The changing Canadian payments landscape

The changing Canadian payments landscape

An interview with Anne Butler, Chief External Relations and Legal Officer, Payments Canada

27 September 21

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The views expressed in this article are solely those of the author and should not be attributed to the European Payments Council.

Over years and even decades, we’ve witnessed growing changes in the way Canadians pay. The payments ecosystem is rapidly evolving. Canada’s economic and financial welfare depends critically on payment systems.

We had the pleasure to interview Anne Butler, Chief External Relations and Legal Officer at Payments Canada about the recent developments in the Canadian payments system but also about the implementation of the new high-value payment system Lynx as a significant step towards transforming Canadian payments.

What are the current main features of the payment landscape in Canada and how has it evolved in the recent past?

Over years and even decades, we’ve witnessed a growing pace of change in the way Canadians pay. And COVID-19 has accelerated this at an unprecedented rate. In particular, the nation witnessed a burgeoning growth in digital payments. With changing behaviours, preferences and technological advances, there has been a major shift away from paper-based payments, such as cash and cheques, toward digital forms of payment, such as debit cards and credit cards.

In a rapidly changing financial technology environment, new technologies, consumer demands and shifting competitive dynamics are driving payments system modernization initiatives around the world. 

That’s the case for Canada, a country that has seen extraordinary growth over the years.

As the payments market continues to evolve, this growth momentum is expected to continue to ensure that Canada is poised for continued transformation that will benefit everyone within the payments ecosystem.

Can you tell us more about the impact of COVID-19 on Canadian payments trends?

While the public health crisis triggered by COVID-19 has had an impact on nearly all aspects of daily life, the pandemic has been a catalyst for disruption and change in both consumer and business behaviours.

This deeply impacted the Canadian payments industry, as individuals and businesses started to shift their payment behaviour due to widespread lockdowns and restrictions. Stay-at-home orders and brick-and-mortar business closures restricted the ability for people to make in-person transactions and changed the way people made them when they did. These shifts catalysed three overarching themes that are continuing to reshape the dynamics within the payments ecosystem, including:

•    An acceleration to contactless, with 43 per cent of Canadians indicating a newfound   preference  for digital and contactless payments.

•    A consumer shift from cash to cards, with the majority of Canadians (58 per cent) using less cash overall and 40 per cent saying they were uncomfortable handling cash due to the pandemic.

•    A business transformation from POS to online, demonstrated by a 20 per cent increase in e-commerce site creation by Canadian retail merchants at the onset of the pandemic.

Can you tell us more about the next generation of payments in Canada? Has there recently been an evolution and do you see a new trend? 

Canadian consumers and businesses have made it apparent that when it comes to payments, efficiency and convenience are vital, which are key factors that underpin Payments Canada’s Modernization journey. There is no doubt that the continued innovation of the payments ecosystem and infrastructure is critical to ensure Canada remains globally competitive.

Beyond the continued shift toward digital and contactless payments, Payments Canada is building the foundation for the next generation of payments to ensure Canadian consumer and business needs for more control, speed, convenience and affordable payments methods are met.

This year, future opportunities for innovation will become possible with the Lynx high-value payments system, which launched successfully in August 2021, followed by the roll-out of Canada’s Real-Time Rail system in fall of 2022. These systems are designed for tomorrow’s digital world and will introduce new opportunities to simplify and enhance everyday payment interactions.

Lynx is a pivotal part of Payments Canada’s multi-system payments Modernization program. This system processes large value, time-critical payments with real-time settlement finality, and will lay the foundation for transformation.

The launch of Lynx represents years, days, hours, and minutes of participation, negotiation, and collaboration by all members of this ecosystem and is a true illustration of what can be achieved by working together. Lynx serves as a necessary precursor to this fast, data-rich system that will further enable payment innovation in Canada. 

On the other hand, Canada’s new real-time payments system called the Real-Time Rail will provide 24/7/365 payments that are final and irrevocable. At launch, the system will feature account number-based routing and ISO 20022 messaging to support data-rich payments. With the launch of the Real-Time Rail in 2022, traditional and non-traditional players will be able to connect and develop new and innovative ways for Canadians to pay for goods and services, transfer money and compete domestically and abroad.

Both Lynx and the Real-Time Rail will deliver and address the speed, security and convenience Canadians expect now and into the future.

Finally, a broader question: how do you see the Canadian payment landscape developing over the coming five years? 

As the needs and expectations of the Canadian marketplace continue to change, it will be critical for the country as a whole to maximize on all that has been created – a strong foundation, an ecosystem that can collaborate to achieve big things, and an industry with a voice and a presence on the global stage – to modernize towards a world-class payments system capable of strengthening Canada’s competitive advantage.



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