Total Finance Magazine Summer 2021 by Lloydmedia Inc

TotalFinance SUMMER 2021

C A N A D A’ S M A G A Z I N E F O R F I N A N C I A L E X E C U T I V E S

GIGECONOMY Entrepreneurs Who Drive Changes in Finance

ALSO IN THIS ISSUE:

❱ Prepaid Innovates & Grows ❱ Ten Predictions for Payments ❱ Equipment Finance Navigates Inflation PM40050803

CFO Central Digital transformation is shifting the world of finance and Canadian finance leaders are managing unprecedented levels of change. Learn from experts across a series of complimentary webcasts, case studies, and new research reports to discover how digital transformation is changing the world of finance. Learn more at sage.com/en-ca/cfo-central

TALKING POINTS

Royal Bank of Canada Launches RBCx to Support Visionary Technology. It’s a platform to accelerate the entrepreneurial journey at every stage of growth, giving access to capital solutions, innovative products and services, and operational expertise to help technology companies scale up. RBCx is for entrepreneurs who are disrupting business models, industries and sectors. RBCx will offer differentiated products and solutions for technology clients across their entire journey from inception to IPO and beyond, including: Innovative financial products, including credit and specialized banking; deep sector expertise in specialized tech verticals, including clean tech and life sciences; exclusive offers from industry-leading providers within the RBCx marketplace; counsel from operational specialists across a number of key disciplines; an inspired network of founders and funders engaged through curated events and content; proprietary research and guidance; plus a suite of custom personal banking services, including credit cards, wealth management and personal finance.

$ $ $ Shopify Inc. has invested a large stake in Stripe Inc. Shopify had a big hand in turning Striple into a payments giant and Silicon Valley’s most valuable private company. The Ottawa-based commerce software behemoth poured more than US$350million in Stripe — its exclusive provider of payments processing services — over a series of investments. The investment was first revealed by the Wall Street Journal. Payments has been a key driver of Shopify’s success as it has grown into Canada’s most valuable company, providing a platform for more than 1.7 million merchants globally to run their digital stores and manage their operations. The partnership has been a lucrative one for both companies, and expanded this year as Shopify introduced bank accounts and debit cards for merchants as part of a program with Stripe.

$ $ $ Canada’s labour force increased by 101,600 jobs from April 2021 to May 2021. When looking at the manufacturing industry specifically, the report shows the addition of 6,100 jobs. The report is a monthly measure of the change in total Canadian nonfarm payroll employment derived from actual, anonymous payroll data of client companies served by ADP Canada and measures more than two million workers in Canada.

$ $ $ FEI Canada has created the Canada Private Company Committee, a national initiative to support our private company financial leaders who make up over 50% of FEI Canada’s 1,500 members. With four dynamic thought leadership groups focused on Private Company M&A, Finance, Multi-Generation Family Businesses, and Entrepreneur Successions and driven by an engaged volunteer committee of over 25 private company financial executives from across Canada, FEI Canada’s Private Company CFO Initiative is now Canada’s premier support and networking resource for financial executive members in the private sector.

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GIG ECONOMY

Table of Contents 3

Talking Points

CFO CV

ANALYTICS 8

Why Are Scams on the Rise in An Increasingly Digital Society?

PAYMENTS 10 Canada’s Prepaid Payments Industry Growing, Attracting Innovation Among Homegrown and Global FinTechs 12 The Future of Conversational Commerce and Contactless Payments 14 Outsourcing Payments — Is it Right for Your Firm?

On the cover 18 Supporting Canada’s Growing Gig Economy Through Financial Inclusion Adjusting how gig workers are paid can help on-demand platforms, while providing a much-needed path to financial health for this growing portion of the workforce

15 Ten predictions for the Payments Industry in 2030 17 As NFTs Storm the World, Digital Identity Security Must Scale Alongside the Trend 19 Canada’s gig economy has been fuelled by the pandemic Workers and businesses are challenged by payments mismatch

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Summer 2021 Volume 1 Number 3 Publisher / Corporate Sales Steve Lloyd steve@totalfinance.ca

Contributors Alex Amoriello, Director of Business Development, Invoice Automation, Cambridge FX Fabio Carvalho, Digital Marketing Specialist, CCV Switzerland Jason Cottrell, CEO, Myplanet

EQUIPMENT FINANCE 23 e-Signatures and e-Leasing in the COVID-19 World 25 Equipment Finance Future Leaders Spotlight The CFLA’s Future Leaders Spotlight is a monthly feature of emerging talent in the Canadian asset-based financing and leasing industry.

26 Navigating Inflation’s Choppy Waters in the Equipment Finance Industry

TREASURY

28 How the Pandemic Changed the Accounting Business: Remote, and Digital 30

Five Treasury Trends to Watch in 2021

32 Fraud, Financial Crimes and the Impact of COVID-19

MARKET RESEARCH

28 SUMMER 2021

Amol Dhargalkar, Managing Partner, Board Member, Global Head of Corporates, Chatham Financial Eileen Foroglou, Chief financial Officer, NYX Capital Corp. TJ Horan, Vice President Product Management, FICO

Gary W. LoMonaco, Director, The Alta Group David Lucatch, CEO, Liquid Avatar & Founder, Oasis Digital Studios Marco Margiotta, CEO & Founding Partner, Payfare Inc. Jennifer Tramontana, Co-Founder & Executive Director, Canadian Prepaid Providers Organization (CPPO) Scott Zoldi, Chief Analytics Officer, FICO

Creative Direction / Production Jennifer O’Neill jennifer@totalfinance.ca Photographer Gary Tannyan President Steve Lloyd steve@totalfinance.ca For subscription, circulation and change of address information, contact subscriptions@totalfinance.ca Publications Mail Agreement No. 40050803 Return undeliverable Canadian addresses to:

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34 Cashless Countries Canada is leading the way to becoming the most cashless country in the world

Ontario Interactive Digital Media Tax Credit

Made possible with the support of the Ontario Media Development Corporation

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CFO CV Ortho Regenerative Technologies Inc. (CSE: ORTH) (OTCQB: ORTIF), a clinical stage orthobiologics company focused on the development of novel soft tissue repair regenerative technologies,

knowledge and proven track record of innovatively improving businesses makes her an extremely valuable addition to Kivuto’s executive team. “I’m happy to

Tania Clark

Tania Clark has joined the Business Development Bank’s Board of Directors. Honourable Mary Ng, Minister of Small Business, Export Promotion and International Trade, responsible for the Business Development Bank of Canada said Clark brings a wealth of experience as director, invaluable to BDC as it continues to play a vital role in delivering critical advisory and financial supports to Canadian entrepreneurs through the pandemic, especially as we begin recovering from the COVID-19 recession; delivering programs for strong, sustainable and inclusive longterm growth; and taking decisive action against climate change. Clark has over 20 years’ experience in senior financial positions in a diverse range of sectors, including the food and beverage, retail, and financial sectors. She is presently the Senior Vice-President and Chief Financial Officer (CFO) at New Look Vision Group, a major Montréal-based retailer in the eye care industry. She has previously served as vice-president and CFO at a publicly traded multinational corporation.

ATAC Resources Ltd. (TSXV: ATC) announces Larry Donaldson stepped down as ATAC’s Chief Financial Officer to focus on his other core engagements. Donaldson served as ATAC’s CFO since May 2011 and will continue as the CFO for a number of other successful junior mining companies. The ATAC Board of Directors would like to thank Donaldson for his significant contributions to the company over the past ten years. Andrew Carne, currently the Vice President of Corporate and Project Development, has been appointed Interim Chief Financial Officer.

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Sarah Foottit Tim Cunningham

announced the appointment of Tim Cunningham to its Board of Directors. Cunningham brings over 30 years of extensive finance and operations leadership experience in the biotechnology and software industries to his work with his public and private Danforth clients, as a CFO with a demonstrated record of success in building start-up enterprises into industry leaders and scaling larger entities globally. Tim’s expertise includes financial & strategic planning, P&L management & execution, acquisitions & divestures, raising equity and debt and post-merger integration. Tim is a trusted advisor and subject matter expert in strategic planning and creative, scalable, business design, and has a proven track record of driving growth leading to either a successful exit via sale or IPO. Tim has raised more than $500M in private and public equity as well as debt in his career.

Kivuto Solutions, a leading provider of digital solutions for the education industry, announced Sarah Foottit has taken on the role of Chief Financial Officer (CFO). Foottit is a versatile financial and strategic executive with extensive experience planning and administering finance operations at a broad range of organizations. This experience includes senior roles in tech companies Titus and Stealthbits Technology. Her industry

be joining Kivuto at what I consider very exciting time for the company,” said Foottit. Kivuto has been transforming the way schools manage and distribute digital resources to students and faculty for over 20 years. Kivuto streamlines the management and delivery of academic software, eTextbooks, cloud licenses, and all other types of digital resources used in education. Software vendors, textbook publishers, and academic institutions around the world rely on Kivuto to ensure the secure and successful delivery of digital assets to students, faculty, and school staff.

Mary Chronopoulos

Supremex Inc. (TSX: SXP), a leading North American manufacturer and marketer of envelopes and a growing provider of packaging and specialty products, appointed Mary Chronopoulos as Chief Financial Officer and Corporate Secretary effective May 31, 2021. Chronopoulos is a highly accomplished financial executive with over 16 years of experience in

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CFO CV finance with large private and public companies. She was previously Chief Financial Officer of Energir, a diversified energy company with over $2.5 billion in sales and Chief Financial Officer of Group BMR, a large home renovation and hardware company. She also held various senior roles in finance such as Vice President of Finance at Aldo Group and at Saputo’s Bakery Division. Chronopoulos holds the CPA, CMA designation and earned an MBA from the John Molson School of Business.

world from over 170 potential targets reviewed, gaining a deep perspective on the developing global hemp supply chains and related regulatory status across several countries. Prior to Canopy Saunders held financial executive and leadership roles across a number of sectors including mobile, telecom, semiconductors, manufacturing and clean tech. He has expertise in establishing financial management and control with responsibilities for the full span of finance operations, leading change, and strategic planning and execution.

