Hedging against uncertainty in e-Payments: What CFO's need to know for 2012
Presented in partnership with:
Study findings:
-Financial executives like:
-convenience of e-payments
-lower transaction costs
-improved cash flow
- The biggest barriers seem to be: -customer behaviour
-convincing suppliers
-security concerns
-organizational constraints and
priorities
-lack of integration with current
accounting systems
Presenters: • Oscar van der Meer, Chief Technology & Payments Officer, Central 1
• Doug Kreviazuk, VP Policy & Public Affairs, Canadian Payments Association
• Kirkland Morris, Vice-President, Enterprise Strategy, Interac Association/ Acxsys
Moderator: Michael Conway, CA, Chief Executive and National President, FEI Canada
Certainties - Cost
• The cost of moving traditional payments is expensive AND increasing
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Source: Canadian Payments Association
Polling Question
Who should take the lead to work on reducing these barriers?
A. Government
B. Financial Institutions
C. Your company
Uncertainty – Innovation & Change
• System, policy, standards – Task Force for the Payments System Review - standards
– Voluntary code of conduct for the credit and debit card industry
– PCI Compliance
• Mobile – Near Field Communication (NFC) & Person-to-Person (P2P)
– Mobile acquiring
• Cheque Images – Cheque replacement document
– Remote deposit
Consider for your payments strategy
• Part A - Manage your cost surrounding cheque processing
• Part B – Invest strategically/selectively in electronic processing
Consider for your payments strategy Part A
• Manage costs around cheques
– Audit current payment operations • Cheque returns
• Cheque archiving and retrieval
• OCR & imaging
• Fraud management
Consider for your payments strategy Part B
• Invest strategically/selectively in electronic processing
– External Barriers • Increasing uptake/consumer behaviour
– Research with your customers
– Incentives or disincentives for clients and suppliers
» Offer faster payment processing for electronic
» Offer discounts
» Charge administration fees
– Usability/account validation
– Security perceptions
Consider for your payments strategy Part B
• Invest strategically/selectively in electronic processing
– Internal Barriers • Reconciliation/internal process
– Use email in the interim to advise supplier of invoice(s) being paid
– Experiment with electronic invoicing
– Establish internal validation systems to match payments
– Leverage account validation routines
Consider for your payments strategy Part B
• Invest strategically/selectively in electronic processing
– Take Action — Walk before you run • Test & learn — Pilot projects
• Practice what you preach — start by adopting electronic payments internally for payroll and expense reports
• Talk to your vendors of core systems
• Explore new payments options e.g. eTransfers
• Get involved in the discussion
Polling Question 2
Does your company have an active program in place to reduce the number of cheques you either receive or send?
A. Yes
B. No
C. Partially
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Getting ready for 2012: Update of the work of the Task Force for the
Payments System Review and the CPA’s Payments Strategy
Doug Kreviazuk Vice-President, Policy & Public Affairs Canadian Payments Association
Payment System Review
Has focused its work on:
• Safety, soundness & efficiency
• Innovation
• Competitive landscape
• Needs of consumers & businesses
• Review of oversight mechanisms
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Market Gaps
• Overarching & common regulation across all payments
• Limitations of CPA’s mandate
• Access & participation within the clearing system
• Straight-through processing (i.e. user to user)
• Enhanced remittance data
• Interoperability with other/global payments systems
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Pillar 1: Electronic Payments
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• Improving electronic bill payments
• Facilitating contactless payments at the point-of-sale (POS)
• Focus on mobile payments
• Enhancing the framework for online payments
Pillar 2: Payment Efficiencies
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• Review barriers to increased electronic payments
• Opportunities to improve straight-through-processing (STP)
• Opportunities for remittance data
• Leverage image technology
What You Can Expect
• Task Force for the Payments System Review
• ISO 20022
• Review of CPA’s Clearing and Settlement Framework
• Business case for centralized common settlement model (CCSM/ACH)
• International Payments Framework Association (IPFA)
• Potential to open gateways to other countries
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Kirkland Morris Vice-President, Enterprise Strategy Interac Association / Acxsys Corporation
The Payments Landscape – An INTERAC Perspective
Changing marketplace
Canadian Payments
System
New Competition
New Products
and Brands
Regulatory Uncertainty
New Technology
Payments used to be boring…
…not anymore!
Growth of e-payments
• Significant shift to electronic payment methods in the consumer payments space
– Widespread use of debit and credit cards
– Significant uptake of online banking and bill payment
• Poised for significant further inroads in remaining paper-intensive segments
– Contactless payments set to take off
• Cash and coin replacement focused on <$20 transactions
• $90 billion annual opportunity
• 12 billion annual transactions
– Increasing use of Web and mobile payment solutions for P2P and remittances
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Source: McKinsey Global Payments Map
Creative solutions needed in B2B space
28 Source: McKinsey Global Payments Map
• Canada a world leader in consumer electronic payments…but a laggard in adoption of electronic B2B solutions
• Challenges different and more complex…but drivers very similar
• INTERAC seeking to apply what works in the consumer space to the business payments environment
Security Convenience Cost
Effectiveness
Looking ahead to 2012
• Significant uncertainty across the payments landscape
• Some things will become clearer in the year ahead – Task Force report due at year-end
– Consumer response to contactless payment will be evident
– Mobile payments trials in Canada and elsewhere will help shape use cases, business models, value propositions
• But, we are a long way from equilibrium – Government response to the Task Force and potential public policy decisions?
– Mobile payment adoption and who will win?
– Solving the security and fraud challenge with next generation authentication?
– Finding the right formula for B2B?
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