finances. Under
PSD2 third parties can initiate payments and other transactions
directly with customers’ permission.
Many experts believe that the full effects of open banking won’t
be felt until 2020. But by then the impact is likely to be one of those
changes that leave people wondering how they managed to shop
and pay before open banking was here. The account and transaction
data that PSD2 requires Europe’s banks to share transits through
application programming interfaces (APIs); making these APIs
available to others is what makes the system open.
The relationship between banks and retailers can change through
using these APIs, and ultimately, between banks and their customers.
For example, once retailers form relationships with Payment Initiation
Service Provider (PISPs), or become PISPs in their own right, they
will have access to the APIs. They may then offer inducements for
direct, instant payments: which has the potential to completely
displace credit cards from transactions, thereby reducing credit
card transaction fees. With the reductions to such traditional fees,
financial institutions will have to be nimble and creative in seeking
march/April 2018
industry
updates
and managing new revenue sources and services.
How financial institutions can respond
While open banking brings obvious opportunities to non-bank retailers,
the banking sector also has its own opportunities. For instance, banks
can use this platform to offer plug-and-play financial products to third
parties, through FinTech companies and including retailers, ultimately
expanding their ecosystem and reach to new customers.
Research suggests that the global banking sector is already up to
the task of meeting the open banking challenge.
A recent study by Accenture found that 99 out of 100 payments
executives at large European, Asia Pacific and North American
banks said their institutions plan to make major investments in open
banking initiatives by 2020.
The survey also found that nearly two-thirds (63 per cent) of banks
in North America believe that launching open banking is critical to
competing with new entrants, such as FinTechs and tech giants.
Industry executives believe open banking will help their institutions
remain relevant.
In fact, North American executives are more bullish on open
banking than their counterparts in Europe, where the changes are
well underway due to PSD2. In Europe, half (51 per cent) of those
surveyed said that open banking is critically important. They, in turn,
are looking at open banking more intensely than bankers in the Asia
Pacific region, where two-fifths (40 per cent) see it as key.
Nevertheless, Accenture’s survey shows that move toward
open banking is worldwide. Globally, half (52 per cent) of all bank
executives surveyed believe that they will need to implement open
banking to compete with traditional competitors that have invested
in digital transformation—that is, to keep up with each other.
Open banking challenges
The arrival of open banking is a huge business challenge for the financial
sector, with major risks as well as unprecedented opportunities. Nearly
two-thirds (65 per cent) of respondents to the Accenture survey said
they see open banking more as an opportunity than a threat.
One of the major risks to be managed is data security. This concern
is one reason why Canada is taking a more cautious approach to
regulatory change than Europe.
In the federal budget tabled in February 2018, Ottawa announced
it was launching a review, “to assess whether open banking would
deliver positive results for Canadians with the highest regards for
consumer privacy, data security and financial stability.”
The other challenge for the financial sector will be how to stay ahead
PAYMENTSBUSINESS 19
 Industry
Updates
in the marketplace as API-based services multiply exponentially. Our
research shows that even ahead of the new European regulation, the
number of banking APIs that third parties can connect to has jumped
from barely double digits a decade ago to more than 1,500 last year.
APIs are expected to grow tenfold now that PSD2 is here. Accenture
estimates that by 2020, seven per cent of the total banking revenue
pool will be associated with open banking activities.
Banks will need to compensate for the loss of revenues from transaction
fees by offering new services both to retailers and individual customers.
For example, they can offer online, mobile-based loans, mechanisms for
mobile payment with credit card loyalty points, even age ID checks for
purchases such as alcohol or, soon in Canada, cannabis.
Navigating open banking
With their strong reputation for prudence and financial probity,
banks have strong brand equity. They will need to deploy this to
derive revenues from partners who pay to offer products and services
on the banks’ own platforms, or on behalf of the banks.
Open banking also means an opportunity for banks to concentrate
on their core product competencies—deposits, credit and mortgages