Tim Saunders

Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF), the market leader in hemp CBD extract products, announced the appointment of Tim Saunders to its Board of Directors. Tim Saunders was Chief Financial Officer of Canopy Growth Corporation from its entrepreneurial beginning and led its public up-listing to the Toronto Stock Exchange, and subsequently to the New York Stock Exchange – both firsts for the cannabis sector. During his tenure he oversaw more than C$6.4 billion in financing, 31 acquisitions, and an increase in market capitalization from approximately C$100 million to C$20 billion, as the world’s largest cannabis company. Saunders retired from his role at Canopy in May 2019 after four years with the Company. Most recently Saunders was CFO for Collective Growth Corporation, a SPAC (special purpose acquisition company) which successfully raised US$150 million and recently completed a merger and public listing on the Nasdaq at a capitalization of US$1.4 billion. As a part of this venture Mr. Saunders evaluated dozens of hemp businesses around the

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Melissa Lee

Michael Watt, Chief Executive Officer of Daiya Foods, announced the appointment of finance veteran Melissa Lee to the position of Chief Financial Officer for the company. As a member of the Daiya Senior Leadership Team, Lee will report directly to Michael Watt and she will be responsible for leading the Finance and IT Teams for Daiya. Originally from Canada, Lee returns following three years in the United States, where she most recently held an executive leadership role as Vice President, Corporate FP&A with Walmart Inc. Prior to her time in the U.S., Lee held progressively senior finance roles in merchandising, supply chain, store operations, and eCommerce over her 10 years with Walmart Canada. Her early finance career started at Unilever Canada, where she held a range of business partnering and FP&A roles from 2002-2010.

AcuityAds Holdings Inc. (TSX: AT) (OTCQX: ACUIF), the technology leader

Jonathan Pollack

in consumer journey based advertising automation, announced upcoming board and management changes. Jonathan Pollack, its Chief Financial Officer, will retire from the Company later this calendar year once his successor has been identified. Pollack stated: “I am very pleased with all of the successes that we have enjoyed during my tenure at AcuityAds, and I am especially proud of my contributions in placing AcuityAds on its strongest financial footing in its history. I am confident that AcuityAds remains poised for even greater accomplishments over the next number of years as it continues to build on the momentum that has been created.” Tal Hayek, the Chief Executive Officer of the Company, stated: “Jonathan has played a meaningful role over the last three years in setting our capital markets strategy and improving our financial reporting functions so that these important aspects of our business have strengthened alongside our commercial successes. During his tenure we have strengthened our partnership with our lender, raised capital from the public markets on two separate occasions, graduated our stock listing to the Toronto Stock Exchange and we are now included in the S&P/TSX Composite Index.”

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ANALYTICS

Why Are Scams on the Rise in An Increasingly Digital Society?

W By Scott Zoldi

ith world well into its second year of the COVID-19 pandemic, the inner workings of banks’ fraud and financial crimes operations continue to be stress-tested. Change always creates opportunities for fraudsters and financial criminals, and the pandemic has provided a field day of possibilities, especially scams. How can banks fight back?

Transaction numbers bear this out; Venmo’s total payment volume (TPV) was $51 billion in Q1 2021, up from $31 billion in Q1 2020, an increase of 70 percent. In a stressed-out, pandemic-stricken world with lots of new users pushing massive amounts of instant payments through unfamiliar channels, what could go wrong? As it turns out, a lot.

A perfect storm for scams

The rise of push payment scams

In 2020, customer behaviours around banking changed dramatically as lockdowns came and went; for example, a study released by Chase in December 2020 asked 1,500 consumers on their use and preferences with banking digitally.

Authorized Push Payment (APP) fraud happens when criminals deceive and manipulate consumers or individuals at a business into sending money to a bank account controlled by the scammer. During the pandemic APP scams have grown at an alarming rate, particularly in the UK. From mobile apps preying on young adults to small business owners mistaking a scammer for a bank official, to elaborate Ponzi schemes scamming tens of millions of pounds, the sophistication of APP scams is evolving at a breakneck speed. According to UK Finance, 2019 saw a 45 percent increase in APP scams, as compared to 2018, with losses totaling £456 million in 2019 alone; scam losses continued to rise in 2020 to a total of £479 million. APP scams are not just a major problem in the UK. According to the Canadian Anti-Fraud Centre, Canadians have lost an estimated $87.8 million from fraud this year as of as of May 31, 2021.

◉ More than half (54 percent) of respondents agreed that they use digital banking tools more due to the pandemic today than they did last year. ◉ Thirty percent of respondents said they had signed up for person-to-person (P2P) payment platforms such as Venmo and Zelle in the past six months ◉ Nearly half (45 percent) of longer-term P2P users said they were using this form of payment more often than they did a year ago.

From this study we can reasonably assume: ◉ More people are making P2P payments ◉ A lot of these folks are unfamiliar with these newfangled payment methods

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ANALYTICS

How can payments to scammers be detected? To better understand how banks can detect authorized push payments made to scammers, let’s take a step back and compare them to the traditional fraudulent retail banking transfer. ◉ An Unauthorized Push Payment (UPP) fraud transaction is a third-party fraud transaction in which the fraudster executes the fraudulent transaction without the customer’s permission. ◉ With APP scams, the transaction is executed with the customer’s consent or by the customer directly; it’s a crime initiated by a first party (customer), typically through methods such as social engineering.

Conversely, when a customer uses their favourite device but transacts with a nonfavourite credit account — for example, using their bank’s mobile app on their own mobile phone that they frequently use to transfer funds, but sending to a new credit account — the risk ratio is 10x times larger for scams as compared to third-party fraud.

transactions and the scam transactions (orange). These differences across a set of signals are used by the machine learning model to assign likelihood of fraud versus scam transitions. The distributions shown above are from an advanced analytic feature. The dashed lines locate the median of each distribution, showing that the

Looking at combinations of favourites, and combining them with other features of abnormality associated with transaction amounts (frequencies, time of day, and many other characteristics), allows advanced fraud detection models to differentiate customers into classes of thirdparty fraud, APP scam and non-financial crime. In the case of scam transactions on favourite devices, a dedicated scam detection score can identify up to 24x the number of these transactions, compared to the standard fraud score at a typical nonfraud review rate.

distributions for the non-fraud, scam and fraud populations are significantly different. Scams and third-party frauds are more likely to occur for values found in the tail of the non-fraud distribution. By taking advantage of the distinguishing characteristics revealed by these analytics, advanced retail banking fraud solutions can help institutions put a stop to scam payments in their tracks, a critical victory in the fight against financial crime.

COURTESY FICO

Analytically, whether a crime is committed by a first or third-party has big implications for the design of models to fight UPP fraud versus APP scams.

Using behaviour-sorted lists to detect scams Humans are creatures of habit. The behaviour sorted list (B-list), a key analytic tool in the fight against payment fraud, leverages this fact to determine abnormality. By monitoring key attributes of an individual’s payment history, B-lists learn customers’ frequent, repeated behaviours (i.e., “favourites”). Hits and misses on these favourites allow the fraud detection model to decide between fraud, scam and normal behaviour. When we consider first-party APP scams, some B-lists will point to favourite behaviours of the customer — unsurprising, given that the customer got ‘scammed’ into making the transaction. However, other B-lists will still show deviating activity with respect to the customer’s key favourites. The key to catching any financial crime activity, whether APP scams or UPP fraud transactions, is understanding which aspect of the transaction is anomalous.

Comparing lists When a customer interacts on a nonfavourite device, they have a 16x higher risk ratio of third-party fraud (UPP) as compared to first-party scam (APP).

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Scott Zoldi is chief analytics officer at FICO responsible for the analytic development of FICO’s

Additional analytic features

product and technology solutions. While at FICO,

Highly advanced fraud detection models can now show distinct shifts between legitimate transactions, third-party fraud and scam transactions. For example, in the model feature illustrated below, the probability distribution of the legitimate transactions (blue) falls well away from the fraudulent transactions (green). However, there is a distinct shift still even between the third-party fraud

Scott has been responsible for authoring 105 analytic patents, with 53 granted and 52 pending. Scott is actively involved in the development of new analytic products and Big Data analytics applications, many of which leverage new streaming analytic innovations such as adaptive analytics, collaborative profiling and self-calibrating analytics. Scott is most recently focused on the applications of streaming self-learning analytics for real-time detection of cyber security attacks.

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Canada’s Prepaid Payments Industry Growing, Attracting Innovation Among Homegrown and Global FinTechs

By Jennifer Tramontana

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he COVID-19 pandemic has had a seismic impact on the Canadian financial ecosystem and has shifted the way Canadians transact. While Canadians are still seeking choice, convenience and security in payments, Canadians are shifting to more frequent contactless, digital payments preferences. According to a survey from Payments Canada, 33 percent of Canadians are using credit cards more often than prepandemic, while 20 percent and 25 percent of Canadians are using debit cards and e-Transfers more, respectively. These trends are expected to continue long-term, creating an avenue for Canadian and global FinTechs to introduce new products and services to meet these needs. The Canadian Prepaid Providers Organization (CPPO), the collective voice of the open-loop prepaid payments industry in Canada, is dedicated to uncovering trends in Canadian payment preferences and ensuring that current and prospective prepaid issuers have access to this important financial tool. Prepaid platforms are being used as a foundation for digital financial services enabling FinTechs and traditional FIs to push the boundaries of what a “card” can do and enabling firms to bring new and innovative solutions to market and allowing FinTech partnerships to quickly launch and scale. As we move towards the post-COVID environment, prepaid continues to grow to become a valuable part of Canada’s financial services ecosystem and support a true digital payments ecosystem. The prepaid industry has been instrumental in displacing cheques, leading to economic benefits for governments

and businesses. And, prepaid solutions can be used to drive financial inclusion, providing an initial point of access to financial systems to those who are currently underserved by traditional products. Being the only association solely focused on this growing industry, the CPPO has set-out to conduct ongoing market research initiatives to further educate around the Canadian prepaid landscape, a segment which continues to drive payments innovation in Canada. The recent Canadian Prepaid Ecosystem Report 2021, produced in collaboration with FinTech Growth Syndicate (FGS), is an analysis of 90 companies operating in the Canadian open-loop prepaid ecosystem to develop a deeper understanding of the innovative offerings, market forces and trends, as well as to build a heatmap of all players in the Canadian prepaid space. Among the many benefits of the growing prepaid industry in Canada, open-loop prepaid solutions provide consumers, businesses and governments with the efficiency, security, and flexibility of electronic payments without involving credit. They are an excellent tool to manage a budget because a set amount of funds is loaded in advance of the purchase. Consumers can exert control over their spending and avoid interest charges and overdraft fees. Prepaid also offers increased financial inclusion to our essential and growing gig economy, while also offering more choice and convenience to all Canadians. According to CPPO’s new report, Canada is starting to see early movers offering integrated consumer ecosystems that represent the opportunity to become super apps enabled

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PAYMENTS

by payments. This means that these emerging consumer and SME ecosystems are creating competition in the space, enabling early movers to serve a larger portion of consumer financial needs, all within a singular digital platform or super app. Non-banks have also been able to launch banking for their customers as an alternative to credit, and capture their spending data for further innovation in predictive services. To no surprise amidst the pandemic, on-demand pay — or instant access to earnings — continues to grow in Canada and globally. Employee or gig worker’s earnings can be made accessible immediately by transferring it to a prepaid card. For Canadians looking to better budget, avoid overspending or get into the habit of savings, prepaid players are also offering money management solutions. Challengers are even offering credit score monitoring and building solutions to further support Canadians. These usecases will further grow as open banking becomes live in Canada. As payments products and regulations evolve, the CPPO will continue to follow innovations and market trends in the Canadian prepaid space, to support innovation and competition in the space, and to showcase prepaid’s benefits as a key role in Canada’s digital payments and banking transformation. To learn more about the CPPO or become a member, visit https://cppo.ca/. Jennifer Tramontana is the Co-Founder and Executive Director of the Canadian Prepaid Providers Organization (CPPO).

