Most people don’t think about payments. We just tap on our phone and money moves from one account to another in a matter of seconds. From the outside end user’s perspective, the system seems seamless and automatic. But from the inside, it’s way more complicated.
“In the background, the dollars haven’t necessarily moved between financial institutions at the same speed,” explains Ian Burns. “The money leaves your account and shows up in another account, but that money isn’t exchanged in real-time. It has to wait for one of the three windows through the day when we effectively settle all our balances.”
As the President and CEO of Alberta Central, Ian thinks a lot about payments. Not just about the mechanics, but about how the system should be easier to use, about the need for faster transactions and, most importantly, about the future of payments because for credit unions, that future is critical. Ian, alongside CEOs from the three Prairie Centrals and seven of the largest credit unions across Alberta, Saskatchewan and Manitoba, have developed a comprehensive strategy called the Prairie Payments Initiative (PPI) to help credit unions transition to a modernized payment system.
“We live in Alberta, so let’s talk about it like this – we need to build a new payments pipeline,” explains Burns. “This will be a backbone for all the financial institutions, and we all need the same ubiquitous access to that pipeline. The work the PPI is doing provides that access.”
Seven years ago, a national system effort attempted to modernize systems with the PayCo initiative. But the project never came to fruition. This time, it’s not about getting ahead of the curve, but keeping pace with the constantly changing payments environment.
The need has never been greater
Payments Canada has begun modernizing the national payment infrastructure and is pushing the adoption of the ISO 20022, the global standards for how financial institutions exchange data. And open banking is just around the corner, promising a new era of transparency, complete with privacy and security challenges regarding our financial data. As well, companies outside the financial sector like Facebook have plans to enter the market with new kinds of credit cards and cryptocurrencies. Considering all these changes, the need for modernization has never been greater.
“It’s never too late to make a wholesale change,” says Michael Devlin Chief Payment and Technology Officer, Alberta Central. “The PPI is important because it ensures credit unions are future proofed against the modernization initiatives Payments Canada is moving forward with. Really, this is us embracing the future of making payments better, a future we’ve always been a part of.”
In his role, Michael is focused on how to best implement the PPI. From determining downstream impacts to education, he’s working to ensure Alberta credit unions are ready for this transformative change. Already, he’s met with several credit unions and feels confident about how they’ll handle the transition.
“They may not always have the deep technological understanding, but they’re willing to learn and adapt,” he notes. “These credit unions want to be today’s players and I see them working very hard to make sure they’re at the table and part of the conversation.”
Keeping pace by investing in partnerships
Credit unions won’t need to face modernization alone. As part of the PPI, the Prairie Centrals are working with IBM Payments Centre – Canada (IPCC) to rebuild their technology platform for payments. It’s a partnership that should help open new possibilities while levelling the playing field against the larger financial institutions. Outside of their work with the Prairie Centrals, IBM also serves as a key technology partner for several players in the payment ecosystem. IBM is working with Interac, as well as Payments Canada on Lynx, the new core clearing and settlement system that will bring payments closer to real-time.
“I’m excited about this partnership,” says Michael. “IBM has a strong hand in every major part of the payment modernization process. It gives us a high degree of comfort. It’s like when you bring your GM truck to GM. They know how this thing is built, all the way across the line. They know what they’re doing.”
This year, Payments Canada has already reached its first two milestones for modernization: a new credit risk model and enhancements to Automated Funds Transfers. The transformation is well under way. The future of seamless payments is close to becoming a reality. With the PPI and their partnership with IBM, the Prairie Centrals are making sure credit unions aren’t being left behind.
“This is an example of credit unions working successfully together, finding a solution that’s driven by our needs,” says Ian. “This is a change in how we do business and incredibly important to our future. This has been a catalyst for better discussions on how credit unions in different provinces can work more closely together.”
Adds Michael, “It’s not where we are today, but how much further we can go once we have a platform and great tools to build the next stage.”