Canadian Lawyer InHouse

November/December 2019

Legal news and trends for Canadian in-house counsel and c-suite executives

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24 www.canadianlawyermag.com/inhouse FEATURE AS THE GLOBAL payments landscape explodes with faster and more efficient systems, Canada is leading the pack with a host of changes underway to simplify, enhance and speed up the way payments are made. Evolving processes, regulations and standards will present challenges for legal counsel to tackle as well as many opportunities to be harnessed. The federal government plans to implement a new retail payments oversight framework, to be regulated by the Bank of Canada, that will allow for innovation and competition from new businesses that come under the regulation. "It's a very exciting time here in Canada," says Anne Butler, chief legal officer and vice president of policy and research at Payments Canada. "There is a very significant modern- ization initiative underway, which is intended to transform power systems and add a new faster payments system to Canada, which is really important to the Canadian economy and to remain competitive as a nation in a rapidly evolving payments landscape internationally." Among the changes, Canada will be one of some 30 countries around the world imple- menting ISO 20022, a global payments mes- sage standard that will allow large quantities of data to be transmitted with a payment. "Data is very powerful, and one of the things that's exciting about it is how it's an enabler of innovation for financial institutions that are providing financial services," says But- ler. "You'll be able to reconcile payments more easily and send meaningful messages with payments. This is very valuable to businesses." Benefits are expected to include smoother cross-border exchanges, opportunities for automation and innovation in products and services. As part of the overhaul, Payments Canada is in the middle of preparing a new high-value payments system, Lynx, which is expected to go live in the fall of 2021. Canada's new Re- al-Time Rail system will offer faster payments and provides a huge opportunity for innovation from smaller players, Butler says. The 24/7 system will facilitate the real-time delivery of low-value payments in a matter of seconds. Same-day settlements will speed up transac- tions to provide faster services for clients. The Department of Finance aims to reg- ulate new entrants to the payments system, which will bring welcomed competition for the large banks. Richard Shimoda, senior legal counsel at Scotiabank, strongly endorses more open and risk-based access to the payments system. "In fact, we believe that the increased competition will result in greater innovation from banks and new participants in the form of better payment products and services. In the end, that can only benefit consumers," he says. Shimoda also recognizes that opening access to previously unregulated entities introduces risk, so the Retail Payments Oversight Framework is essential to regulate the new entrants, he says. The Canadian government is continuing to assess the complexi- ties surrounding open banking and its potential to offer a secure way to consent to sharing financial trans- action data. Financial institutions are busy preparing for the changes and updating systems to take full advantage of the anticipated op- portunities and to ensure that data privacy and cybersecurity are top of mind. For smaller institutions, such as Canadian Western Bank, payments modernization and open banking are particularly welcome. "It's the big banks that control the vast majority of customers and data so, as a chal- lenger in this open banking world, we're excited for the opportunity to have the same data access and to bring our value-added solutions to prospective clients and hopefully to build our share of wallet with our own clients," says "Data is very powerful, and one of the things that's exciting about it is how it's an enabler of innovation for financial institutions that are providing financial services." Anne Butler, chief legal officer and vice president, policy and research, Payments Canada Transformation of payments Evolving processes, regulations and standards will present challenges for legal counsel to tackle as well as many opportunities

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