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The Future of Conversational Commerce and Contactless Payments A By Jason Cottrell

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fter over a year of not touching anything — door knobs, items on a store shelf, other people — it’s perhaps no surprise that Amazon is trialing a new, contactless payment method that requires nothing more than the swipe of a hand in front of a sensor. It captures all that we’ve learned and will take forward with us in the new world of digital commerce, lessons that could be summed up in five words: connected convenience above all else. As they almost always do, Amazon has provided us with a great window into a possible future — but whether it’s a probable one remains to be seen. Over more than a decade working with Fortune 500 companies to enable connected convenience, we’ve learned important lessons about how to implement new technologies successfully. Our growing body of research into consumer comfort with technology is adding to our understanding of what works when and how to implement new tech with the greatest chance of both technical success and consumer buy-in.

So what does it take to roll out a successful new tech solution? Strong technical underpinnings and an empathetic customer approach.

Set the foundation for success Contactless payment isn’t new; we’ve had tap and mobile pay options for years in Canada. But the difference between tapping your bank card and using your palm as a personal barcode is significant, at least in the minds of consumers. To win customers over to a new technology, you have to start by getting the technical execution right. If it doesn’t work properly the first time they use it, they won’t deign to use it again. Amazon Go, the first checkoutless shopping experience from the mega-retailer to make headlines, relies on cameras and geofencing technologies. The system is remarkably accurate — years of testing and training the system before launching it to the public paid off. The added convenience it promised in concept is being executed on in practice, and that’s crucial.

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PAYMENTS Our data shows that shoppers are relatively keen to embrace the checkoutless experience (it ranked in the top 25 technologies we surveyed), but they’re wary of the underlying technologies (facial recognition and geofencing rank last and a mere 6 spots higher, respectively). To overcome that hesitancy, Amazon had to execute perfectly on the technical execution from the get-go. If not, consumers would have resisted the experience and the experiment very likely would’ve gone nowhere. As it is, Amazon’s foray into checkoutless shopping has done remarkably well and the ripple effect has been profound. Not only are they piloting even more technologically advanced payment methods, but others in the grocery and retail industry are following suit in their own ways. Smart shopping carts, on-the-go self-scanning — the possibilities are varied and experimentation is on the rise.

can do correctly every time. A composable architecture isn’t the absolute best solution for every business, but for the Fortune 500 clients we work with, it tends to be. Those that are actively working to implement this approach today — to move at least parts of their business off of a monolithic solution and embrace a more flexible, adaptable architecture — are the ones we expect to see succeeding tomorrow.

Understand what your customers want Getting the technical details right is a challenge, but there are almost always logical ways to overcome the hurdles and once the right underlying structure is in place, organizations are free to experiment with new tech solutions. That said, knowing which innovations to pursue doesn’t come with the same clear answers. (If it did, it wouldn’t be an experiment.) This is where we turn

“For retailers looking to prepare for connected convenience...now is the time to lay the groundwork.” Both Forrester and Gartner have written about composable architectures as the future of enterprise. It’s a position that we believe in and it’s picking up steam across the industry. The emergence of the MACH Alliance is a testament to the growing faith in composable architectures, as is the proliferation of technical solutions that enable organizations to build the exact right experiences for their business. With a composable architecture, organizations have the ability to rapidly test new technologies with minimal risks. They can work with best-of-breed solutions, allowing them to roll out the best possible version of an experience at launch. Because those early trials need to be executed extremely well, this is a huge potential differentiator between successful experiences and failures. A first iteration can be lightweight and even lowfeatured, but it needs to do the things it

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to research, combining reams of data and insights about an industry with the expertise of our clients, and increasingly, with our own consumer comfort data. To help inform and support the approaches we take, we’ve surveyed thousands of people about new and emerging technologies. Our Robots Among Us survey provides a snapshot of current levels of consumer comfort with the changing digital landscape and tracks those responses over time. Consumers like the idea of checkoutless shopping, but as noted earlier, the technologies that enable checkoutless shopping are significantly less welcome. That distinction tells us a lot about how to approach the rollout of a new experience. Being able to assess the perception of technology solutions plays a huge role in their success. It can drastically alter your messaging and even the ways in which you implement it.

We know that focusing on the benefits is crucial to a new tech’s success, but the survey data adds an interesting layer to that story: when it comes to checkoutless shopping, it’s important to present the idea as a whole instead of its disparate parts. This isn’t always the case with emerging technologies. With cars, autonomy is being introduced in pieces — lane and parking assist features first, full self-driving sometime down the line. But unlike autonomous vehicles, which consumers view as scary and overwhelming when presented as a whole, checkoutless shopping is scary for consumers when presented in its parts. Consumers would reject facial recognition without the checkoutless benefits attached. The circumstances in which the technology is deployed also matter. Busy urban professionals are more likely to find the ease of the walk-in, walk-out Amazon Go experience worth the privacy trade-off facial recognition requires. But overburdened suburban parents who need to get everything their large family needs for a week would likely adapt to a smart shopping cart better, since it isn’t dependent on facial recognition technology and meets their needs more closely. Understanding where trade-offs lie with consumer comfort is important for determining what technology you choose, how much of it you experiment with at a time, and how you present it to the public when you test it out. For retailers looking to prepare for a future of connected convenience, whatever shape it takes, now is the time to lay the groundwork with a composable architecture that enables them to spring into action to test out best-in-class new solutions as they come. Amazon One is still in early days, and while consumers may not be willing to give a palm print to a corporation for the sake of a little added convenience just yet, the likelihood that they will in a few years — especially if it connects to additional services that offer significant benefits for them — isn’t that outrageous. Jason Cottrell is CEO of Myplanet, the leading software studio specializing in AI-driven digital platform experiences.

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PAYMENTS

Outsourcing Payments — Is it Right for Your Firm? By Alex Amoriello

hile the payments industry is traditionally known as a dynamic and adaptable industry, the COVID-19 pandemic has shed light on some of the complex and time-consuming processes within it. With resources and teams tighter than ever, and businesses looking for convenient ways to conduct any and all tasks, the ability to outsource services has become more attractive. Outsourcing payment process management — particularly when it comes to international payments — is no exception. Outsourcing is the business practice of hiring a party outside a company to perform services that traditionally were performed in-house. For international payments, outsourcing services can eliminate many of the burdens associated with manually entering, managing and executing payments, meaning it can dramatically improve time efficiency. This not only increases productivity for the business, but also allows it to reallocate resources to other important tasks. If this alone isn’t convincing enough, it’s also worth noting that outsourcing services generally requires no software purchases, no upfront financial commitment and no in-depth training, making the outsourced model advantageous when it comes to speed to market, adaptability and low cost to entry. Since its inception, outsourcing has

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seen its fair share of accolades and debate. Originally created by manufacturers in the 1970s as a way to gain efficiencies, by the early 1990s outsourced services providers started to gain traction and quickly expanded; offering services that spanned across many business functions including IT, Human Resources, and Accounting. The primary goal of outsourcing was to reduce expenses, and many businesses embraced the model, as lower expenses ultimately translated into improved profit margins and more affordable pricing for the consumer. But as technology opened the doors to outsourcing abroad, debates ensued over work integrity and the shipment of domestic jobs overseas. Today, outsourced service providers are successfully replicating the overseas business model here in the United States, leveraging talent from across the country. Manufacturers are also finding the United States to be more favorable to do business in and have been bringing jobs back at a record pace. According to USA Today “the number of jobs being re-shored by U.S. (manufacturing) companies has increased more than tenfold since 2010.”

Outsourcing your international payments Although nearly all companies make domestic vendor payments, many organizations also have the added dynamic of doing business globally, thus creating the need to make foreign payments to overseas vendors. Most

CFOs and Treasurers who deal with international payments will agree that these payments can be equally as time consuming and, in many cases, far more complex when compared to domestic payments — even if the number and value of foreign payments is much smaller than the domestic payments. This is where an outsourced service provider can play an integral role. By becoming, in effect, an extension of the Accounts Payable department, foreign payments can be partitioned and managed by the service provider in its entirety — from invoice processing and data integration through to payment. As a provider, we operate an invoice automation business that has been used for outsourced international payment services for over 25 years, since the Global Exchange business began in 1994. Cambridge acts as an extension of the AP department of a business, offering a service with less complications, more convenience and a lot of saved time and money. So, while there are solutions available at the enterprise level to help streamline AP departments as a whole, outsourcing the international payments process itself may be a quick, affordable, and very effective choice for businesses that want to improve their return-on-time, save money and increase productivity — all by simply outsourcing the arduous task of managing and conducting international payments. Alex Amoriello is Director of Business Development, Invoice Automation, Cambridge FX.

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By Fabio Carvalho

Ten predictions for the Payments Industry in 2030

OVID-19 has changed the way consumers look at commerce and payment options. It has provided the impetus to overcome consumer inertia, and has created an unprecedented global appetite for changes to how we pay, with businesses adapting to make payment transactions fast and safe for both customers and associates. According to Visa’s Back to Business study, 78% of global consumers have adjusted the way they pay for items in the wake of intensified safety concerns. In the immediate future it’s predicted that: ◉ By 2023, five countries will have launched digitization initiatives aimed at eliminating cash from circulation. ◉ By 2024, global cash in circulation will be reduced for the first time after decades of continuous increases. ◉ By 2024, mobile proximity payment users globally will double to nearly 2 billion, compared to less than 1 billion in 2019.

