Proposed updates to the Canadian Payments Act have the potential to help small businesses overcome today’s payment challenges
By Donna Kinoshita, Chief Payments Officer, Payments Canada
Payments Canada recently conducted a survey that found small and medium-sized enterprises (SMEs) plan to improve efficiencies, decrease expenses and debt while finding ways to save money within their operations over the next 12 months. Payments are part of the day-to-day operations of all businesses and impact each of these areas – presenting small business owners with challenges and opportunities for their organizations.
Expressing the pain points of payments
For nearly one third of SMEs (29%), their biggest payment pain point is delays in incoming and outgoing payments. As consumers, it feels like payments happen at the tap of a card, but as a small business owner can relate, business payments can take days to settle.
Specifically, when making payments, the biggest challenges SMEs face are additional fees (31%), processing delays (21%) and managing their business’ cash flow (21%).
Security concerns were also top of mind for small business owners. Seventeen per cent of small SMEs reported them as their biggest payment challenge, an increase of 112% from the previous year. Large SMEs had an increase of 40% year-over-year, with 21% of them reporting security concerns as their biggest payment challenge.
Despite these challenges, opportunities are on the horizon that will help make payments work smarter for small businesses.
Fostering innovation through updated legislation
With an increasingly digital economy, the payment landscape is evolving at an unprecedented rate. With a well-regulated banking system and a stable economy, Canada’s payment ecosystem has the ideal foundation to thrive in the digital payment age. However, to unlock its economic benefits for Canadians and the country’s small businesses, we need to modernize the legislation supporting it.
In the lead-up to the federal government’s Fall Economic Statement, Payments Canada and organizations across the payment industry are advocating for the Canadian government to make changes to the Canadian Payments Act (CP Act) to expand the type of organizations that are eligible for membership. The CP Act has helped to ensure the safety and soundness of Canada’s payment infrastructure and economy. But, like any essential infrastructure, technology or regulatory framework, it requires updates.
Currently, the CP Act limits Payments Canada membership to banks, credit union centrals, and select other financial institution types. As technology transforms payments, broadening access to more types of regulated financial institutions will help to modernize our payment landscape while ensuring innovation happens safely – within Canada’s regulatory framework.
Unlocking benefits for small business
For SMEs, struggling with the cost of accepting payments, broader access could lead to lower overall operating costs. They would have access to a broader range of financial service providers, such as fintech companies, payment service providers, and other non-traditional financial institutions.
More players will fuel innovation and encourage the development of new user-friendly and cost-efficient payment solutions, which can drive down the cost of doing business. Small businesses will also benefit from better ways to manage their cash flow, including added visibility into their financial position.
Finally, expanding membership eligibility will mean improved security and payment fraud protection for small businesses. This is because more financial products and services will be brought under the same rules and regulations that membership and participation on Payments Canada’s systems requires.
In summary, while small businesses navigate the current pain points of payments, legislative changes can present new opportunities and benefits that allow them to overcome these challenges.
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ABOUT DONNA KINOSHITA: Donna has more than 20 years of stakeholder and strategic product development experience. As payments continue to rapidly evolve, Donna and her team at Payments Canada work closely with industry stakeholders to ensure the Canadian payment ecosystem is inclusive, enables fair competition and supports a thriving Canadian economy.
