The most important developments in Canadian payments industry in 2012 have been on three fronts, viz. regulatory oversight, product innovation and product commercialization. Mobile payments have been top of mind, and while they are still in their infancy in Canada, the year saw some important developments in setting the stage for successful mobile payments rollout. On the regulatory side there have been a number of initiatives, including readying the environment for mobile payments, taking on the big payment card networks and setting the stage for new markets (for example, prepaid). Contactless payments have gained traction as have ‘competing’ debit offerings. Here is our assessment of the top ten developments in the Canadian Payments Industry in 2012 (roughly in chronological order).
1. In March 2012 the Canadian Payments System Review Task Force released its final recommendations to the Department of Finance. The Department’s response was somewhat muted, and by all account fairly disappointing to those who were hoping for a major overhaul of the Canadian payments System.
2. The Department of Finance releases a Consultation Paper titled, ‘Addendum to the Code of Conduct for the Credit and Debit Card Industry in Canada’, to address how the code of conduct released in 2010 could be made more appropriate for a mobile payments world. The Department is still examining input from industry stakeholders and has yet to issue the final code.
3. The Canadian Bankers Association released their proposed Mobile Payments Reference Model, which provide guidelines for any players wishing to participate in the Canadian mobile payments market. Although the document was crafted under the auspices of the CBA, it is now being managed (as a living document) by a more diverse stakeholder group.
4. In 2012 Interac Flash started building traction amongst merchants in their key target categories. The number of Interac Flash cards in circulation is still low, but is expected to increase dramatically as new issuers come on board. While Interac Flash was slated for rollout in 2011, it has reportedly been plagued by a number of technical problems and instability around the final specification.
5. The Commissioner of Competition held hearings in the case against Visa Canada Corporation and MasterCard International Incorporated, et al, in mid-2012. The Commission still has to issue its final ruling. A ruling either in favour or against is likely to have a major impact on the payments industry in Canada.
6. Scheme debit gains some traction with TD’s introduction of an innovative debit card product that houses the Visa debit application, regular Interac debit and Interac Flash all on the same card. The card is compliant with the Code of Conduct in that the Visa debit functionality is only enabled for domestic transaction types where Interac cannot be used.
7. Rogers and CIBC issue the first mobile wallet in Canada, allowing NFC payment with a smartphone. RBC was slated to launch its own mobile wallet based on Visa’s v.me platform in late November, but this has yet to materialize.
8. Square enters the Canadian market, distributing readers through retailers such as Future Shop, Best Buy and Apple Stores. Although Vancouver-based Payfirma – which has a similar offering – has been around for a while, Square’s entry into the Canadian market garnered substantial interest, among other things, because of the alliance with Starbucks.
9. The Minister of Finance released new proposed regulations for prepaid credit products. The proposed Federal regulation (see an analysis here, and here) will eliminate expiry dates on non-promotional prepaid credit products (while allowing for alternative funds access mechanisms for phased out products), and prevent the levy of certain fees without express consent of the user. Initial fees on the product are allowed, but subject to strict disclosure requirements.
10. Presto increases its penetration of the transit market. GO Transit passengers have been migrated, throughout the year, to the Presto card, and the TTC has signed up for the Presto card. In addition, Presto is testing the functionality of an open payment system (traditional debit or credit) on its network and is also expected to test mobile payments in the near future.