In the decade to 2030, the pace of transformation in the payments industry is set to accelerate. Non-traditional players continue to enter the market, from the global technology giants to car manufacturers and consumer goods companies, bringing new industries into payments. Here are 10 predictions for what will happen to payment by 2030.

1. Nation-states will launch their own digital currencies to retain control of economic policy The growth of digital currencies has disturbing implications for sovereign states and central banks, which are at risk of losing sight of the financial flows passing through their economies. As such, expect more countries to follow the lead of China in launching a state-controlled digital currency; for example, last October The Bahamas launched the Sand Dollar. Each country doing so will assert its digital currency’s supremacy over non sovereign alternatives but will also compete with the currencies of other nations.

2. Regulators will police payments processes rather than providers With so many new players emerging in payments, including many from beyond banking

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and even financial services, today’s regulatory systems, constructed around scrutinizing the activities of categories of institutions is increasingly unfit for purpose. Instead, a new multinational approach to regulation, through which watchdogs police payments processes rather than individual providers, will emerge.

3. The payments value chain will be built on data In a new world of open banking and APIs, the greatest value exchange taking place on payment systems will be found in transactional data rather than the transactions themselves. Such data will unlock a huge variety of new opportunities, from combatting fraud to sophisticated financial planning for consumers, with corporate customers benefitting too.

4. We will reach an international consensus on data privacy Fundamentally, data has the potential to transform the payments industry value chain. However, to achieve these goals it will be crucial to establish greater international consistency on data protection and privacy laws. Debates over what standards should apply on a global scale, who should control data and how the rules are enforced, will have to be conducted in the wider context of the debate around protectionism and free trade, particularly given the power of the technology giants of the US and China.

5. Almost every global citizen will have their own biometrically-enabled digital ID The inconsistent application of digital identity today means that in some countries, people are able to transact freely and easily while in others, where it is harder to verify identities and assets, there is much greater friction in the payments system. These barriers will diminish as nation-states and payment providers work together to establish internationally agreed digital identity standards, increasingly leveraging biometrics, including facial recognition, fingerprints and implants.

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6. Payments technology will drive down financial exclusion Developed economies will learn from the successes achieved through mobile channels in many emerging markets, driving down financial exclusion. For those who currently struggle to access payments and financial services more broadly, a digital identity will represent a golden key, unlocking services from benefits payments to banking, and enabling them to establish credit histories and financial footprints possibly for the first time.

7. The social experience will converge with payments technology The convergence of social media and payment services, already firmly established in China, will spread internationally. This will create new opportunities for payment providers and their customers — for example, for merchants to engage with individual consumers at scale through such networks.

8. Distributed ledger technologies will underpin a globally connected, high-speed payments network Distributed ledger technologies have the potential to be the primary means through which we deliver the payments system of the future. Cloud computing and API tools will link blockchains to create cross-border, high-speed networks: an ‘internet of value’ through which payments flow unhindered, just as information currently flows around the worldwide web.

need — and want — to work alongside banking partners. Together, these organisations will create new payments ecosystems. The experience of emerging markets where new entrants have come together with incumbent providers and regulators to create new payments systems from scratch will be replicated on a global scale; without such collaboration, transformation will not be possible. Application leaders need to protect business continuity and align to evolving customer payment expectations to be prepared for the changes ahead. Those responsible for digital commerce payment technologies should: ◉ Protect or enhance their sales volumes by optimizing their digital commerce channel and unified commerce initiatives. Provide consumers with contactless ways to shop and pay within the physical store. ◉ Recalibrate business monitoring efficacy to the new normal by continuously assessing and amending metrics and KPIs. ◉ Measure the capacity of their organization’s payment capabilities to withstand the effects of the pandemic by evaluating the resiliency of their commerce payment vendor(s).

◉ Increase their organization’s resiliency by taking advantage of payment vendor initiatives designed to help them adapt to the current and emerging environment. Fabio Carvalho is a Digital Marketing Specialist at CCV Switzerland. Former professional soccer player at FC Lausanne-Sport. He studied Politics, Marketing and Communication at the Universities of Lausanne and the London School of Business and Finance.

9. Real-time payments will become the norm, even for cross-border transactions As blockchains dissolve the borders between domestic settlement systems, payments will be instantaneous, even when they are cross-border.

He speaks German, French, English, Spanish and Portuguese.

About CCV Switzerland: In Switzerland we are the leading acquiringindependent provider of payment infrastructure such as payment terminals, cash registers, customer

10. Payments ecosystems will evolve from collaboration between new entrants and incumbents

loyalty and shopping card systems. Together with

In the highly-regulated financial services market, where payments are a potential source of systemic risk, new entrants will

offer you customized solutions for the best shopping

our partners, terminal manufacturers, cash register manufacturers and dealer banks (acquirers), we experience for your customers. If you want to find out more, please click on https://www.ccv.eu/ch-de/

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As NFTs Storm the World, Digital Identity Security Must Scale Alongside the Trend By David Lucatch

hile you may not know what an NFT (NonFungible Token) actually is, or why the trend caught fire so rapidly that it effectively reshaped the digital world in merely a matter of weeks, but you’ve probably heard some rumblings about the digital artwork that recently sold for over $69 million or the fact that Twitter founder, Jack Dorsey, sold a digital copy of his first tweet for $3 million. It is estimated that in the first quarter of 2021 alone, there were over $2 billion in NFT transactions! With margins like that, it may be getting clearer. Essentially, NFTs are unique, noninterchangeable digital items that can be bought and sold online, with ownership attached to and tracked by blockchain technology. In actuality, an NFT can be any kind of digital asset, including drawings, animated GIFs, songs, memes, photographs — you name it and can, in some cases be connected to a physical good in the real world. As the explosive popularity of NFTs continues to grow, their future will potentially hinge upon increased security through items like verifiable credentials and provable digital identity. So, what is it that makes NFTs work in today’s environment? Millennials and Gen Z’ers are not hoarders: Younger generations see value in NFT ownership because, typically, they are minimalists. They place much less value on accumulating tangible things and physical properties than previous generations. If you tell them about your robust CD or DVD collection, they’ll look at you like you’ve just asked directions to the nearest payphone. (What they’re really

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thinking: Why would anyone feel the need to own a physical pile of recordings, when all the music that’s ever been recorded is available to stream instantly for a relatively low monthly fee?) Millennials don’t want to have to invite friends over to their place just to show off how/where they’ve stored a one-of-a-kind, signed Billie Eilish photo. They want to be able to whip out their phone and say, “Check this out.” NFTs are highly collectible: An NFT can either be a one-of-a-kind item (like a digital version of a real-life painting) or one copy of many (like trading cards). Either way, an NFT’s potential scarcity is supported by their record on the blockchain. Several weeks ago, the blockchain company Injective Protocol created one of the world’s most soughtafter NFTs by purchasing a Banksy painting “Morons (White)” for $95,000. They then proceeded to literally burn it live on Twitter. After the incineration, the company created an NFT of the burnt painting, which was auctioned and sold for over $394,000 on the Open Sea NFT marketplace. The purpose of burning the artwork was so that the NFT would be valued more highly than it would be if the physical artwork still existed. Markets for spending cryptocurrencies are insufficient: A huge factor at play in the price of NFTs is that there currently aren’t many markets where people can spend their cryptocurrencies. Aside from converting crypto into fiat currencies (like the dollar or the euro), you can’t currently buy a Starbucks Frappuccino with Bitcoin However, the ability to purchase NFTs with one’s cryptocurrency of choice gives many HODLers (also so known as crypto investors who buy and hold their positions

regardless of price; the term originated with a typo for “hold.”) the opportunity to speculate further and leverage their Bitcoin or Ethereum by purchasing dynamic, culturally relevant collectibles that might also grow in value over time.

That said, the true question at hand then becomes: How secure is my NFT ownership, really? While we watch NFTs continue to blaze through our cultural consciousness, we must also witness a mutual rise in the digital identity and verification protocols necessary to sustain the legitimacy, scarcity and ownership information for each NFT. The truth is, NFTs are only as secure as the platform that they are stored on, both of which have historically proven to be highly susceptible to breaches, hacks or leaks. Soon, we will be able to store NFTs on blockchain-based registries, but the digital world needs a more secure solution today. While edge wallets offered by device manufacturers are popular, they are neither self-sovereign nor Cloud-based. Rather, they reside on the device that is managed by the user, but ultimately controlled by manufacturer or system software provider. If the phone gets lost or stolen, the contents of the digital wallet could be effectively lost also unless there is a backup. The trick is to make your NFTs secure while also allowing access to them safely and on multiple platforms. One way of doing this is through digital identity security solutions that utilize the latest advances in biometrics, thereby ensuring that only the owner has access to their NFTs. Another inherent limitation to NFTs, is that in most cases, they are only viewable via the platform on which you Continued on page 31

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Supporting Canada’s Growing

GIG ECONOMY Through Financial Inclusion Adjusting how gig workers are paid can help on-demand platforms, while providing a much-needed path to financial health for this growing portion of the workforce

C By Marco Margiotta

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anada’s gig economy is growing, and it’s growing quickly: a new study from Payments Canada shared that gig workers now represent more than one in 10 Canadian adults, and more than one in three Canadian businesses employ gig workers. Why? For many, the COVID-19 pandemic has led to a desire (or need) to control how, when and where they work. While the entire payments industry has witnessed a seismic shift in the last year to mass adoption of digital banking and contactless transactions, facilitating payments to our essential gig workers has not kept pace. In fact, turning to gig economy work isn’t always the path to financial freedom one might hope to encounter. Canadian gig workers, especially in the transportation industry, incur a high cost for the nature of their work. Fuel, maintenance, depreciation and insurance are just some of the costs that must be incurred before they can even go to work. The Financial Health Network identifies several indicators of financial health, with two basic ones looking at whether an individual’s savings are liquid and long-term. Research shows many gig workers couldn’t be further from meeting these indicators — as of 2018, three in five full-time gig workers said they’d struggle to cover an unexpected $400 expense. As gig economy platforms and employers look to stand out in this rush to shape the post-COVID workforce, they must focus on

empowering a financially healthy workforce. According to the same study by Payments Canada, almost 40 percent of participating gig workers are looking for improvements in how they are being paid. Further, one in five Canadian gig workers cite that it currently takes at least a couple weeks to receive payment once work is completed, while expenses to run their personal slice of the gig economy accumulate daily. Fortunately, there is a path to financial health for these workers — leveraging FinTech solutions to make pay available on-demand and at no cost. There are three key reasons why employers should provide gig workers with automatic or same-day access to their earnings: 1. Gig workers face a “cash gap.” It is common for gig workers to have to spend money in order to make money. And unfortunately, many gig workers aren’t provided with the pay structure they need to operate quickly and effectively in their work environments. For a rideshare driver, this “cash gap” could make it impossible to call a tow truck to fix a flat tire so they can return to work quickly. This ever-present fear of steep operating expenses creates a need for funds to be readily available at no cost, so they can continue to work and generate more income. Cash gaps also make paying bills on time difficult and leaves many members of our gig economy with no choice but to incur overdraft fees or rely on high-interest credit cards.

