Time to mod­ern­ize pay­ment tech­nol­ogy, says key bank of­fi­cial

The Hamilton Spectator - - BUSINESS - ANDY BLATCH­FORD OT­TAWA —

The coun­try’s pay­ments in­fra­struc­ture is long over­due for an up­date to en­sure fi­nan­cial sys­tem sta­bil­ity amid the rapid ad­vance of new tech­nolo­gies and the risks that ac­com­pany them, a se­nior Bank of Canada of­fi­cial said Thurs­day.

Deputy bank gover­nor Syl­vain Le­duc warned that, for ex­am­ple, the sys­tems must be able to keep up with new pay­ment op­tions that have mush­roomed in re­cent years. He pointed to ex­am­ples in­clud­ing in­no­va­tions like PayPal, In­terac etrans­fers and Ap­ple Pay.

Keep­ing the pay­ment sys­tems up-to-date, he added, is nec­es­sary to pro­tect Canada’s fi­nan­cial sta­bil­ity and to ad­dress credit, liq­uid­ity and op­er­a­tional risks that can arise — in­clud­ing those that can even come in the form of a com­puter glitch.

The ex­ist­ing pay­ment sys­tems are also show­ing their age, Le­duc said in a Toronto speech.

“I don’t want to be alarmist here, the sys­tems are still func­tion­ing — but it could be im­proved,” Le­duc said af­ter the speech as he took ques­tions from the au­di­ence at the event for Pay­ment Canada, a not­for-profit group funded by fi­nan­cial in­sti­tu­tions that helps over­see busi­ness and con­sumer trans­ac­tions.

“We have look at the fu­ture to do this be­cause at one point it’s go­ing to be very costly to op­er­ate those (older) sys­tems.”

He said that down the road the re­tail pay­ments sys­tem must also be de­signed to al­low enough open­ness to al­low for con­sumers’ ex­pec­ta­tions of fast, ef­fi­cient pay­ment op­tions, like PayPal.

If the sys­tem fails to stay up-to­date with th­ese in­no­va­tions, con­sumers may choose to adopt al­ter­na­tive, po­ten­tially un­reg­u­lated forms of pay­ment, that could even­tu­ally pose risks to the broader econ­omy, he added.

“Mod­ern­iz­ing sys­tems when tech­no­log­i­cal ad­vances and other changes in the pay­ments en­vi­ron­ment are oc­cur­ring at such a fast pace is not only chal­leng­ing, it is po­ten­tially par­a­lyz­ing,” Le­duc said.

“How­ever, we all know that in­ac­tion is not with­out costs.”

He cred­ited Pay­ments Canada with un­der­tak­ing a plan to mod­ern­ize them.

The Bank of Canada, Pay­ments Canada, a tech con­sor­tium called R3 and sev­eral fi­nan­cial in­sti­tu­tions have also spent the past year work­ing on an ex­per­i­ment called Project Jasper that tested an in­ter­bank pay­ment sys­tem us­ing a dig­i­tal-ledger plat­form, some­times re­ferred to as “blockchain.”

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