Payments Canada’s annual Summit drew a record-breaking 1,700 attendees over three packed days in May to talk all things payments modernization. Here are six key takeaways from this essential event.
Should we do open banking?
“Yes!”, the consensus answer, required little debate. Rather the question “how should we do open banking?”, elicited a diversity of responses with speakers urging Canadian participants to reflect on lessons learned from Europe’s PSD2:
- Account for the readiness of payment service providers to open-banking-enable their infrastructures to prevent banks from defaulting to the fastest path to compliance;
- Incorporate all account types in the data model, not just payments initiation;
- Adopt an agile methodology for specification and development, avoiding the rework required in Europe when technical specifications for PSD2 were released far ahead of development;
- Realize that in Canada, since API-based access to banking services is already available from many banks, open banking is actually a migration, affecting existing aggregators and service providers;
- Ensure that any regulation covers both technical standards and governance—for example, in the UK, PSD2 wasn’t enough by itself, CMA9 was needed to make open banking a reality.
Real-time rails need real-time trains – and real-time security
Don’t focus on speed, instead emphasize the end-to-end experience made possible by the real-time rail—the “trains”, in effect, that run on the rails. The following aspects ranked high:
- Having access to the payment at the point and time of need, for sender and receiver;
- The availability of data around the payment, to eliminate reconciliation and facilitate traceability;
- Whether or not the payment experience was integrated end-to-end with corporate treasury and ERP systems;
- The intelligence and security around the payment.
Distributed Ledger Technology / Blockchain in payments has jumped the shark – maybe?
The hope, excitement and promise of blockchain in Canada circa 2017 appears to have devolved into uncertainty, fear, and doubt. One main-stage speaker firmly said: “Don’t build payments on the blockchain”. A question to a panel on the possibility that blockchain
could solve challenges in real-time treasury elicited little enthusiasm. Tellingly, only one breakout session featured the term DLT or blockchain in its title, well down from past years.
If there was a consensus at the Summit about DLT, it was: DLT has excellent applications in trade finance, contracts, and digital identity, and is realizing its promise in certain areas of payments, notably cross-border payments. But closer to home? At least
in Canada, the closing statement of the Jasper project seems to be carrying the day: “the technology is not yet ready to underpin a domestic payments system”.
ISO 20022 isn’t just about message translation
Summit participants understood that the move to ISO isn’t just about a commoditized technical translation from one message format to another. It’s about:
- Rethinking business processes to unlock the power of rich data that can travel with the payment
- Improving straight-through processing
- Reducing reconciliation burdens
- Harnessing the power of real-time payment experiences
- Providing customers with more effective ways to connect directly into open banking services through ISO 20022-aware APIs
To build on an oft-repeated phrase, if “data is the new oil”, ISO 20022 will help us all to collaborate and construct the pipeline networks that let this essential fuel flow smoothly through the financial supply chain.
Keeping with this theme of collaboration, the second day of the Summit saw a welcome addition to the landscape: the launch of the non-profit organization 20022 Labs, which provides consulting, education, research and ‘sandbox’ services focused on the promotion
of the ISO 20022 message standard in payments.
Leave no Canadian behind
One of the best-attended breakout sessions of the week was a standing-room only panel discussion on approaches to modernization with representatives of the five largest banks in Canada. The format personified one of the unique characteristics of the Canadian
financial industry, the willingness of institutions to set aside traditional competitive practices and collaborate to advance the common good.
What better way to remind the industry that payments modernization isn’t a technological or even a fiscal exercise? Rather, that its fundamental purpose is to improve customer experiences and access to banking services for all Canadian consumers and businesses:
the 1m unbanked, the digitally motivated millennials who make up 28% of the population but 40% of the workforce, the 25% of Canadians who are self-employed, the gig economy workers, the 50% of small businesses who have incurred missed payment fees, as well
as the large corporations who drive Canada’s economy forward.
A unique opportunity to lead
Many speakers dwelt on the concern that Canadian payments are behind the times: Canada lacks an effective B2B real-time payment capability, none of the national payment systems are as yet ISO 20022 based, other regions have already entered the open banking
economy, and so on. While valid, this concern missed a major silver lining. As a follower, Canada can learn from the mistakes of the early adopters; as a leader, Canada can innovate, setting an example for others along the way. This kind of opportunity comes
up at best once in a generation, and based on the 2019 Summit, the Canadian payments industry is uniquely poised to capitalize on it.