Other parts of this series:
An exciting new era is emerging for financial services companies in Canada, as innovations in technology drive new relationships with customers across the country – and beyond our borders. FinTech continues to be a catalyst for change as new entrants, bolstered by inexpensive computing power, better software tools, and creative minds are challenging established business models. In our financial system whether it be banking, asset management or insurance, the foundation is the payments system. Each new innovation relies on the strength of that foundation. But if the mortar is brittle, the bricks will shift, the house will settle, and major repair work will emerge. While we can focus on renovations around the house, we still need to pay attention to the foundation.
Every industry, not just financial services, needs to pay attention to payments as they adopt and drive their own innovations. Cash flow is fundamental to every business and our entire economy. Fintech startups, payment companies, and banks have launched many new payment services in recent years. Each in its own way is tackling the need for faster, more secure, more content-rich payments. And this change is hitting the industry players across the board right now. At the core of our payment system, Payments Canada has launched its own modernization program. This program is set to tackle some of the biggest challenges facing Canadian businesses. In the organization’s own words, the program creates a “vision for a modern payments system that is fast, flexible and secure, promotes innovation, and strengthens Canada’s competitive position.”
Why is a modern payments system so important? If you ask Jonathan Magder from our Strategy business, he likes to say that if you liken a country to a body, the payment system is like the circulatory system. With a modernized payment system, the blood — in this case, money — can flow faster in different ways and carry more “nutrients” with it as it travels. So understanding the direction of payments is key if you’re really going to capture opportunities. It can prompt us to think about the new types of transactions that could emerge, new ways for corporations to transfer value among themselves, and to interact with consumers.
These interactions are not limited by borders either. Global opportunities are emerging as a result of advancements in payment systems, and many of those opportunities exist in North America — and Canada, in particular, which is home to 15 world-leading financial industry head offices. Our world is fundamentally interconnected and capital – be it institutional or personal – flows to where it gets the best return.
This modernized payment system can present some interesting challenges and opportunities, especially around risk and regulation, but perhaps most intriguing will be the debate on the speed of change. Each financial institution will have a different take on where to focus, how much to change how quickly and where these changes rank in their internal priorities. And it should not be looked at in isolation. Remembering that payments are the foundation on which innovation rests will shape the growth of our overall economy as well as our financial system.
For further information about payments, take a look at this link. Although it covers USA, I think you’ll find it worthwhile.