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Canada payments modernisation offers firms up to $6.5bn saving says EY


The way Canadian businesses process payments costs them CAD $2.9 billion to CAD $6.5bn in unnecessary costs every year, according to a new study by Payments Canada and EY Canada, that advocates the former’s modernisation plan.

The primary efficiency improvement for businesses identified in the EY report, which questioned Canadian small, medium and large corporations and payment professionals last Autumn, is the adoption of the ISO 20022 data standard. This will rectify the lack of data and transparency in payment messaging in the country as it moves towards implementing an instant payment system.

ISO20022 messaging will also improve automation and efficiency for firms, says the report, reducing many of the pain points in accounts payable (A/P) and receivable (A/R) treasury departments, particularly for those organisations processing large volumes of payments.

The report attempts to quantify the benefits of the move towards faster, more data-rich payments in Canada, which is in its early stages. Payments Canada’s modernisation plan is discussed by its chief information officer (CIO) Jan Pilbauer, in this InstaPay video interview carried out at the Sibos 2017 trade show in Toronto in October. The plan is expected to remove the following inefficiencies for small, medium and large enterprises:

  • Labour-intensive matching of customer payments to invoices.
  • Poor visibility into supply chain and collections.
  • Limited predictability of cash inflows and outflows.
  • Difficulty tracking cross-border payments.
  • Continued reliance on manual processes and legacy technology.

“The modernisation of Canada’s payment systems – specifically the introduction of faster, safer and more data-rich payments – will bring highly efficient options to Canadian businesses that will lower operational costs and boost bottom line returns over time,” said Gerry Gaetz, President & CEO of Payments Canada in a statement.

“Business leaders can prepare to take advantage of the changes now by paying more attention to the way they make and receive payments, examining the inefficiencies in their existing processes and becoming more informed about the coming changes to national payment systems.”

According to Ron Stokes, Partner and financial technology (FinTech) Leader at EY Canada: “There are many opportunities to deliver significant efficiency gains for the Canadian business community without compromising safety and security. By modernising and building a scalable, future-oriented payments infrastructure, Canada will continue to promote innovation and strengthen its competitive position in the global economy.”

The new system, which is also consumer focused with a full scheme definition due later this year according to this North American Q&A, will offer the following benefits:

  • Enhanced analytics and faster reconciliation from larger and richer data.
  • Simplification of accounting processes.
  • Increased productivity and re-deployed capacity.
  • Reduced operational risk.
  • Improved cross-border capabilities. This is important as The Clearing House (TCH) RTP US real-time payment platform ramps-up.
  • Greater interoperability across platforms. This is important for linkages as the adoption of application program interface (API) banking increases where service modules can be swapped in and out of a service orientated architecture (SOA), with FinTechs often providing the front-end tools. It may also be useful in linking to existing infrastructures such as Interac, the Canadian back-end system that presently connects banks in the country allowing them to offer fast, but not instant, consumer payment solutions, although some leakage from older systems can be expected as the new infrastructure comes on stream.
  • A new more flexible and open payment architecture is expected to spark a wave of value-added FinTech innovations and bank services.
  • Increased adaptability to future technological innovations and future-proofing.

Payments Canada owns and operates the country’s payment clearing and settlement infrastructure, including associated systems, bylaws, rules and standards. The value of payments cleared by its systems in 2016 was nearly CAD $50 trillion or $201.5 billion every business day. Its scope covers inter-bank transactions, including those made with debit cards, pre-authorised debits, direct deposits, bill payments, wire payments and cheques.


Author: Neil Ainger