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Moving Canada into the Digital Age



A compelling need for a payments system overhaul.

The way we pay for goods and services affects every Canadian in profound ways.

The Task Force for the Payments System Review has found that unless Canada develops a modern digital payments system, Canadians will be unable to fully engage in the digital economy of the 21st Century‚ leading to a lower standard of living across the country and a loss in international competitiveness.

Moreover, the Task Force found that a thoroughly modernized payments system could save the Canadian economy as much as two per cent of GDP in productivity gains‚ equivalent to $32 billion in annual savings for Canada.

As important as this massive benefit, a modern Canadian payments system will lead to far greater choice, efficiency and convenience for consumers, businesses, governments and organizations, as well as a safer, more secure system.

A failure to act now will not only result in a loss of these benefits, but will also trap our economy in a less productive and more costly payments system. The question isn’t whether Canada should overhaul its payments system. The question is: Can we afford not to?

A collaborative investigation of the facts

To come to grips with the complexity of our payments system‚ and learn what solutions are required to bring Canada into the digital age‚ the Task Force went beyond a standard consultation processes to draw more fully on the wisdom of citizens, payments experts, consumer, retail and small business groups, federal and provincial government representatives, financial institutions, small and large businesses, and new entrants to the payments system in a process of extended dialogue.

The Task Force engaged many stakeholders in working groups and a scenario process in order to better understand the massive changes underway and their implications for government policy and action. It was the first time that the views of such a wide range of stakeholders had ever been heard in such depth on the subject of Canada’s payments system.

A swiftly evolving digital environment

From the outset, the Task Force heard that payments habits and the digital economy are evolving rapidly around us, exceeding most expectations for change. Even during its brief mandate, the Task Force witnessed the advent of new digital payments products and services that have married payments to mobile-based apps, cloud computing, and “tap-and-go” technology.

The Task Force also learned about the vital interplay between payments and the business and personal information associated with those payments, a relationship that features prominently in a digital, information-based economy.

Amid these advances‚ and despite the fact that Canadians have a tendency to be early adopters of technology‚ we still rely largely on old-fashioned methods of payment such as paper-based processing, and cash and cheques. In addition, Canada is falling behind in the international push to generate a secure mobile ecosystem, the revolutionary agent that will deliver extraordinary new commercial and public services to consumers via their smart phones.

Canada will be left behind

Twenty-seven European Union countries, the BRIC countries‚ even Peru and Romania‚ are significantly outpacing Canada’s transition to digital payments, with obvious negative implications for Canada’s global competitiveness and interoperability.

A study by Swiss e-invoicing and billing services firm Billentis (substantiated by separate studies carried out by the European Payments Council, Innopay and the European Banking Association) found the following benefits accrue in countries and organizations after moving from paper-based and non-automated invoicing and purchasing to electronic solutions:

  • After five to seven years, 27 European Union countries expect to save the equivalent of 1.98 per cent of GDP, which amounts to €243 billion per year in increased productivity.
  • Organizations are able to reduce the cost of invoicing by 60 to 80 per cent when they move from paper-based invoicing to electronic and automated methods.
  • Businesses, on average, realize a 1- to 2-per cent-of-revenue reduction in costs by switching from paper to e-invoicing and automating the related supply chain processes.

A system dominated by the major banks

Canadians continue to use an outdated payments system not necessarily because they prefer it, but because no viable alternative has been priced and promoted in a way that makes it attractive to use. Canada’s system has simply not evolved in step with the wants and needs of its users, and this stagnation is standing between each one of us and a better standard of living.

The reason for the stagnation? Our payments system is controlled by Canada’s major banks and other key institutions. Their interests are best served by keeping at bay new entrants to the system‚ the very entrants who would bring the innovations that Canadians need.

The Government of Canada must move forward decisively

The Task Force has concluded that, in the absence of a healthy competitive environment, government needs to create demand for a modern digital payments system. Such a system must put the needs of users first, protect the public interest and encourage collaboration and innovation by all stakeholders now and into the future. In particular, the Task Force calls on the Government of Canada to:

  • Implement electronic invoicing and payments (EIP) for all government suppliers and benefit recipients;
  • Partner with the private sector to create a mobile ecosystem;
  • Propel the build of a digital identification and authentication (DIA) regime to underpin a modernized payments system and protect Canadians’ privacy;
  • Pass legislation to define a discrete payments industry and create a public oversight body to ensure effective governance of the industry; amend the Canadian Payments Act by overhauling the governance, business model and powers of the Canadian Payments Association; and, most important, transform the payments infrastructure so that it can innovate to meet the evolving payments needs of Canadians in a digital economy.

Canada must take decisive steps in overhauling our payments system to further our national interest and the well being of Canadians.

How to read this report

“The Challenge” section of this report provides additional detail about the risks inherent in Canada’s current payments system. As such, it complements certain ideas explored in the introduction. “The Opportunities” section explores Canada’s prospects for creating a trusted, accessible and valuable digital payments system that meets the needs of myriad users. The “Recommendations” section details the specific actions government must take to deliver the digital payments system that Canadians want and need.