Wise: Modern payments regulations will support Canada’s economic recovery

Published: March 5, 2021

Nick Catino headshot

Nick Catino, Head of Policy and Campaigns (Americas) at Wise (formerly TransferWise) shared his thoughts on the need for modern payments regulation in Canada, including the Retail Payments Oversight Framework and changes to the Canadian Payments Act, in order to provide Canadians new payments options that are safe, affordable and convenient. 

Amidst the prevailing pandemic, how might modern payments support Canadians?

While “modernizing payments regulations and infrastructure” might sound technical, it’s actually one of the most important financial policy initiatives the government can lead. Payments are the part of finance that consumers engage with most on a day-to-day basis. Much like our mission at Wise, governments should strive to make payments instant, convenient, transparent, and as low cost as possible. Payments modernization will help meet those goals and ultimately help ensure the financial health of Canadians and keep more money in their pockets. 

In order for Canadians to reap the benefits of modern payments, what legislative and regulatory changes are needed?

Finance Canada is leading three initiatives that will have outsized benefits for Canadians. First, there’s the proposed Retail Payments Oversight Framework, which will result in new registration and market conduct requirements for payments companies. Subsequently, these newly regulated companies will be eligible for direct access to the payments system via amendments to the Canadian Payments Act. And, finally, on a parallel track is consumer-directed finance*, also known as open banking, which will give consumers more control over their financial data. These reforms will require legislation from parliament and the implementation of new regulations. 

Collectively, these reforms, along with Payments Canada’s forthcoming Real-time Rail payments system, will dramatically modernize and improve the way consumers engage with payments on a day-to-day basis. The initiatives will enable access to innovative financial services and lead to a more competitive marketplace. 

Who benefits from these regulatory changes? Canadian consumers or businesses? Or both? 

Everyone benefits from payments modernization! Real-time payments help consumers avoid hefty fees from overdraft and cheque cashing, while small businesses unlock working capital that would otherwise take days to access. The Retail Payments Oversight Framework will help Canadians better understand the costs and terms of payments, inducing more competition and resulting in lower costs. The amendments to the Canadian Payments Act will expand membership and access to the payments system to Wise and Canadian payments technology companies, leading to better services, lower costs, and increased innovation. Finally, consumer-directed finance* will allow consumers to efficiently manage their finances, take advantage of tailored financial products and services, and make more sound financial decisions, while small businesses gain access to capital based on cash flow data. The benefits of these initiatives are overwhelming for both consumers and small businesses. 

Looking at your current role, we know Wise’s mission is money without borders. Can you tell us about the current pain points in the cross-border market for Canadians? 

Wise was started because cross-border payments are broken – they’re slow, expensive, inconvenient, and riddled with hidden fees. We’re trying to change that. More than 10 million people and businesses globally now use Wise to move six billion dollars every month, but that’s a tiny sliver of the overall market. 

Migrant workers in Canada sending remittances abroad face average fees of six per cent according to Statistics Canada. Similarly, small businesses struggle with high costs and delays when making international payroll or paying and getting paid for goods and services. 

That’s why the international community – led by the United Nations International Fund for Agricultural Development and the World Bank – recently released a seminal report with global remittance policy recommendations. In the “Blueprint for Action,” they highlighted real-time payments systems, non-bank direct access to payments systems, and transparent pricing (the elimination of hidden exchange rate margins) as critical to spur lower cost and more accessible consumer cross-border payments. 

Additionally, the Committee on Payments and Market Infrastructures (CPMI), which is part of the Bank for International Settlements (BIS), has released a series of reports on cross-border retail payments in support of faster, cheaper, more transparent and inclusive services. The recommendations are in strong support of payments modernization, including non-bank access to payments systems. 

In fact, Timothy Lane, Deputy Governor of the Bank of Canada, recently gave a speech in which he highlighted the CPMI initiative and the importance of a “coordinated domestic effort…to make lasting improvements to cross-border payments.” I agree with Deputy Governor Lane that both the public and private sector will need to play a role to reduce the considerable pain points in cross-border payments. It’s achievable but it takes action and a commitment to progress and modernization. 

As you know, Payments Canada’s Real-Time Rail (RTR) is expected to launch in 2022. How will RTR help address these cross-border issues? What about ISO 20022?

In 2021, moving money should be like sending an email – instant. The first step to making payments instant globally is to make them instant domestically. For example, Wise has built a cross-border payments infrastructure by integrating – directly where possible – to local payments systems around the world. If we’re directly originating payments with real-time rails on both sides, then we can move money instantly and as low cost as possible. Direct payments access means no middleman taking a cut and adding friction to the process. That’s how we make 34 per cent of transfers instantly and 53 per cent within an hour, with an average cost of .69 per cent. We’re proud of the progress we’ve made so far, but we’re just getting started. Canadians will quickly benefit from faster cross-border payments and lower costs with the implementation of a real-time payments system that allows direct access for payments technology companies. 

Additionally, the ISO 20022 standard is being used in the development of faster payments systems around the world. The standardization of message formats and information sharing will help achieve the goal of instantaneous and lower cost cross-border payments in a global economy. Once fully adopted, it will be a boon for economic growth, technological innovation, and operational efficiency. 

Looking ahead, we’re excited to have you join us at The Payments Canada SUMMIT. What can we expect to hear more about during your session?

I’m excited for the opportunity to speak at The SUMMIT. I plan to highlight the importance of payments modernization to the future of payments and the economic success of Canadians. Specifically, why it’s so crucial that the Canadian government keeps pushing forward on four key initiatives – the Retail Payments Oversight Framework, real-time payments, non-bank access to the payments system, and consumer-directed finance*. And I’ll stress why industry and other stakeholders must continue calling for action to ensure payments modernization stays on track and remains a top priority for Canada. Additionally, I’ll offer my perspective on how payments modernization efforts in Canada compare to the United Kingdom, United States, and other jurisdictions. Look forward to seeing you on the virtual stage!

The Payments Canada SUMMIT is a meeting point for the payments community to exchange ideas on the future-state of the payments industry. To hear more from Nick Catino, and many other payments industry leaders and innovators, join us virtually from May 31 – June 4, 2021. Register now.

*Open banking