There’s been a lot of talk about payments modernization over the past several years. But what is it?
First, let’s define it in technical terms. When people who work in the payments and fintech industries say “payments modernization,” they’re often talking about advances in the ecosystem of payments systems and technologies. In Canada, these include the Real-Time Rail (RTR), which will allow Canadians to send and receive payments in seconds around the clock (Interac is the exchange provider for RTR); Lynx, Canada’s system for high-value payments, which is in place as of 2021; and ISO 20022, an international standard for business-to-business communication that can be leveraged for transformation of finance processes (for example, using Interac e-Transfer for Business).
But what’s arguably much more important is what these developments can actually do for Canadian consumers and businesses. Payments modernization isn’t just a set of technologies; it’s a fundamental change in outlook toward a more digital economy.
Payments modernization has been talked about as a public policy objective, because the benefits it delivers are broad, and touch all parts of the economy. Perhaps it’s best to think about it in practical, people-centric terms: What products and services can we adopt to deliver better for our customers, businesses’ bottom lines, and the productivity of the Canadian economy as a whole?
We expect the evolving set of payment products and systems that make up payments modernization to continue to empower businesses (and other entities) of all sizes, from freelancers to large corporates, to get paid more quickly and easily — while meeting the growing expectations of Canadians who also want fast, safe and easy ways to pay and get paid.
Why payments modernization now?
What’s brought us to this point? Why is it so crucial for payments and practices to evolve now?
First, there’s the inescapable fact that consumer behaviour has changed rapidly, and continues to do so.
We witnessed a shift in payments at the start of 2020, with consumers and businesses alike adopting new shopping and payment habits. And while the pandemic accelerated that shift, we’ve seen a steady move towards digital payments and commerce over the last few years. Whether online, on mobile, or in-store, Canadians are looking for a frictionless, omnichannel experience when shopping or transacting.
For Canadian business leaders — especially those in retail, customer experience, and finance — this means finding new payment strategies to navigate this change in behaviour. And businesses of all sizes are responding. Among bigger players, for example, quick-serve restaurants like McDonald’s Canada are allowing customers to speed up their experience by ordering ahead of time through an app, and pay with Interac Debit or another electronic method so they can grab their order and go. For medium, small, and micro-sized businesses, Shopify and Interac teamed up to enable them to securely accept card-based payments using a regular mobile device paired with a piece of Bluetooth-enabled hardware.
Payment experiences like these help Canadians to keep living their busy lives without missing a beat. An economy that gives people the options for seamless digital experiences that offer a full array of payment options is the exciting natural evolution we’re moving towards.
Driving Canada’s digital economy forward
The second factor driving payments modernization? The opportunities it creates for more efficient transactions (and therefore operations) for both government and businesses across sectors.
The ability of businesses, governments and other entities to move significant sums using fast, data-rich payments will strengthen Canada’s competitiveness on the global scale. It’s estimated that traditional payment processes cost Canadian businesses anywhere from $2.9 to $6.5 billion annually due to inefficiencies and manual work, labour-intensive processing, difficulty tracking payments and limited visibility into cashflow.
As Payments Canada notes, Canada has more than a million employer businesses. Of these, 98 per cent are small businesses. Enhancing the payment options of these businesses will give them faster access to their funds with fewer processing delays. This will in turn improve their cash flow, building up their resilience and productivity.
With these enhancements, Canadian businesses can only grow stronger. And stronger businesses mean a stronger Canadian economy.
How Interac can help organizations seize the advantages of payments modernization
Interac is bringing solutions for this fast-changing landscape. To see what this looks like in practice, consider a few examples of how organizations are modernizing their payments and processes thanks to the products and services that we offer.
Businesses are offering Interac Debit through multiple channels. Interac Debit contactless payments, Interac Debit online payments, and Interac Debit through digital wallets all empower customers to pay for products and services using their own money directly from their bank accounts – whenever and wherever they want. Whether it’s an order of fries in person, a hand-made craft at a local market, or an online purchase from a big-box retailer, Interac Debit allows customers to transact with their own money how they want to.
On the business-to-business payments front, Canadian organizations are harnessing Interac e-Transfer for Business to modernize their back-office practices, including streamlining accounting processes for account payables and receivables. That means using Interac e-Transfer to pay vendors, employees and contractors. By taking advantage of Interac e-Transfer for Business features like real-time payment and transaction limits of up to $25,000, businesses can leave behind slow, old-fashioned paper invoices, cheques and electronic funds transfers (EFTs) for all of these transactions.
Modernizing payments pays dividends in terms of organizational efficiency: Using services like Interac e-Transfer for Business to replace cheques and other antiquated payment methods with faster, modernized digital payments can cut down the labour time your organization spends on reconciliation and other accounting and back-office functions. This can lower costs, and, as we’ve discovered within our own walls, free up accounting staff to work on more important, higher-level tasks.
Canadian organizations are also using Interac e-Transfer Bulk Payables to send payments to a large number of recipients at once. Imagine, for instance, that your organization has a long list of payees. Do you really want to spend money, time, and resources mailing out cheques in 2023? Interac e-Transfer Bulk Payables can take the wait and the paper out of the process by deploying the speed and convenience of Interac e-Transfer.
In moments of crisis or unexpected need, payments modernization takes the form of bulk payments in real time, which empower governments and aid organizations to deliver financial assistance quickly. Interac e-Transfer Bulk Payables has already been deployed to move money faster between relief agencies and recipients. During the pandemic, governments distributed relief payments via Interac e-Transfer for those self-isolating and unable to work, while the Canadian Hospitality Worker Relief Fund used the platform to disburse funds to grant recipients in the hospitality industry.
(Note that with both Interac e-Transfer for Business and Interac e-Transfer Bulk Payables, you can designate a payee with a text message, email address or account number — whichever is the most convenient way for your organization to identify them.)
What payments modernization truly means: Speed and convenience fuelling a more competitive economy
These examples demonstrate what payments modernization really means for the Canadian economy: Faster payments help organizations large and small thrive, grow, and better serve their customers and clients; streamline relationships with vendors and suppliers; lower costs and drive efficiencies.
All in all, modernization is a win-win for Canadian consumers, government and business, making this an inspiring time for payments. It’s also a challenging one. Businesses and other organizations can fall behind if they don’t understand the implications of modern payments, or if they simply stick to the status quo instead of adopting new solutions that would lead to benefits for their operations and for customers.
We’re excited for Canadian organizations to use our tools and adapt to the evolving landscape that is the increasingly digital global economy. We all live in a faster world now — and we want to help you get up to speed.
Learn more about what Interac e-Transfer for Business, Interac e-Transfer Bulk Payables, Interac Debit and other Interac services can do for your organization.