—while redefining the customer relationship and experience.
This shift may imply leaving some specialities to niche providers
or closer collaborations with non-banks to ensure a truly remarkable
customer experience that is associated with the banks. The successful
players in this new open era will broaden their ecosystems and play
a much greater part in the financial and non-financial transactions
of their customer base.
To navigate this more competitive market, banks will need to
learn. Here’s what their payments executives should be looking for:
• Banks will need to decide how to compete or collaborate with
non-banks that can replicate some traditional banking services
using APIs, while preserving and monetizing their own trust and
customer relationships. At the same time, they’ll need to continually
build their mobile presence and offerings through APIs;
• In Canada, the financial sector will need to meet payments
modernization goals and faster payment implementation dates.
Adding open banking capabilities to the mix will challenge internal
technology and business process staff;
• The United States is driving the sector toward faster payment
dates through directives and industry initiative rather than set
regulations. Canada will need to keep up, and it’s likely that
our financial institutions will need help from agile, experienced
development firms from our technology sector;
• Payments Canada will need to monitor the change closely and
make sure that the payment system incorporates these changes
while preserving its safety and soundness. Financial institutions
will need to be adaptable: as open as possible to open banking if
you will; and
• FinTechs will need to be more than just nimble. Open banking
is bigger than a technology change. It will require a deep
understanding of payment rules and standards and the need for
data security, along with the ability to spot potential banking and
non-bank partners.
20 PAYMENTSBUSINESS
Change comes with uncertainty, but the evolution of the banking
and payments system with open banking is becoming clearer. With
payments modernization comes the opportunity for the Canadian
banking system to prepare for and design its own course for open
banking. It is time to think through that future.
Robert Vokes is managing director and head of Financial Services Canada Bob has over
30 years of financial services industry experience spanning banking, insurance, wealth
and capital markets as well as several FinTech providers. Bob joined Accenture in 2015
to lead the Financial Services team in Canada. Prior to joining Accenture, Bob held
leadership positions at Novantas, FMCG, Gartner and Mitchell Madison Group. He
was also a co-founder of Zeborg, a procurement analytics firm acquired by Emptoris in
2003. Bob began his career at McKinsey & Co. Bob is a graduate of the Massachusetts
Institute of Technology with a bachelor’s degree in computer science.
Opportunity-rich payments trends
becoming reality
Continued from page 16
Looking forward
Payment trends tend to take a long time to come to fruition with all
the regulation hoops and tremendous effort on merchants. However,
we are seeing that starting to change in 2018. This is the year of the
merchant, where trends become real opportunities for everyone.
Ryan Stewart is chief commercial officer for Bambora North America, an Ingenico
company, where he leads the sales, marketing and product teams. He is passionate
about the dynamic payments space and focuses on delivering a simple, elegant
payments experience to merchants and software providers globally. Ryan has
launched numerous disruptive payments products in Canada, the U.S. and Europe,
from online, to in-app, mPOS and merchant online onboarding automation.
CFIB: Making the payments market
work for small businesses
Continued from page 17
end up on the hook for fraudulent transactions, even when they
take every realistic precaution, are causing anxiety. And merchants
being stuck with the bill for processing fees on sales taxes they remit
to government remain an unfair burden.
But a lot has changed for the better. Had someone asked me a
decade ago whether I would be fighting or working cooperatively with
card giants on deals to lower fees for small business owners, I would
have put money on the boxing gloves. I’m proud of what has been
achieved in Canada so far and look forward to what comes next.
Dan Kelly is president and CEO of the Canadian Federation of Independent Business
(CFIB). With over 110,000 members, the CFIB is Canada’s largest non-profit
organization devoted to creating and supporting an environment where businesses
can succeed. The CFIB advocates for small business with politicians and decision-
makers across Canada. As a non-partisan organization, it influences public policy
based on its members’ views, ensuring that they have a chance to affect the laws and
policies that affect their businesses.
March/April 2018
 2018 Industry
events

