Electronic, contactless and mobile payments are growing in Canada. The pandemic has accelerated this shift to digital payments preferences and has brought to light questions about how the Canadian payments ecosystem can achieve economic equality that supports inclusion, growth and innovation for all businesses and consumers.
For Payment Source, the established and ubiquitous Canadian fintech, financial inclusion has always been a core part of its mission to power digital payments for everyone. Canadians want more choice and flexibility in how they make payments without sacrificing security and convenience. The pandemic has only further underscored the need for more services to help Canadians achieve financial inclusion. This is particularly true for small merchants that have been deeply affected from the lack of in-store retail and inherent shift in how Canadian consumers shop and pay online.
“One of the target groups we service is marginalized Canadian communities that struggle to pay or be paid,” said Robert Hyde, CEO at Payment Source. “We are always looking to bridge the gaps within Canada’s payment ecosystem because there are lots of ways in which people are excluded from the traditional banking industry — whether it be because of geography, lack of access to banking products, or inexperience with technology.”
Hyde, like many payment service professionals, has witnessed how the pandemic has accelerated digital and online payment trends. The problem with this rapid shift, he said, is that the technology and tools used to speed up the adoption haven’t kept pace. “The underlying structures and access points are lagging, meaning there are still individuals being left behind. But it’s not just individuals. It’s the small businesses and merchants receiving those payments that are falling behind as a result,” Hyde noted.
Take, for example, grocery stores. Pre-pandemic, small businesses and merchants saw significantly more foot traffic in-store. With online and click-and-collect payments becoming the norm, many payments — because of the lack of ubiquitous options — have been shifted disproportionately to credit. This increases overall payment costs to small businesses and merchants, which can have a trickle-down effect on consumers.
“The economic shift has caused credit cards to dominate payment volume. But that makes it difficult for merchants who have not built this cost into their business model. Ultimately these higher costs will be passed along to the consumer,” Hyde said. “We need to find new solutions that will restore the balance.”
Opportunities Across the Payments Ecosystem: Balancing Cost Structures
Prepaid is one platform that is a great bridging solution to deliver banking-like services to more businesses and consumers who have been marginalized by not having equal access to the payments ecosystem. Prepaid is one payment mechanism that has helped consumers gain access to online shopping experiences.
Where Hyde sees opportunity for the prepaid industry to evolve is in its ability to provide more options to Canadian consumers and merchants. While prepaid platforms facilitate access for many under- and unbanked individuals, it doesn’t always benefit merchants in the same way. It provides choice, but still often at a cost to the merchant. Hyde is interested in following where and how prepaid can evolve as a platform to level the playing field and maintain a better cost structure for everyone.
“We know that, these days, Canadians make buying decisions based on their payment preferences. Merchants must keep updated on these customer preferences or they risk losing business,” Hyde said. “However, while many retailers have gone online to service Canadians, they can’t always make money because of the fees and high-cost structures.”
By including non-credit based options, merchants can achieve a more balanced cost structure, allowing more payment platforms to thrive without the full expense falling on the merchant. As more payments shift online, technology isn’t always the problem, Hyde said, but rather the capability to accept payments in ways that balances the needs of the consumer and the business.
“We believe we are going to solve problems that banks aren’t able to solve on their own. We can work in partnership with banks to bridge the gaps and provide a whole host of new customers that would otherwise struggle to access financial services,” Hyde said. “Providing greater choice and convenience is important. It supports a good mix of payment solutions and allows for everything to grow as an equal part of the pie. This is good from an economic perspective for everyone.”
To learn more about Payment Source, visit paymentsource.ca