The Canadian Payments Association estimates that the cost benefits to businesses of a move to the ISO20022 standard could be as high as $4.5 billion over five years simply from the elimination of cheques
The CPA has launched a multi-year initiative to modernise Canada’s core payments infrastructure, which will ultimately use the internationally recognised payment messaging standard.
In a discussion paper outlining the financial benefits of a move to ISO20022, the CPA says that adoption of the standard will expedite cheque elimination in favour of lower cost electronic payments.
In 2014, nearly one billion cheques were written in Canada. Many businesses still use cheques because of the information that can accompany a payment, such as invoicing statements. The ISO 20022 standard, once implemented, will allow significantly more information to travel with electronic payments, says the Association, enabling greater automation and improved efficiency for businesses and financial institutions alike.
The biggest beneficiaries will be Canadian businesses, who currently bear the brunt of the costs associated with cheque processing and reconciliation.
“Modernisation of the Canadian payment system will require material investment by financial institutions and businesses,” says Carol Ann Northcott, vice president responsible for research at CPA. “Therefore, it is critical we understand the prospective benefits for all users of the Canadian payment system.”
Aside from the shift away from cheques, other financial benefits are harder to quantify, she says. Much of the upside potential comes in the creation of a single payments language that can be a spur to innovation in the mobile arena, and introduce efficiencies in cross-border payments processing as other market infrastructures adopt the standard.
“Establishing a shared vision for the Canadian payments ecosystem in the future and understanding the efforts required to realise this vision requires the collaboration and participation of all payment system users," says CPA chief Gerry Gaetz. "That’s why we are actively engaging our member financial institutions and stakeholders. We are committed to support this industry-wide discussion with sound research."
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