When Canadians buy gifts this month, the last thing on their minds will be the mechanics of how their payments are processed behind the scenes. But new and sweeping reforms announced this week by Payments Canada will forever change the way we buy things – and may ultimately allow driver's licence renewals, medical test results and other services to be immediately delivered online.
After decades of reliable service, our country's antiquated payments infrastructure will be replaced by a faster, more secure, information-rich system. This will serve as Canada's ticket to full participation in the digital economy of the 21st century.
A quick primer: Our economy depends on the exchange of billions of dollars each day. Responsibility for the infrastructure that enables these transactions falls to Payments Canada.
The challenge? Much of our payments infrastructure is decades old. It is long past time for renewal. That's the only way to ensure that critical information is transmitted safely, securely and efficiently in the modern age.
This week, Payments Canada announced plans to replace Canada's antiquated payments infrastructure with a modern, information-rich, faster payments system. Canada's financial institutions are also stepping up. They are investing billions to replace their core transaction systems and incorporate new advances in digital innovation.
These investments by Payments Canada and Canada's financial institutions will make a profound difference. Currently, our payments system is capable of carrying very little information. Modern infrastructure will allow the protected transmission of much more data – such as the results of a blood test, delivered securely right to your smartphone.
This is more than mere convenience. A modern payments system will help to improve Canadian productivity.
In Northern Europe, the removal of paper from some government services – the information is now transmitted electronically – has resulted in huge cost savings.
On average, businesses and governments can expect to realize a 1- to 2-per-cent revenue reduction in administrative costs.
A thoroughly modernized payments system could help to save the Canadian economy as much as 2 per cent of GDP – equivalent to $32-billion.
But the reforms we are seeing today may not have been possible without the use of a new consultative process, known as catalytic governance.
Here's the background: Five years ago, the federal government of the day established a task force to review Canada's payments system. There was no easy consensus to be found. Members came to the process with hardened and conflicting views about the best path forward.
Catalytic governance encourages constructive and inclusive dialogue. It empowers leaders – on boards and in government – to better engage stakeholders, find common ground and build trust. It creates a community of people with the power to catalyze action.
And that's just what happened with the payments task force. Working together, stakeholders – including established players (the banks, credit card companies and so on), new entrants (wireless carriers, technology companies and more) and users – formed a microcosm of a new payments system that everyone could agree on.
As a result, the task force was able to deliver a widely-supported road map – which, in turn, enabled government and industry to act.
For instance, the federal government moved quickly to begin phasing out the use of cheques. Banks and wireless carriers launched apps that make mobile payments available to most Canadians. And, the federal government introduced and passed legislation to overhaul the governance of the Canadian payments industry. The newly appointed independent board of Payments Canada prioritized replacing Canada's obsolete payments infrastructure and held the new CEO accountable for delivering it.
A direct result of the Catalytic governance process, this investment in Canada's payments system positions Canada to take on the opportunities of the global digital economy. Our new payments system will support electronic invoicing and payments, enable immediate delivery of mobile and online services and support a pan-Canadian digital identity and authentication framework.
Canadians will benefit from greater choice, efficiency and convenience – and can do so with the confidence that our payments system is safe and secure.