Payments System Review: How far is Canada behind in the payments industry?

Payments System Review: How far is Canada behind in the payments industry?

Canadians are early adopters of new technology. There’s no question about this. Many of us find ourselves driving two hours across the border to purchase the latest Ipad.  We are also one of the heaviest user’s of the Internet, online banking and shopping. If we rely so much on technology then why are mobile payments so absent in Canada?

Photo Source: phonedog.com

The Task Force for the Payment’s System Review fulfilled their commitment made in 2010 and reviewed the Canadian Payment’s System. The team conducted an analysis and considered the following:

  • the safety, soundness and efficiency
  • the level of innovation
  • the competitive landscape
  • business & consumer ease with providers
  • payments system oversight mechanisms

 

In the report “Moving Canada into the Digital Age” the Task Force identified the need for a new payments system and provided their analysis on the current system, recommendations, and the willingness by Canadians to participate in a new system.

 

The Task Force consulted citizens, payments experts, consumer, retail and small business groups, federal and provincial government representatives, financial institutions small and large business, and new entrants to dig deeper into the issue.

 

In their careful analysis, the Task Force concluded that a new modern payments system could save our Economy about 2% of GDP. An equivalent to $32 Billion in annual savings.

 

This system would be safer, more secure & efficient. Above all, it would satisfy the needs of consumers and businesses across canada.

 

So how far behind is the Canadian Payments System?

 

“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.” – the Task Force for the Payments System Review

 

Additionally a study by Billentis a Swiss e-invoicing and billing services firm with moderation by the EU found the following benefits from moving away from paper and moving towards electronic solutions:

 

  • 27 EU countries are expecting to save 1.98% of GDP equivalent to 243 Billion Euro’s per year in increased productivity
  • Moving from paper-based invoicing to electronic & automated methods allow organizations to reduce the cost of invoicing by 60-80%
  • On average businesses realize a 1-2% of revenue reduction by switching to e-invoicing

 

Canada relies heavily on paper transactions. About one billion cheques are written annually in Canada.  About 60% are issued by large corporations, SME’s and the government.  The remainder are issued by consumers.  These numbers are outstanding as many european countries have either stopped or mitigated the use of cheques all together.

At this point, Canada does not have a practical alternative payments system that has been priced and promoted that seems attractive and makes sense. Our system is outdated and has not evolved to meet the growing needs and wants of its users.

Thankfully the recommendations by the Task Force for the Canadian Payments System should shed some light on the Canadian government and convince them to seriously pursue a new and improved payments infrastructure.

Follow this link to learn more about the initiatives of the Task Force for the Canadian Payments System and how our Payments System can be changed to satisfy the needs and wants of consumers & businesses in a technological economy.