Businesses in British Columbia frustrated by a Canadian payments system that favours eastern time zones will get some relief this fall with added time for processing transactions.
Starting September 17, Payments Canada, the corporation that facilitates clearance of payments in Canada, will add a third daily exchange for batch payments made using automated funds transfer with a deadline of 6 p.m. Pacific standard time. Once this is in effect, companies and banks in B.C. won’t have to choose between rushing to process payments before 1:30 p.m. and facing a day’s delay.
The change comes as part of Payments Canada’s modernization program and allows for expedited bill payments and same-day payroll, while putting the West Coast’s banking services on an equal footing with the rest of the country.
The program also mandates the adoption of the ISO 20022 global messaging standard, which transfers data alongside payments.
Colin Hansen, former B.C. finance minister and president of AdvantageBC, the non-profit agency that promotes investment in the province internationally, said the added time for payments is a welcome response to one of the agency’s major headaches. While it has been hearing from business executives in Vancouver that the current system was a huge frustration, it took some pressure for executives in Ontario to get the message.
“Payments Canada, to their credit, has recognized that the payment system has not properly served Western Canada until now,” Hansen said.
In recent years, other countries like Australia have streamlined their payment systems to meet consumer needs. Hansen said Payments Canada’s modernization plan will not only meet demand, but also set Canada ahead technologically and enhance its attractiveness as a place for business operations.
“Canada will be the country that is leading in terms of payments-processing technologies as this rolls out over the next three years,” Hansen said. “It will be a very desirable location for international companies to locate their payments-processing systems.”
While the immediate adoption of a third payment exchange applies only to payments made within the country, Robert Nernberg, vice-president of corporate cash management at TD Securities, suggested that companies looking to set up Canadian operations won’t be forced to do so in Ontario following the change.
“It puts [Vancouver] on a level playing field with Toronto,” Nernberg said. “It’s just a relief.”
Under the current payments system, many Vancouver businesses feel pressured to run their financial systems in alignment with their eastern counterparts, but now they’ll be able to re-evaluate how their offices are run, he said.
“We work with people [in Vancouver] that operate on eastern standard time because they need to facilitate payments. This can change the way people do payments and even run their offices.”
Hansen stressed that it’s up to the business community to take advantage of the changes.
“It’s something that has been flying under the radar. Survey 100 CFOs in Vancouver.… I would bet you fewer than 5% would be aware it’s coming.”
Government services, like emergency funds from social workers or the debit cards handed out to families displaced by wildfires last year, could also be affected, he said. Currently, government funds being transferred to emergency accounts face the same risk of delay if they’re not processed on time.
“It affects more than just businesses, absolutely,” Hansen said.
Payments Canada’s move to adopt the ISO 20022 standard is also expected to be a big cost saver for businesses across the country. For one thing, Hansen said, it will spur more companies to offer an alternative to cheques, which have an average cost of processing of $15 each.
“A lot of companies are reluctant to move away from cheques to electronic transfers because they don’t have the data that comes with it,” said Hansen. “With ISO 20022, along with the transfer of money goes the information as to what it’s for.”
Research by Payments Canada in 2015 showed that ISO 20022 could save Canadian businesses up to $1 billion annually just by reducing the usage of cheques. According to an initial study by the Task Force for the Payments Systems Review in 2011, the full savings a modern payments system could provide the economy are up to $7.7 billion a year. •