Moving forward with payment systems

Moving forward with payment systems
A recently released discussion paper looks at the future of Canada’s payments systems. Photo: CNW Group
In a world of constant technological evolution, it’s important to be aware of the latest developments, says Andrew Fleming.
Fleming, a senior partner at Norton Rose OR LLP, suggests reading The Way We Pay: Transforming the Canadian Payments System, a discussion paper recently released by the task force assigned to review Canada’s payments system.

The task force was established by the federal Ministry of Finance in June 2010. Its mandate is to analyze Canada’s payments system and make recommendations to the finance minister on how to ensure the system is secure and efficient.

In announcing the new task force, Finance Minister Jim Flaherty said: “Today, Canadians can pay for things in a bewildering number of ways, even by tapping a cellphone against a scanner. It is important to ensure the payments system facilitates the introduction of new and exciting technologies to the benefit of users without compromising Canadian safety and efficiency or consumer protection.”

In accordance with this, the task force’s objective is to put Canada at the forefront of this new technology as the country is currently lacking, says Fleming. “There’s been some empirical evidence garnered from various jurisdictions around the world . . . that Canada is not at the cutting edge of developing a truly high-tech and efficient payments system.” For instance, he says, “in Europe direct transfers are much more common than they are here. People still write cheques in this country.”

In the discussion paper, task force chairwoman Pat Meredith noted: “Canada needs to become a leader in payments so that its people can enjoy the benefits of a safer, more affordable, and efficient payments system.”

The discussion paper highlights several challenges facing Canada’s payments system, including modernizing the fragmented regulatory and governance payments structure, improving fairness in the credit and debit card networks, increasing online security, and moving into a digital economy.

The recommendations made in the discussion paper include establishing a self-governing organization in the industry, drafting new legislation for the payments system, creating basic infrastructure for payments, and setting up an oversight body.

Fleming says it’s a “no-brainer” that businesses, and therefore their counsel, need to stay up to date on what is happening in the industry because Canada’s payments system can affect how they will structure their businesses and where they will dedicate their resources. “You’ll be called upon to embrace new methods of payment, which you should understand in order to advise your clients properly on whether they should use it and what sort of protections they should have when they use it, things surrounding privacy for instance,” he says.

“I think there’s a perception that if you can use technology and drive efficiencies into the payments system, you can save billions of dollars.” But with these new technologies comes increased security risks. Information exchanged through these new methods of payment raises the usual privacy concerns because it involves personal financial information. A breach of someone’s private financial information would be “pretty dire,” adds Fleming.

The task force plans to submit its final recommendations to the minister at the end of the year.

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