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PAYMENTS 2. Payment preference is for fast, secure payments. Recent data shows that Canadian gig workers prefer electronic payments, but many are still paid weekly via slow bank transfers or paper cheques while continuing to incur daily expenses. Slow payments could lead some gig workers to platforms that offer instant payout options with a fee attached, or to payday loans. Many payday or predatory lenders charge steep fees, such as $10 to $30 for every $100 borrowed, and often leave borrowers deeper in the debt cycle. 3. Canada’s gig sector is made up of essential workers. The global COVID-19 pandemic created a surge in demand for delivery. We learned that many gig workers are essential, as consumers stayed home and turned to online services to meet their essential needs like restaurant, grocery and even pharmaceutical delivery; providing transport to other essential workers; and more. On-demand payment will help ensure a low gas tank, flat tire or other unexpected expense doesn’t derail a gig worker or make it challenging to do their job

Above all, gig workers are entrepreneurs driving our economy, and they need funds to do business. As independent business owners, they — along with all other Canadians — should have flexibility and control over their earnings. The PYMNTS Gig Economy Index™ shared that 84 percent of gig workers would work more if they could be paid faster, meaning many gig worker-based platforms could benefit from this shift, too. Payfare’s business model was developed to encourage financial inclusion. The idea was conceptualized in the backseat of countless trips in rideshares, as we listened to drivers describing the personal financial challenges and hardships that they’ve endured because of the delay in receiving wages for the services they provide. We reimagined the value of the gig worker and provided them empowerment over their financial security through an API integration. On-demand and freelance platforms must provide solutions to help gig workers

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Canada’s gig economy has been fuelled by the pandemic Workers and businesses are challenged by payments mismatch

grow their business. The wrong method of pay can keep them from performing essential tasks while limiting their income potential and in turn, financial health. Marco Margiotta is the CEO and Founding Partner of

New research shows that the COVID-19 pandemic has led to an increase in the number of Canadians who participate in short-term contracts or freelance work, such as rideshare drivers, freelance writers and graphic designers, or contractors. These gig workers now represent more than one in 10 Canadian adults (13 percent), and more than one in three Canadian businesses (37 percent) employ gig workers. Key contributing factors fuelling this increased footprint include the prevailing economic impact of the pandemic, with a general decline in real output across Canadian businesses in 2020. This includes four percent that shut down temporarily in 2020 and remain shut, and a further 37 percent that remain only partially operational. At the same time, demand for gig worker-based businesses has been strong throughout the pandemic, including delivery services in both urban and suburban locations across Canada. This includes about three in 10 Canadians who report using delivery services more often than before the pandemic. Gig workers and the businesses that employ them want the same thing from a payments solution standpoint: fast, convenient, secure, and traceable payments methods. However, the research indicates there is a mismatch between how workers are getting paid and how they prefer to get paid among a large portion of gig workers in Canada. Of those that participate in the gig economy, almost 40 percent want to see improvements to how they are paid. Two key areas that gig workers identified for improvement are to be paid faster and be able to trace these

Payfare Inc.

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Gig Worker Practices

How Do Commercial Businesses Pay Gig Workers

payments more efficiently. While payments options do exist (such as direct deposit, which is fast, secure and convenient), cheques and Interac e-transfer continue to be preferred by small-to-medium businesses (98 percent of Canadian businesses), leaving gig workers’ preferences unaddressed. Modernization of Canada’s payments systems, including the introduction of real-time payments, will help support solutions for the gig economy. Shifts in the demographics of gig workers The pandemic has not only fueled the gig economy footprint, it also led to a change in its demographic make-up. This includes the entrance of more workers between 35-54 years old (11 percent), females (10 percent), and those living in suburban areas (11 percent). Gig economy maintains its core worker profile While the gig economy has become more mainstream as a result of the pandemic, it is still largely comprised of workers who fit a discernible profile, being predominantly male, younger (18-34 yrs.), living in urban areas, well educated with lower incomes, usually self-employed / run their own business, and frequently send money internationally.

How Do SMEs Pay Gig Workers

Gig workers have digital payments preference Overall, gig workers are highly engaged when it comes to digital payments adoption. They are also more likely to frequently use electronic payment methods than non-gig workers such as EFT (electronic funds transfer), Interac e-Transfer, and PayPal. Favour mobile payments Around half of gig workers (49 percent) used mobile payments (such as Apple Pay, Google Pay, etc.,) in the last month, and frequently make mobile payments by tapping their phone against a contactless terminal in a store (80 percent).

How GW Get Paid vs Preference

Prefer to be paid through electronic payments Electronic payments are the primary and preferred way for gig workers to get paid. Of those that participate in short-term work, around two in five gig workers get paid by Interac e-Transfer or direct deposit, with 45 percent who prefer to get paid by these methods. Cash and cheque payment also common ways for gig workers to get paid Cheque and cash are also common ways for gig workers to get paid by 27 percent of gig workers. However, only 19 percent prefer to be paid by cheque, and 22 percent by cash. Gig workers seek faster, traceable payments While gig workers want to receive fast, secure, and traceable payments, this is not currently the case for many workers. For

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Profile Gig Workers - Education And Income

Profile Of Gig Workers

tend to be smaller ($10M to S100M annual revenue). Commercial businesses usually pay their gig workers using cheque and direct deposit. SMEs that employ gig workers skew more towards large SMEs ($500K to $10M annual revenue), and usually pay gig workers through Interac e-Transfer and cheque. Generally, drivers for these payment methods are speed, ease of tracking, and convenience. HOW DO SMES PAY GIG WORKERS? HOW DO COMMERCIAL BUSINESSES PAY GIG WORKERS? Disconnect between payment preference and current payment method For many gig workers, there is a mismatch between how they are currently being paid versus their preferred payment method. Overall, gig workers want more access to electronic transfers and direct deposit and less reliance on cheque and cash payments. HOW GIG WORKERS PREFER TO BE PAID VERSUS ARE CURRENTLY PAID

Length Of Payment

one in five Canadian gig workers, it currently takes at least a couple of weeks to receive payment after their contract is done. Moreover, the gig workers who do get paid on the same day that their contract is done are predominantly paid by cash (59 percent), which creates challenges for traceable payments.

In conclusion Gig workers and the businesses that employ them want the same thing from a payments solutions standpoint. They want to be able to send and receive payments that are fast, easy to complete, and traceable. However, there is a prevailing disconnect among a significant number of gig workers around how they want to be paid and how they are currently being paid. This points to a significant opportunity to evolve the payments solutions within the gig sector to benefit both the workers and businesses. A payments solution that can solve for this need/gap will improve the overall efficiency of the gig economy, and in turn, the Canadian economy. The findings in this report are sourced from the Leger/Payments Canada

Businesses employing gig workers More than one in three businesses in Canada employ gig workers (37 percent). Commercial businesses are more likely than SMEs to employ gig workers (51 percent vs. 36 percent). These commercial businesses

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2020 Consumer and Business Payments Behaviour Tracker Surveys (Wave 1).

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EQUIPMENT FINANCE REGULATORY NEWS

e-Signatures and e-Leasing in the COVID-19 P

rior to COVID-19, adopting e-signatures and e-leasing was on the list of to-dos of many equipment finance companies, but it became a priority when the pandemic struck and a return to normalcy remained unclear. During an Equipment Leasing and Finance Association webinar, “e-Signing and e-Leasing in the COVID-19 World: Taking it to the Next Level,” panelists provided updates on the progress the industry has made in adopting digital contracting. The hour-long online session was presented by Stephen Bisbee, president of eOriginal; Bob Cohen, partner of Moritt Hock & Hamroff LLP; and Dominic Liberatore, deputy general counsel of DLL. All three speakers have participated in ELFA’s multi-year initiative to expand the

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use of electronic documents and e-chattel paper in equipment finance, and presented a previous ELFA webinar on the topic in May. The association has promoted adoption of these technologies via a variety of educational offerings and an ELFA Board of Directors Task Force on e-Leasing, and the Equipment Leasing & Finance Foundation has released a number of articles and studies on the topic. Bisbee kicked off the webinar noting that COVID-19 has been a digital adoption accelerator due to its deep and dramatic impact on all aspects of our lives, including forcing people to work remotely and contactless in a fully digital transaction environment. Although the processes, tools and technologies were

Stephen Bisbee

Bob Cohen

Dominic Liberatore

ELFA webinar panelists Stephen Bisbee, president of eOriginal Bob Cohen, partner of Moritt Hock & Hamroff LLP Dominic Liberatore, deputy general counsel of DLL

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EQUIPMENT FINANCE available in the pre-pandemic world, they were not as widely utilized. As equipment finance companies settle into the post-COVID “new normal,” below are five highlights from the webinar.

1. The impact of COVID drove greater speed and efficacy in a variety of digital processes. Pre-pandemic, digital adoption was driven primarily by customers who wanted to transact on their phone or computer the way they did with other transactions. Since social distancing, office closings and work from home were enacted, organizations quickly ramped up their digital capabilities. The mortgage industry conducted remote closings, the Small Business Administration issued billions of dollars in loans remotely in a matter of weeks, and auto loans that were typically executed in dealerships were done remotely. Remote online notary (RON) technology that was available but not widely adopted was authorized in 47 states and over 20 states are expected to pass permanent legislation for its use by the end of 2020.

2. The post-COVID business environment will remain remote and contactless. Post-COVID, the panelists predicted that engagement with the customer — and with each other as business colleagues — will continue to be conducted remotely. Organizations are continuing to create remote and contactless back-office operations, which Bisbee noted is one of the more surprising developments in digital adoption. People will look for speed of processes with compliance a priority. Capital efficiency and cost reduction will continue to be side benefits, yet digital adoption will remain more of a pull.

as well. Areas of focus include: finding ways to work quickly and collaboratively to remove friction while executing a transaction, creating a better customer experience while engaging remotely, executing digital contracting and remote signing, and supporting online transactions.