Budget 2018: more flexibility, April June 5-8

Internet Retailer
possible progress April 29-May 1
Canadian Credit Union
IRCE Conference + Exhibition
2018
Continued from page 18 Association Chicago, IL
2018 National Conference for irce.com
Canada's Credit Unions
Toronto, ON June 13-15
and territories. ccua.com FEI Canada
The CCUA will continue to advocate for differentiated treatment 2018 Annual Conference
April 29-May 2 Halifax, ON
based on the credit unions’ cooperative structure. We are engaging NACHA feicanada.org/2017/Annual/
credit unions on the framework for a voluntary code, one that Payments 2018 Conference
will include the disclosure elements referenced in the banking San Diego, CA
payments.nacha.org June 18-20
terminology fix but also serve to inform our engagement with the
CUCA
FCAC and provincial market conduct regulators. April 30-May 2 National Credit Union Treasury
ACT Canada and Finance Forum 2018
Cardware 2018 Toronto, ON
Additional security measures Niagara Falls, ON www.cuca.com
The federal government announced a plan to protect against cardware.ca
cyberattacks. It proposes investments of $508 million over five years, August
and $109 million per year thereafter, to fund a new National Cyber May
August 16
Security Strategy with three principal goals: May 8 FinTech Canada
• Ensure secure and resilient Canadian systems; Canadian Prepaid Providers FinTech Canada Conference 2018
Organization Toronto, ON
• Build an innovative and adaptive cyber ecosystem; and Prepaid Symposium 2018 www.fintechcanada.com
• Support effective leadership and collaboration between different Toronto, ON
levels of Canadian government and partners around the world. cppo.ca August 21-22
The Prepaid Press
May 8-11 tppEXPO’18
Modernizing regulations Finovate Las Vegas, NV
Budget 2018 also commits to “Modernizing Canada’s Regulatory FinovateSpring 2018 prepaidpressexpo.com
San Jose, CA
Frameworks.” The federal government wants to help shepherd spring2018.finovate.com September
regulations that accommodate emerging technologies and business
models. May 9-11 September (TBA)
Payments Canada NAPCP
Although the financial sector, specifically credit unions, do 2018 Payments Summit Commercial Card and Payment
not figure in these commitments, it will be an important area of Toronto, ON Conference 2018
engagement for the CCUA. We will continue to advocate for more payments.ca Toronto, ON
effective and appropriately calibrated regulatory approaches that do napcp.org
May 14-17
not create unnecessary costs and inhibit growth in our sector. Reed Expositions September (TBA)
CNP Expo & Conference 2018 Western States Acquirers
Marc-Andre Pigeon is assistant vice president, government relations at the Canadian
Orlando, FL Association
Credit Union Association (CCUA). The CCUA is the national trade association for
www.cnpexpo.com 2018 Conference
Canada’s credit unions, member caisses populaires and regional Centrals. Rancho Mirage, CA
May 15-17 westernstatesacquirers.com
WB Research
eTail Canada 2018 September 25-26
Toronto, ON InsuranceNexus
etailcanada.wbresearch.com 4th Annual Insurance Analytics
Canada Summit
May 29-30 Toronto, ON
To send press announcements, Retail Council of Canada events.insurancenexus.com/canada
please direct them to STORE 2018
Toronto, ON
Brendan Read, Editor, storeconference.ca
at brendan@paymentsbusiness.ca
June Visit us online
June 5-7
Canadian Venture Capital
& Private Equity Association
Invest Canada Conference 2018
Calgary, AB
.ca
www.cvca.ca

