After the pandemic: are we prepared for the next phase in the “payments system” journey?

Doug Kreviazuk, Executive Director, Fintechs Canada, April 18, 2020

As we all wait with baited breath for the dark cloud that is the Covid-19 pandemic to pass, have we begun to consider what our new reality will look like?  Within a couple of months, the world has completely changed, and with it, expectations of how business and the economy should function.

There have been many lessons learned in terms of commerce, travel, banking and health care.  Our operating paradigm hasn’t simply shifted; it has been dislodged and realigned to a new reality.

The pandemic is also creating clear challenges for our payments system (e.g., difficulties in expeditiously transferring money to Canadians; a growing reluctance to handle bank notes, or touch payment devices; growing gaps in the supply chain and insufficient business continuity plans).   Over the past 4 decades, changes in the payments system have been incremental; minor renovations to existing systems and platforms (e.g., tap-n-go/cheque imaging).  It is only in times of stress that we recognize the limitations of our current offerings.  Today, we avoid touching anything (e.g., shopping carts, door handles or payment devices) and even human contact.  For years now, there has been a real need to deliver a completely remote and virtual platform to conduct payments and support the growth of e-commerce.

Had we properly resourced a national mobile payments platform and replaced aging payments processes, many of the emerging payments challenges would not exist.  The state of e-commerce and ability to easily move money safely, quickly and ubiquitously is a current failing of our and many other payments systems.

While Canada’s largest financial institutions are focused on matters of stability for the economy and themselves, our responsiveness to the downstream “payments transaction” market is somewhat lacking.  The new challenges facing Canadians requires innovative thinking and rapid response times.

The Federal Government and Bank of Canada are advancing a well considered and thoughtful regulation to support the broader oversight and inclusion of payment service providers in Canada’s payments ecosystem, “Retail Payments Oversight Framework (RPOF)”.  Now is the time to advance a more flexible and responsive payments system to combat the current harsh realities.  PayTech firms are able to address many of the current obstacles and deliver against customer needs; but we need these and other regulatory changes now; not in 2-3 years.

There will be a desire to quickly resume business activities and return to some sense of normalcy, once the pandemic is under control.  But unlike flipping on the light switch in a darkened room, the objects in this room will have changed or disappeared altogether.  Very little will be as it was before.

Once the threat of the pandemic lifts and the economy awakens, business and government will be eager to restore operations quickly.  We must prepare now and avoid the possibility of pandemic “ice-damming” of financial services innovative ideas.

Now is the time to implement an enabling framework for the payments system, in order to avoid the congestion of an innovation stampede and mass confusion.  A new paradigm demands new approaches, bold thinking and courage.  Canada’s ability to respond appropriately, will define us as a nation and set the tone for future successes.  Across the global landscape, the leadership from the PayTech sector is responding to the current challenge and presenting new solutions and opportunities.

In a March 30, 2020 Forbes article, a survey by the deVere Group links the coronavirus to a surge in consumers/businesses uptake on fintech applications. In fact, across Europe, there has been a 72% rise in fintech application usage during this short period.  While Europe and others are ahead of Canada in terms of supporting laws and regulations, we have the luxury to leverage their learnings and leapfrog ahead to support the needed changes for Canada.

Canadian business can respond to this crisis and collectively, emerge to address the new challenges and market demands.  The Government of Canada has been progressing along the right track but now needs to move quickly to embrace a broader, safer, more competitive and innovative payments sector, thereby ensuring a healthy Canadian response.

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