“Despite vaccinations...we won’t get back to business as usual any time soon... remote is here to stay.” 4. Digital documents are enforceable under federal and state laws. While e-signatures and e-leases are relatively new to the equipment finance industry, the laws governing them have been in effect for many years. The “granddaddy” of them all is the Electronic Signatures in Global and National Commerce Act (ESIGN), a federal statute that applies to certain transactions, including equipment leases. It generally states that the mere absence of an ink signature in and of itself does not render the document unenforceable. ESIGN did not gain acceptance for some time, but it made provisions for certain state laws to broaden the main purpose of ESIGN. The result of this broadening was the Uniform Electronic Transactions Act (UETA). UETA is a UCC Model Law that has been adopted by 48 U.S. states and enables the general legal enforceability of digital signatures and records. Another law, UCC Article 9-105, sets rules for electronic paper for non-real estate assets, and is the first law to apply “control” rather than possession for the priority of security interests.

3. Digital contracting continues to become the preferred way to contract.

5. E-signatures provide better protection for contract enforcement and risk management than ink signatures.

In an auto industry survey 94 percent of dealers preferred digital contracts and there has been a 97 percent increase in remote-signed contracts since the pandemic began. Emerging trends among customers and funders in the auto industry apply to other financial sectors

Cohen emphasized that electronic signatures are not documents physically signed by ink and faxed to a lender. E-signatures use a front-end vendor to authenticate the identity of the person who signed the document. This distinction is important because developments

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in technology present opportunities for fraud when using faxed or scanned documents such as copying or cuttingand-pasting signatures into photocopies of documents. A well designed e-signature platform, on the other hand, requires multi-factor authentication of the person signing the document which enables

the verification of the person’s identity as well as his or her intent to enter the contract. Sending a password to a person’s phone to go online and create an account is one authentication process. Lexis/ Nexis questions that ask about situations that are not current are another form of verifying a person’s identity. For example, questions such as have you ever lived at a certain address, which cannot be answered by an “out-of-the-wallet” test in case a person’s ID and credit cards have been stolen. Authentication processes provide an audit trail of touch points, including the computer IP address, that show numerous steps the borrower went through to enter the contract. Despite coming vaccines it is speculated we won’t get back to “business as usual” any time soon. Liberatore noted that the way we’ve been working in the COVID remote world is here to stay, “It is transformational and it’s not just in the equipment finance world, it’s everywhere. It’s what all of our customers want and frankly also need…this will be the tipping point.” The Equipment Leasing and Finance Association (ELFA) is the US-based trade association that represents companies in the nearly $1 trillion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. A recording of the webinar and the webinar slides are available at https://www.elfaonline.org/events/ elearning/web-seminars/esigning-and-eleasing-inthe-covid-19-world-taking-it-to-the-next-level

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Equipment Finance Future Leaders Spotlight The CFLA’s Future Leaders Spotlight is a monthly feature of emerging talent in the Canadian asset-based financing and leasing industry.

Brandon Stone

President, QuipFinance.com

Carla Potter

Partner, Banking & Specialty Finance Group, Cassels

What brought you to the asset-based finance and leasing industry?

I was in consumer finance but stumbled across a used commercial truck dealership who was having trouble getting their older aged commercial trucks financed at decent rates. I helped them accomplish this and within a very short amount of time transitioned our business out of consumer finance and fully into commercial leasing.

I like helping businesses get the equipment they need to grow their business. I’m passionate about supporting other entrepreneurs.

Too often lawyers are seen as the red tape and not part of the business solution. After spending time as a chartered accountant and heading to law school, I came to Cassels knowing that it was a law firm that was a leader in asset-based finance and leasing, but not knowing much about the industry. Through working with clients in the equipment finance industry, I quickly learned that it was one where I had an opportunity to help clients achieve their business objectives in a practical way. It wasn’t exactly yellow iron I dreamed of when I pictured myself as a lawyer watching Damages or Ally McBeal, but it has proven to be a challenging and rewarding industry to grow my career in.

How do you overcome the challenges you face at work?

What do you like about working in this industry?

We make it our mission to put our customers first and don’t let the little things that don’t change the big picture effect that. As long as we can honestly say we did our best to hit our mission than we don’t let the other things get in the way.

The people that work in the industry and the mentoring that you receive. At Cassels, I have been able to learn from the best, and have also been lucky to continue to learn from players in the industry and work with clients that continue to push the industry forward and advocate for change.

What do you like about working in this industry?

What does it mean to you to be a leader and how do you lead others in your organization? For myself I’ve always found it the most effective to lead by example. Do what you expect others to do and the right people will follow.

What is your favourite part of your job? I love the flexibility to work form anywhere and that I can help businesses from anywhere in basically any industry. There is no shortage of opportunity.

What is one of your favourite books and why? “The Richest man in Babylon” because I believe anyone who reads this book and follows its principles can create financial freedom.

What is a common misperception about the asset-based finance and leasing industry? The industry has historically been seen as a male-dominated profession, but it is filled with a lot of women who are leaders in the industry and champions of other women looking to start off or grow their equipment finance career.

What is your favourite part of your job? No day is ever the same. There are always new issues that allow you to think critically and meet new people – whether it’s funders, owners of family-owned business, entrepreneurs or a corporate leasing company, everyone you meet quickly feels more like friends.

What is your number one travel destination and why? Being from Northwestern Ontario, I love exploring the outdoors and am hoping to do another cross-Ontario road trip with family this summer!

The Canadian Finance & Leasing Association (CFLA) represents the asset-based financing, equipment and vehicle leasing industry in Canada. With over $400 billion of assets financed in 2018, this industry is the largest provider of debt financing in the country after the traditional lenders (banks and credit unions). CFLA’s 230+ corporate members range from large multinationals to national and smaller regional domestic companies, crossing the financial services spectrum from manufacturers’ finance companies and independent leasing companies, to banks, insurance companies, and suppliers to the industry.

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Navigating Inflation’s Choppy Waters in the Equipment Finance Industry By Gary W. LoMonaco

s we hopefully approach the end of the pandemic, most of us are weary of seeing and hearing the word, “unprecedented.” In the case of COVID-related inflation, it is a truly appropriate way to describe the pandemic’s present and future effects on the economy. We haven’t experienced a pandemic of this magnitude in over a hundred years. Policy makers and businesses are scrambling to assess the long-term impact we will see as a result. In the near term, most policy makers and economists agree that temporary factors will drive inflation in the US over the next few months — and they don’t dismiss the possibility of longer-term issues. Some inflation is expected over the coming months simply because of the distortion created by comparing a period with generally weak prices to a period of growth. As the economy recovers, it will be compared to a pandemic period in which fuel prices, transportation costs and non-essential goods were affected by lower demand caused by unemployment and under-employment. Supply chain disruptions, such as the current lumber shortage, semiconductor shortages, especially in the automotive and tech industries, and truck driver shortages, have already driven prices higher and are expected to continue in the near future. Pent-up demand reflects the return to consumption allowed by the easing of restrictions, rising employment and the ability for families to spend pandemic-related savings on services forgone during the pandemic. When combined, these factors point to inflation in the range of 2.5 percent at the low end to 5 percent or higher, according to numerous published reports, with that inflationary period lasting anywhere from the balance of 2021 to 2022 and beyond.

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EQUIPMENT FINANCE

“Steep growth puts demands on working capital regardless of industry.” What does a recovery look like? Equipment finance customers are facing myriad issues as they head into recovery activity, some of which will depend on their own customers and the size of their businesses. Small businesses that sell to other SMBs and consumers have to address how their clients have fared during the pandemic. A number of economists depict a “K-shaped recovery,” in which the upper tier of the economy (e.g., technology and large-cap firms) experiences a relatively quick, strong rebound while the lower tier (e.g., SMBs, service-based and cyclical businesses) has a much slower, more shallow recovery curve. Some of the ways smaller businesses will need to address inflation are as follows: Businesses that had to downsize staff at the height of the pandemic are finding it difficult to replace workers temporarily laid off. This is causing wage inflation as companies compete to attract the best staff in a tight market. This labor situation may make it an opportune time to invest in automation. Selling to other businesses experiencing shrinking margins limits a company’s ability to pass along increasing costs. Equipment finance companies can provide benefit to these companies by allowing them to conserve scarce working capital. As many organizations return to growth, demands on working capital will increase. Equipment financing will become a more attractive alternative as companies utilize working capital to fuel expansion. New technology and applications utilized by providers of financing are also making it easier to identify sources of funding and gain quick approvals.

How are larger firms affected? A steeper recovery curve bodes well for longer term success, but comes with issues that larger firms will need to address. Steep growth puts demands on working capital regardless of business size or industry. Also, with the current global semiconductor shortage, demand for

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equipment will likely outstrip supply for a while. Many firms deferred investment in needed infrastructure, only to find that if equipment is available, it is being sold at inflated prices. Other concerns for larger firms include the following: Despite sophisticated forecasting by businesses and the government, the recovery and its attendant inflation will have unforeseen consequences and opportunities. As is true with smaller firms, larger businesses will need to be agile to take advantage of the recovery. Inflation reduces purchasing power over time. A key selling point of equipment financing is that it affords clients the opportunity to pay for equipment with future dollars, whose value would be reduced by the effects of inflation. For businesses that sell outside the US, inflation rates in those jurisdictions will vary depending on the local economic climate and pace of recovery, which will, in turn, drive currency fluctuation. These companies will need to pay close attention to exchange rates and take advantage of risk hedging opportunities.

What do equipment finance businesses need to know? Inflation can be tricky for an equipment finance company. On one hand, it makes the leasing/financing option a much more attractive means to acquire equipment necessary to take full advantage of the opportunities that recovery can bring. On the other hand, it requires diligence to make sure that business is being added profitably and sustainably. Some issues to be aware of include the following: ◉ Temporary inflation and rising equipment prices necessitate increased diligence when setting residuals. Assumptions will need to be adjusted to make sure future values are in line with business profitability goals. ◉ Capital spend that was deferred during the pandemic represents a significant

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opportunity to participate in the growth economy. Each equipment finance customer will have its own set of issues to address, and it will be more important than ever to be a strong financial partner to your lessees and vendors by listening and structuring around such issues where possible. The Federal Reserve has indicated that for the time being, inflation will not result in increased interest rates, but market rates and the Fed do not always move in lock step. Equipment finance companies need to be diligent in managing float risk between quote and close, particularly those that depend on discounting as a means of funding new business. As equipment prices rise, marginal credits will be seeking longer terms and lower down payments, increasing credit default risk. Lenders will need to pay more attention to inflation’s effects on risk-reward. Demand has already shifted toward used equipment due to the price and availability of new product. Future collateral values of such used equipment will be adversely affected as supply of new product catches up with demand. Rating agencies are considering downgrades for issuers particularly sensitive to inflationary pressures, which will impact hold positions on larger borrowers/lessees. Margin compression is likely to continue into the foreseeable future due to the high degree of liquidity in the market.