march/April 2018 PAYMENTSBUSINESS 21

 Hardware
Report: POS
Tapping customer feedback
at the POS
By Georgina Nelson
W
hile the primary
function of a
point-of-sale
(POS) system is to receive
payments, POS technology now has the
potential to do so much more. In fact, POS
systems, like the Poynt smart terminal,
can hold the key to improving business
operations through obtaining customer
feedback: because of the direct interaction
customers have with the terminals.
Customer feedback is vital to business
growth. In fact, more than 90 per cent
of U.S. business executives agree that
customer feedback is critical to their bottom
line, according to a study conducted by
HundredX.
Connecting with customers at the POS
puts the power back in the business’s hands.
It helps them understand their customers’
needs and it provides access to valuable
insights to make better business decisions.
Here are a few best practices on gathering
genuine customer feedback directly at the
point of purchase.
Keeping it simple
It’s no secret that customers have busy lives.
They don’t have time to fill out lengthy
surveys in-store, through pop-ups that
interrupt the purchase process or via follow-
up emails when buying online. With this in
mind, how can merchants gather customer
feedback in a way that’s both convenient
and accurate?
The key is simplicity. Instead of asking a
slew of lengthy questions, merchants can
gather far more data by asking one short
question at the point of payment, thereby
guaranteeing that the respondents are
genuine customers and that the shopping
experiences are fresh in their minds. The POS
22 PAYMENTSBUSINESS
serves as the perfect channel for merchants
to offer a convenient way for customers
to tell them what they’re doing right (or
wrong) with little to no inconvenience.
Yes, one question per customer may
sound almost too simple at first. But the
data adds up, especially when merchants
can rotate through a variety of questions
and continuously change the type of data
they receive from customers.
TruRating’s research shows that when
asking one question as customers pay and
providing an easy and frictionless way for
immediate feedback, merchants can obtain
an average of 88 per cent response rate,
versus the 1-2 per cent response rate that
other customer feedback solutions see.
All that data provides merchants with the
chance to not only gauge their performance
but strategically improve it according to
verified customer feedback.
Rotating the questions
Rotating the questions asked means that
repeat customers aren’t getting prompted
with the same questions on every visit. This
gives merchants the ability to target specific
areas, such as customer service, product
selection, layout and price, according to
their business needs.
Merchants can ask customers: “How
would you rate the service?”, “Did you find
everything you were looking for?” and “Were
you satisfied with the staff’s knowledge
of the products?” The answers provide
retailers with the ability to understand how
their businesses are holding up in the eyes
of their customers.
Go omni-channel
In an omni-channel world, it is important
for merchants to use customer feedback
solutions that can integrate everywhere a
March/April 2018
consumer wants to shop, whether in store
or online. When all customer feedback
is collected in the same dashboard,
merchants can efficiently correlate it.
Not only does this ensure the feedback
received is representative of the whole,
but it also helps retailers make data-driven
business decisions that benefit all shopping
environments.
Act on the data
Collecting near real-time customer feedback
at the point of purchase allows merchants to
make executive decisions more efficiently.
It is of little use to find out customers were
highly dissatisfied with the staff’s service
long after they’ve left the store. With robust
customer feedback solutions integrated
with POS terminals, merchants can analyze
the data and act on the results to rectify
problems.
It is with this data that merchants can truly
improve their businesses. By understanding
how their customers think about their
shopping experience, retailers can adjust
their strategies accordingly and increase
positive scores over time. For example, if
a retailer is receiving poor service ratings
during the evenings, managers can rethink
their approach and train their evening staff
in order to improve customer satisfaction.
In conclusion, customer feedback provides
retailers with the knowledge to boost their
bottom lines and adapt their stores to the
needs of their customers. These insights will
help them to keep pace in the digital age.
Georgina Nelson is the CEO and founder of TruRating,
a customer feedback solution. Headquartered in the
U.K., TruRating has operations across Canada, the U.S.
and Australia. With a background in law and an eye
for the consumer, Georgina saw the need for reliable,
validated customer reviews that would better serve
businesses, thus launching TruRating in 2014.
 Reach marketers & financial executives
Our magazines are must-reads for key executives in core corporate competencies.

Can you help our readers:

• Create a strong financial structure and healthy economic
ecosystem to ensure capital and cash flow keep their engines running?

• Determine who their customers should be, how they can reach them most
effectively, and how they can turn data-driven marketing into profitable sales?
• Build efficient and effective financial systems to enhance payments
and billings between their companies and their customers and vendors?

• Convert all the data and information they collect from every contact
point into tangible benefits that increase revenue and reduce costs?

• Equip their companies with the tools, technology, systems and hardware needed to manage
their operations, to create new services or products, and deliver them to their market?

• Manage their customers with smoothly functioning support departments that are properly
staffed and equipped to solve problems, foster loyalty and retain customers?

• Make any or every step in that chain better, faster, cheaper, and more profitable?

We can help you tap into the ecosystem

at the points that will drive your campaigns.
To advertise or get more information and media kits:
905-201-6600 | 1-800-668-1838 | 302-137 Main Street North, Markham ON L3P 1Y2
Visit our websites:
Direct Marketing magazine, www.dmn.ca Canadian Treasurer magazine, www.canadiantreasurer.com
Contact Management magazine, www.contactmanagement.ca Canadian Equipment Finance magazine, www.canadianequipmentfinance.com
Payments Business magazine, www.paymentsbusiness.ca Financial Operations magazine, www.financialoperations.ca.