By: Doug Kreviazuk, Executive Director, PayTechs of Canada
For more than two decades, national payments systems around the world have been transforming: transforming their infrastructure and scope of activities. Numerous countries have used payments modernizations to drive greater efficiencies and, in return, create opportunities for their economies to grow and allow businesses and consumers to reap greater benefit. Unfortunately, Canada can hardly claim to be among those vanguard nations leading the push for payments transformation, though we have often described as a close follower of payments innovation. This portrayal of Canada as a “close follower” is dubious, too; over the past two decades few payments-related innovations can be directly attributed to the efforts of Payments Canada- the operator of Canada’s national payments system- aside from the growing suite of services at Interac. But that could soon be changing.
Amidst Canada’s general payments-related woes, largely compounded by the pandemic, one positive ray of light is beginning to shine and it is coming from Payments Canada. My sense of optimism may come as a surprise to some, particularly those who have been active stakeholders of the payments system for a long time. For me, though, with nearly twenty years of work under the Payments Canada banner and thirty years working in payments, this has been a long time coming.
First, a brief word about the history of Payments Canada.
Payments Canada (aka the Canadian Payments Association) has been seen, traditionally, as a “bankers club” serving only the interests of its largest members, despite having a broad public policy mandate and objectives. While catering to optics, changes in their rule set directly or indirectly benefited their membership, while little attention was afforded to the broad range of stakeholders in the system.
Following the legislative amendments to their mandate in 2001, Payments Canada became the target of stakeholder criticism, primarily for not doing enough to create the right incentives or facilitate greater opportunity to encourage and embrace innovation within the operational framework of the payments system and the downstream payments ecosystem.
Payments Canada is charged with three critical objectives: i) to establish and operate the national clearing and settlement system, ii) facilitate interactions with other payments systems, and iii) foster the development of new payment methods and technologies. These objectives are not substitutable with one another, nor are they ordered to signify a specific priority ranking; they are mutually exclusive and equally important.
To compliment the mandate, Payments Canada is guided by legally prescribed public policy objectives: namely that it shall promote the efficiency, safety and soundness of its clearing and settlement systems and take into account the interests of users. The conundrum faced by Payments Canada can be summed up in a single question: “Do you support the needs of those that directly participate and pay for the system, or should you support the needs of those that increasingly depend on the payments system to move money/payments and data?” This question highlights the debate as to whether the national payments system is effectively a public purpose utility for the benefit of Canadians or a private venture that seeks to satisfy and maximize proprietary commercial interests of the major incumbents. These two battleing identities have been the source of much of the tension that has existed within this industry for some time.
That might well be changing and changing for the better. The operational beavior at Payments Canada seems to be shifting in the direction of positive and sustainable change for the Payments System in Canada. Some may argue that the move to require a majority level of independence on the Board of Directors was the catalyst for this shift, but in reality that was but one small component in a host of critical steps toward a more consumer-focused approach to policy. Payments Canada’s previous President and CEO, Gerry Gaetz’s decision to launch the infrastructure modernization initiative was also a contributing factor, as were the activities of the Stakeholder Advisory Council and the bureaucrats within our payment’s regulators. The reality is, this was an organic evolution of the payments system from within the Payments Canada structure driven by a well-informed stakeholder community and an increased desire to safeguard public interest.
Given the broad range of interested stakeholders to the payments system, it has become almost a daily exercise for Payments Canada to walk a tightrope balancing the various interests in the payment system- an unenviable task, surely, but important one in the payments modernization proicess.
What is most noticeable and most telling of the level of maturity of the payments system is the willingness on the part of Payments Canada to table and engage a broad community of interest on important policy and emerging operational issues. At any other time, these discussions may well have been bypassed because a proposed change, while introducing positive benefits to users, would present challenges or heighten unwanted competition to their current membership base. Lately, though, the level of stakeholder engagement on key policy and operational matters is being sought and considered. Now, with Tracey Black at the helm, there is a clear and recognizable change in this direction, and the reaction from the stakeholder community is increasingly positive.
Today, payments issues are again topical and viewed as increasingly important to our economic recovery. The climate appears to be much more inviting to table, discuss and seek to resolve longstanding, critical issues that have hindered growth in our payments system. As Executive Director for PayTechs of Canada, I believe it is important for the broad payments ecosystem to tackle these issues collectively and promote the public interest. I am encouraged to see that Tracey Black’s leadership efforts and the work of her Payments Canada team are aligning with this approach.