Clearly, the current inflationary environment creates some choppy waters that require skill to navigate. Equipment finance businesses have traditionally been very adept at charting a path through those waters, and with care and planning, will be positioned to manage through those challenges and the attendant risk. The Alta Group stands ready to advise your firm through these challenges and position you for success. Gary W. LoMonaco is a director of The Alta Group who primarily works with the consultancy’s Strategy & Competitive Alignment Practice. He draws on his extensive industry experience, recent executive leadership, and passion for new challenges to help Alta clients succeed. His areas of expertise in a wide-ranging career include captive and vendor finance, and credit management.

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TREASURY

How the Pandemic Changed the Accounting Business: Remote, and Digital

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TREASURY

By Eileen Foroglou

“N

ecessity is the mother of invention” may be cliché, but the pandemic brought the concept to life for most industries, including accounting and finance. Over the past few years with the push toward paperless offices, workers were encouraged to go digital with the technology invented for the purpose of helping the environment. Before COVID, accountants were shifting to digital, but sluggishly. Offices were cluttered with paper stacks, bills, ledgers, calculators and the like, as manual work was still a focus for the accountant’s role. Outsourcing the accounting function was a possibility that was not widely accepted. Then came the pandemic, lockdowns and work-from-home mandates, and the idea that accountants had to be in an office engaging in face-to-face meetings to be considered effective went out the office window. What was once a long-term vision — working from home — became an immediate reality. Companies had to rethink and adapt quickly.

a head start. Online review systems and cloud-based systems enabled accounting professionals equipped with laptops to shift to remote work and operate normally immediately. To their credit, those firms that had not integrated digitally rose to the challenge and found ways to get their teams up and running within a few weeks. It has now been nearly a year and a half since the initial lockdown. Our 20/20 hindsight enables us to look back and draw several conclusions about the lessons we have learned as a result of the “necessity” that mothered invention. ◉ Change can happen quickly when everyone buys in and works together. We saw firsthand that changing a process and introducing new software could be handled efficiently, all from home. This is a good thing, because time is money, and process improvements implemented through a unified stance are cost effective. Cooperation and keeping an open mind are keys to making it all work. ◉ In addition, embracing technology and a digital culture encourages innovation, creativity, transparency and collaboration, allowing teams to adapt to

“During the pandemic...companies relied on accurate stakeholder reporting to provide confidence.” Interestingly, the role of accountants and finance professionals became increasingly important during this unusual situation. It was critical to manage cash flows and payment practices without interacting in person. Companies using cheques were faced with ensuring proper control systems were in place and adhered to. Stakeholder/Investor reporting and on-time delivery of accurate financial statements are more crucial than ever but there were challenges with everyone working remotely. Of course, those firms that started to go digital and paperless pre-pandemic had

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change swiftly. The digital culture forced people to automate, collaborate and expand their technological knowledge. We learned that to be more effective, efficient and scalable, companies need to invest in technology. ◉ During the pandemic, an accountant’s role became increasingly more important. Companies and individuals turned to accountants to manage cash and government subsidies. They also relied on accurate stakeholder reporting to provide Stakeholders with confidence that their investment was actively managed during the pandemic. Again, accounting firms

accepted the challenge and kept their clients up to date and happy. ◉ The need or requirement to have in-person face time diminished with the help of online meeting platforms such as Zoom and MS Teams. The pandemic proved the accountant’s function can be completed outside of the office with the help of digital technology. Conversely, teams worked harder and longer, as they converted commute times to business hours. The moral of the story is that flexibility is the key. Although at some point, face time will still be optimal, for more collaboration and strategic/creative work, daily tasks can be completed at home.

◉ This leads us back to the idea of outsourcing, which can help. Accounting firms should at least consider this option. It has been proven that remote work, in fact, works. Outsourcing for day-to-day simple tasks can be used to allow teams to focus on the non-standard tasks. In short, despite the many problems the pandemic posed, it also spurred innovation when it comes to conducting business-as-usual from home. COVID “mothered” a lot of invention that helped everyone who were figuring out new and improved methods of work. The business landscape has changed, and it is fascinating to watch how it has created a “new normal.” As we move forward, we will all be more adaptable, flexible and open-minded about the challenges the future may bring.

Eileen Foroglou is Chief financial Officer, NYX Capital Corp., a private equity real estate investment company with extensive industry relationships. Based in Toronto, the firm invests in high-quality commercial, residential, industrial and selfstorage development projects throughout Canada. Currently, NYX is a joint venture partner with the active lifestyle brand Altea Active in the Fall 2021 opening of the Ontario flagship social wellness club in Toronto’s Liberty Village. The facility will feature two levels of wellness-inspiring fitness and social spaces. https://www.nyxcapital.com/

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TREASURY

Five Treasury Trends to Watch in 2021 T

By Amol Dhargalkar

o succeed in the 2021 marketplace, corporate treasurers must rethink their financial risk management objectives, strategies, and policies while addressing their team’s changing role within the organization. Recognizing these five trends can help treasurers prepare for success in the year ahead. Corporate treasury teams face a dramatically different landscape in 2021. We begin our year in the shadow of a global pandemic, amid a tumultuous political climate, and facing volatility across asset classes — all while still working from home for many. The amorphous “new normal” hits organizations on all fronts, impacting forecast certainty, capital structure, and organizational priorities. Even as vaccines and fiscal stimulus spark hope, shifting buying patterns and economic recovery efforts continue to influence both business demand and financial risk profiles. To address these impacts and succeed in the new marketplace, you may need to rethink not only your financial risk management objectives, strategies, and policies but your treasury team’s ever-changing role within the organization. Fortunately, these challenges also present opportunities to position your team and your business for stability and success in the long term. Focusing on applying lessons learned in 2020 to the following five emerging trends can help you prepare for managing financial risk in the year ahead.

TREND 1 Reviewing risk policies and practices to ensure they withstand market shocks One of the key trends we’ve seen at Chatham is clients reviewing and adjusting their risk policies and practices to integrate organizational changes, apply lessons learned in 2020, and build stronger programs for the future. Just as “earthquake-proof” buildings are designed on a flexible foundation that

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absorbs seismic shifts, these treasury leaders aim to develop hedging policies that maintain controls while providing the latitude to respond effectively to unforeseen events. This might include re-writing policy to align with new objectives, updating hedge accounting treatment to allow for greater forecast flexibility, and wholesale revamps of hedging approaches as a result of market and business changes.

TREND 2 Rethinking FX programs to address volatility and use resources efficiently An effective hedging program must balance risk reduction and efficient use of treasury resources — whether personnel, budget, or technology spend. We’re seeing clients conducting reviews and analyses to assess whether their FX programs continue to produce risk-reduction benefits that justify the program’s complexity and operational costs. Senior executives at companies are increasingly asking the question, “How can we do this more efficiently?” and proactive treasury teams are no longer waiting for questions from the board or senior management to engage in benchmarking and reviews of their existing programs. The objective is to identify opportunities to maximize program return, such as hedging the most impactful currencies, achieving data-driven programs, increasing operational efficiencies, streamlining accounting workflows, and communicating meaningful and dynamic reporting to stakeholders.

TREND 3 Transforming treasury through automation Whether fuelled by the need for actionable data, the mandate to leverage a lean workforce, or the realities of a continued work-from-home

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TREASURY environment, the steady movement toward treasury automation accelerated significantly in 2020. We saw clients integrate and automate their financial risk management programs from gathering exposures through hedge accounting, streamlining FX balance sheet, FX cash flow, interest rate hedging, commodity hedging, and hedge accounting programs. Despite a challenging year, many companies increased their budget capacity to take on meaningful process changes to re-imagine their workflows, strategically employ technology, and utilize enhanced management reporting to improve controls, lower costs, and enable data-driven decision making.

TREND 4 Preparing for the LIBOR transition While it seems as though LIBOR’s demise has been discussed ad nauseam for years, 2021 brings very real changes for corporates. With the ISDA-driven IBOR fallbacks protocol officially underway, and Topic 848 relief available for a limited time, many corporate finance and treasury teams are now actively preparing their organizations for the LIBOR transition. In addition, recent pronouncements of certain LIBOR tenors living on through the end of 2021 open questions around longer-dated debt and derivatives. Corporates are already starting to execute non-LIBOR based derivatives, and in 2021 we expect to see clients gaining visibility into the mechanics of SOFRbased trades, preparing IBOR Fallbacks Protocol action plans, and weighing the impacts of electing ASC 848 on their hedge accounting treatment.

engaged with procurement to identify ways in which financial hedging can blend with supplier contracts and purchase agreements in order to provide greater forecasting certainty for corporates. Operational hedging programs for commodities will often include a wider range of products and strategies than operational FX programs to address the physical nature of the asset class as well as program objectives that may require a more dynamic approach. Market conditions have triggered many commodity hedgers to re-evaluate product selection and alignment with risk management objectives. COVID-19 has had far-reaching impacts to virtually every industry and business sector, which forced treasury teams to keep pace with a rapidly changing landscape and the risk profiles and strategies necessary to manage unprecedented interest rate, FX, and commodity volatility. As treasury organizations navigated these uncharted waters, many endured by establishing new risk management practices, evaluating market triggers to adjust current practices, and incorporating flexibility in the face of business uncertainty. As the pandemic moves toward the rearview mirror, savvy leaders will apply lessons learned during the pandemic to develop strong, flexible programs built to withstand the next black swan event.

As NFTs Storm the World, Digital Identity Security Must Scale Alongside the Trend Continued from page 17

bought them — so if you buy NFTs on 20 different platforms, you probably have to view them on 20 different websites or portals (although technologies are improving to change that) and just as NFTs are not interchangeable, most are not interoperable across platforms. By integrating augmented reality into the file, you can potentially solve some of these issues and enable your NFT to be displayed in other places and other ways around the world. Presumably, you could even make your digital artwork a virtual background during Zoom calls or project the image onto a building or the wall of a museum. The possibilities for AR-enhanced NFTs are actually limitless. The future of NFTs and other blockchain AI innovations will move beyond the current focus on artwork to also include verifiable credentials and digital identity. For example, a digital identity representation or avatar can be based on a one-of-kind NFT. Currently, digital identity and verifiable credentials solutions are just now entering their initial growth stages and will likely make blockchain as important as the internet itself by the end of 2021.

