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The future of payments in Canada
By ATB Financial 5 May 2021 3 min read
Overview
The future of banking promises to be transformational.
The move toward data rich real-time payments will give users access to both their financial and non-financial data in a faster, simpler and more secure way, says ATB Business Solutions Vice President, Brian Ford. He describes the ability to integrate and create straight-through processing, as a game changer. “Everyone benefits.”
COVID-19 has exponentially brought the dates forward on implementing ideas like open banking, digital currencies, digital identities, real-time payments, distributed ledger/blockchain and Application Programming Interfaces (APIs), which allow applications to exchange data and functionality easily and securely. The push to more digital data along with digital payment methods will not only allow customers more context in terms of moving money, it will also enhance insights from the data and will help with end-to-end processing, says ATB Business Solutions Managing Director, Natasha Lalani.
“We know we need to provide better cross-border payment options because we live in a global society. Financial institutions want to offer more competitive products to their customer base. There is a shift now to digital methods of moving money - moving more to e-commerce solutions and generally a reduction in cash. And, we’re talking about the amalgamation of payments and payment data coming in the same stream. From a data perspective, with the merging of data and payments together, you will start seeing that more in your enterprise resource planning (ERP)/ accounting software, making reconciliation easier.”
Currently, more than 50% of business-to-business payments in Canada are made by cheque. The majority of payment types currently in use (Electronic Funds Transfer—EFT, wires and cheques) have limited data. But this is changing fast, as banks move away from paper-based solutions and data starts being incorporated with the payments.
Payments Canada vision
Payments Canada is responsible for Canadian clearing and settlement infrastructure, payment processes and rules governing payments in Canada. Payments Canada, which is modernizing Canada’s payments ecosystem to replace the outdated legacy systems in use today, envisions a modern payments ecosystem with data-enriched payments that can be made across borders, in real time. It’s being designed to promote innovation and strengthen Canada’s competitive position. It will give you oversight of your activity through many different channels, whether it’s through your bank or your accounting platform. It’ll allow you to make payments that are faster, more secure, easier and transparent. The value exchange is about your transactional data.
The future of payments
The future of payments is all about improving digital banking products and services, and leveraging data (which will also help combat fraud) and APIs to deliver customized, personalized solutions to customers.
ISO 20022—the global standard for electronic data interchange between financial institutions and payment messaging—“changes everything. It offers opportunity and value for corporations, small and medium enterprises and consumers,” Lalani says. Data-rich payments will lead to business efficiencies and ease of reconciliation, she explains, and could include the following types of information:
- Transaction date
- Amount owing
- Amount paid
- Invoice number
- Payee information
- Payor information
- Delivery details
- Security data
- Unstructured data, such as hyperlink to invoice
- Time of transaction
What's happening in Canada and around the world?
- Open banking/data: Sharing financial information electronically and only under conditions that customers approve
- Digital currencies: Currencies in exclusivity electronic form
- Digital identity: Verifying who a person/company is
- Real-time payments: Instantaneous payments, whether domestic or cross border
- Distributed ledger/blockchain: smart contract; settlement and payment
2021-2022 are key years for the payments modernization work that Payments Canada is undertaking along with financial institutions across the country.
Looking to the future, payments will be instantaneous. The future of payments is about having options, the ability to move money easily and relatively inexpensively. We may also see distributed ledger technologies become instrumental in the payments system of the future, both between banks and around the world. “Payments will be faster, simpler and more secure. You will have the ability to receive insights from your data and get alerts based on your transactions, this way your bank can work for you and you can focus on growing your business,” Lalani says.
“You can exchange funds instantly, with absolute transparency, confidence and certainty.”
Our Business Solutions team has local experts that can help guide your organization through the future of payments and what will impact you in the near future."
All summaries and recordings
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Payment modernization, and what to expect from the future of payments.
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Need help?
Our ATB Business Solutions team will be happy to assist.