Amol Dhargalkar is Managing Partner, Board Member, Global Head of Corporates,

David Lucatch is CEO of Liquid Avatar & Founder

Chatham Financial.

of Oasis Digital Studios.

Advertise in

TREND 5 Treasury’s role in managing commodity risk Commodity prices have retained their high volatility status throughout the past year, and with markets pricing in a robust recovery punctuated by concerns over COVID variants and vaccine distribution, we expect such volatility to remain a fact in 2021. Treasury teams are increasingly

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Targeted. Timely. Responsive.

Contact Steve Lloyd, steve.lloyd@lloydmedia.ca

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TREASURY

Fraud, Financial Crimes and the Impact of COVID-19 H

By TJ Hoarn

aving passed the one-year mark on the global pandemic, it’s clear that COVID-19 has stress-tested the inner workings of numerous industries and functions, including banks and how they fight fraud and financial crimes. Change always creates opportunities for fraudsters and financial criminals, and the pandemic has provided a field day of possibilities. In 2020, customer behaviours changed dramatically as lockdowns came and went; people worked from home, ordered food delivery of groceries and restaurant meals, and conducted much of their shopping online. The good news is that today’s anti-fraud teams are rapidly evolving, and banks are deftly using centralized decisioning, automation and an integrated platform approach to drive effectiveness.

New research shows how banks are adapting

Analyst group OMDIA recently released the findings of a study of more than 100 banks in the U.S., Canada, UK, Brazil, Germany and the Nordics on how COVID-19 has impacted both fraud and financial crime strategies. The study, commissioned by FICO, examined how institutions are responding to challenges in both areas—in particular, assessing whether banks need to take a more centralized intelligence approach across AML compliance and fraud—and whether new artificial intelligence (AI) and machine learning (ML) technologies offer genuine benefits. Throughout the pandemic, one of the biggest demands on fraud and financial crime operations has been the ability to quickly adjust. The increase in fraud attacks proved to be the biggest challenge for institutions, with 54 percent saying they needed to better identify emerging financial crime challenges. Some banks fell victim to systems that couldn’t adapt quickly enough (or at all) to new customer behaviour, which led to identifying some legitimate transactions as suspected fraud, to customers’ frustration. (See Figure 1 below.) This challenge was followed closely by banks’ struggle to maintain controls when most of their workforce suddenly became remote. Other key findings from the survey include 43 percent of the banks identifying the need to see a full customer-level view when investigating alerts, and 38 percent wanting to increase the speed in Figure 1: Changing consumer behaviours resulted in high levels of false-positive responding to evolving threats. fraud alerts, a top concern for banks in the Omdia survey.

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TREASURY What about AI? One of the most exciting areas of recent technology innovation has been the development of artificial intelligence, as well as the maturing of machine learning. Importantly, recent advances have improved the ability to provide decision outcome “explainability,” addressing the “black-box” challenge of ML approaches, which has been an issue for regulatory support. OMDIA found that the AI/ML innovation maturity curve has generally moved from the innovator/early adopter phases to early maturity.

institutions are widely taking a strategic approach to integration; some 69 percent of the institutions surveyed now have strategic plans to integrate functions or share resources between AML compliance and fraud. Significantly, this strategic approach is translating into active plans, with institutions that are actively looking toward integration generally seeking to do so within three years. Three years can seem like an eternity, given how COVID-19 has transformed much of the world in just a year. As more companies embrace AI adoption and

Figure 2: Banks see completeness of detection as the foremost benefit of adopting AI and ML technologies to fight fraud and financial crimes.

Reflecting this, the OMDIA study focused on assessing the benefits of using such technologies. AI and ML are providing benefits in driving fuller and more complete detection coverage, and in allowing institutions to rapidly respond to emerging threats. The benefits seen from using AI and ML in tackling financial crime are shown in Figure 2. Clearly, more complete detection is seen as a significant benefit by all financial crime functions.

Preparing for AI—and the unexpected The OMDIA study also investigated how banks are evolving their operations during the pandemic. In addition to AI adoption, collaboration between fraud and compliance organizations is now the norm, driven by both effectiveness and efficiency benefits. Concurrent with the pandemic,

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integrate their fraud and compliance functions, it’s important to take advantage of the opportunity to learn from the lessons COVID-19 has taught the banking industry. Here’s a checklist on how banks and their fraud teams can be better prepared for the next unprecedented event: ◉ Have a digital-first mindset: As banks strive to adapt to changes in consumer behaviour, especially at the fast pace seen during the pandemic, it’s imperative they adopt a digital platform that provides them with access to all customer data, regardless of location or format. Keeping up with evolving threats requires a system capable of feeding intelligence based on the right data at the right time. ◉ Adopt centralized data storage: A critical component of the data ingestion capabilities enabled by a digital-first

mindset is having a centralized (or connected) data storage system in place. This enables banks to leverage customer data in a variety of ways in order to deliver a more secure user experience, through methods such as pre-book prevention or post-book detection and management. ◉ Consider the cloud: With the pandemic forcing companies across a wide range of industries to be more adaptable than ever, banks would be wise to consider using the cloud to power their digital operations. Cloud-based solutions help banks to increase server capacity and expand the scale of their digital services without having to worry about whether they have the infrastructure to do so, while also making it easier for employees to access the tools they need to do their jobs. ◉ Use automation to increase efficiencies: Some institutions lack the skilled talent needed to respond to recent spikes in fraud and financial crime in a timely manner. To make up the difference, companies should consider solutions that use robotic process automation (RPA) to alleviate some of the burden on existing personnel, allowing them to focus on high-value tasks while routine ones are automated. ◉ Incorporate analytics: The AI that powers RPA is also key to the increased collaboration between fraud and compliance teams mentioned above – but banks need to choose wisely. Whatever machine learning models they adopt need to be flexible, innovative, and deployable, with enough options available to ensure that banks and their fraud teams can adapt to the financial crime climate as quickly as it evolves.

While we don’t know when or how the next pandemic may strike, one thing is certain: today’s purpose-built solutions for fraud and financial crime threats are ready to adapt to ever-evolving threats, preparing institutions for the next unprecedented event. TJ Horan is vice president of Product Management at FICO. He leads the fraud solutions business unit. He is responsible for developing the strategic direction for FICO’s fraud products, and is also a key strategic leader in the area of transaction decisioning and analytics

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MARKET RESEARCH

Cashless Countries Canada is leading the way to becoming the most cashless country in the world Canada has been named the country most likely to banish the banknote in exchange for electronic payments. Hong Kong is the world’s second most cashless economy, followed by Singapore. European countries account for seven of the 15 most cashless economies, with the United Kingdom ranking 11th. The full research by money. co.uk can be found in the Cashless Countries report here: https://www.money. co.uk/credit-cards/cashlesscountries The world’s most cashless economies have been revealed in a new report by the credit card experts at money.co.uk. The report has analyzed the following five factors to reveal which countries use the most cashless and contact-free payment methods: ◉ % of population (aged 15+) with a credit card ◉ % of population (aged 15+) with a debit card ◉ Number of ATMs per 100,000 adults ◉ Contactless payment limit ◉ Number of major e-wallet operators available

Using a weighted ranking system, the study then assigned a score to each country in the index, revealing the most cashless countries in the world. Country Cashless Score /100 1. Canada 79.1 2. Hong Kong 76.8

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3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Singapore 76.2 New Zealand 75.0 Japan 74.1 Australia 72.3 Norway 72.2 United Arab Emirates 72.1 Switzerland 70.9 Finland 70.0 United Kingdom 68.1 China 66.0 Sweden 64.9 Denmark 64.6 The Netherlands 64.1

Canada is the world’s most cashless economy. Leading the way with cashless payments, the latest World Bank data shows 83% of the population (aged 15+) own a credit card — the highest usage in the world. Canada also has the highest contactless payment limit in the world at $250 CAD (£147~). Hong Kong takes second place, with the latest figures showing that 4 in 5 (83%) of Hong Kong’s citizens (aged 15+) own a debit card and 4 major e-wallets are in operation — Apple Pay, Google Pay, Samsung Pay and Alipay. Commenting on the results of the Cashless Countries report, James Andrews, senior personal finance expert at money.co.uk, explains how the pandemic may have changed the way we use money forever: “Even prior to the Coronavirus pandemic, we were beginning to see a global shift away from paper money towards electronic payments. However, the Coronavirus pandemic has undoubtedly

accelerated this. “In the past 12 months, we’ve witnessed more than 40 countries increase the limits for contactless payments and in the UK the Government has placed emphasis on using contactless methods of payment where possible. “The move away from banknotes and coins towards plastic payments and e-wallets presents many advantages. Cashless payments will allow for quick and easy transactions when international travel fully resumes, and the creation of digital paper trails could help reduce tax fraud and money laundering. “From the retailers’ side, it means less time spent sorting out a float at the start of the day, quicker transactions and fewer trips to deposit takings in the bank — as well as less risk from theft. “However, as with many technological advancements there is some concern that the change could leave vulnerable individuals behind. As things stand, shops are also well within their rights to refuse cash payments in the UK if they choose to go fully cashless - potentially excluding people unwilling or unable to pay with a card or smart device. “That means any move towards a fully cashless economy will need to be met with infrastructural changes, as well as potentially legislative ones, to ensure every individual within a

society has what they need in order to pay for essential goods and services.”

How they were scored We scored each of the following five factors out of 20 to give each country a score out of 100. We used these scores to determine the most cashless countries in the world. ◉ % of population (aged 15+) with a credit card: World Bank ◉ % of population (aged 15+) with a debit card: World Bank ◉ Number of ATMs per 100,000 adults: World Bank ◉ Contactless payment limit ◉ Number of major e-wallet operators available: Apple Pay, Google Pay, Samsung Pay, M-Pesa, Alipay

We only analyzed the countries which had reported the % of the population with a credit and debit card in the latest World Bank data collection. For ATM data, where the latest data was not available for 2019, we used the last reported information. Contactless payment limits were converted from the local currency to GBP on 14/05/2021. A full list of sources can be found on the Cashless Countries report page. Find the full research by money.co.uk here: https://www.money.co.uk/creditcards/cashless-countries

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