Canadian Payments Landscape
Prepared for the
Task Force for the Payments System Review
September, 2010
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Prepared by Deloitte
Executive Summary: Overview of the Canadian Payments System
• Extremely complex system involving a wide range of stakeholders
• There is a wide, and growing, range of payment methods available to consumers,
merchants, businesses, corporations and governments
• Incumbents (such as Canadian banks), new entrants (such as e-commerce
specialists) and global payments providers (such as the credit card networks) are
rapidly expanding the range and breadth of payments options available to Canadians
Overview
of the
Canadian
Payments
System
• Likewise, a range of payment enablers are also actively contributing to this
expansion
• There is active competition across all parts of the complex payments landscape.
There are no participants that dominate the system
• The current regulatory environment is complex, involving multiple industry
stakeholders and levels of government
• In general, consumer oriented payment mechanisms (cash, debit and credit) account
for the bulk of payments transactions
• In general, business oriented payment mechanisms (LVTS) account for the bulk of
payment dollar values
• Electronic payment mechanisms (e.g. debit) generally are growing while
conventional paper based methods (e.g. cheque)
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Prepared by Deloitte
Executive Summary: Overview of Key Payments Trends
• The Canadian payments landscape has evolved in quite distinct phases over
preceding decades
• Over the past decade, the marketplace changes have resulted in much greater
choice for consumers and higher levels of innovation
• Most of the innovation has been centred on the consumer oriented payments and
not corporate oriented methods (e.g. LVTS, SWIFT)
Overview
of Key
Payments
Trends
• A wide range of factors are driving this accelerating rate of change:
– Expansion and convergence of payment form factors
– Accelerating pace of innovation
– Increasing global collaboration
– Maturing of consumer preferences
– Historic regulation losing relevance
– Increasing security and privacy challenges
– Leadership of global, scale-efficient players
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Prepared by Deloitte
Table of Contents
1. Introduction
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
3. Review of Payment Methods
4. Review of Participants in the Payments Ecosystem
5. Appendices
a. Participant Profiles
b. Review of Payment-Related Activities
c. Glossary of Terms
d. Further Reading
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Prepared by Deloitte
1. Introduction
This current-state summary of the Canadian Payments Landscape has been prepared
for the Task Force for the Payments System Review
Report Background
• The Task Force for the Payments System Review was formed in June 2010 by the Department of Finance Canada with the
objective of reviewing the Canadian Payments System and providing recommendations to the Department of Finance
• As a key input to the process, the Task Force requires a holistic mapping of the current Canadian payments landscape, including
all payment types and identifying all scheme and system operators as well as their users
• In addition, the Task Force requires an analysis of the competitive landscape, interaction between participants of the Canadian
payments system and a review of relevant federal and provincial regulatory frameworks
Objectives and Scope
Approach
• The objectives of this report are to:
− Provide a graphic map of the Canadian payments system
− Detail the roles of all players
− Discuss trends and significant changes over recent years
− Identify the various regulatory regimes that govern
participants
• New and emerging payment types have not been covered in
detail
• This report is not a qualitative review of the payments
landscape and does not provide recommendations for change
• Publicly-available data was used to gather transaction growth
information and extrapolate market trends, as well as to
compile profiles of participant types and companies, and
identify trends, recent developments and the regulatory
framework for the payments industry
• Internal Deloitte expertise and available public information was
used to build a comprehensive map of the Canadian payments
system, including the interdependencies between key players
Observations
• The rapid evolution and integration of new technologies in recent years have changed the way that payments are made, while new
business models and new market entrants have reinvigorated what was previously a relatively stable industry
• While businesses and consumers can choose from an ever-widening array of payment options, the magnitude of this evolution of
the payments marketplace has created considerable uncertainty regarding the near- and medium-term direction of the industry
• Recent trends have indicated a continued decline of cheques, with credit cards as the fastest-growing payment type
• New form factors (e.g., contactless, mobile) have considerable long-term potential to change the way Canadians make payments
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Prepared by Deloitte
Table of Contents
1. Introduction
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
3. Review of Payment Methods
4. Review of Participants in the Payments Ecosystem
5. Appendices
a. Participant Profiles
b. Review of Payment-Related Activities
c. Glossary of Terms
d. Further Reading
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Prepared by Deloitte
2. Payments Overview: A. What is a Payment?
Payments facilitate the flow of funds and information between two parties
 A payment is the transfer of value between two parties
 Payments may be used for a variety of purposes, including to purchase goods and services, to settle a legal
obligation or to transfer funds between parties/locations
What is a
Payment?
 Payments encompass a wide range of activities, Examples include (but are not limited to):
− Paying with cash
− Writing a cheque
− Wiring money overseas
− Paying for inventory via EDI
What are the
defining
characteristics
of different
Payment types?
 Sender/Recipient: e.g., Person-to-Person (P2P), Consumer-to-business (C2B) or Business-to-Government (B2G).
Who are the parties to the transaction?
 Form Factor: e.g., Is the payment made with cash, paper cheque, plastic card or electronically?
 Funding Source: e.g., Do the funds come from cash in your wallet, a demand deposit account (chequing account),
or from a line of credit?
 Timing of Funds: e.g., Is it a Pay Now transaction (debit), Pay Later (credit) or Pay Before (gift card)?
 Regulation: Which regulatory bodies oversee the transaction – is it a CPA-regulated transaction (ACSS/LVTS), a
Consumer Protection Act-regulated transaction (cash) or largely unregulated (eWallets)?
 “Payments ecosystem”, “payments landscape” and “payments industry” all refer to the collection of consumers,
businesses, merchants, financial institutions, payments networks, regulators, processors, new entrants and service
providers that play a role in initiating, processing and regulating payments transactions and redefining boundaries
What is a
payments
ecosystem?
 Payments ecosystems are inherently complex with multiple payment options, multiple players (with sometimes
divergent goals), overlapping or non-existent regulatory regimes and evolving consumer choice
 In addition to the Sender and Recipient there can be many parties involved in the transaction such as an issuer to
provide access to funds; an acquirer to help the merchant process the transaction and clearing and settlement
agencies
 Changes to one part of the ecosystem (e.g., new entrants, new regulations, new fees) will have a ripple effect
across the entire landscape as different parties adjust to the new competitive environment
 A well-managed payments ecosystem provides secure, reliable and cost-effective payment options for consumers
and merchants, and is a vital component of a stable economy
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Prepared by Deloitte
2. Payments Overview: A. What is a Payment?
A variety of payment methods can be employed to enable the transfer of funds
between parties
Payment Type
Examples
Paper notes and coins as issued by the Bank of Canada;
foreign currency where accepted
Cash
Paper instrument instructing a financial institution to pay a
specific amount of a specific currency to a specific Recipient
Cheques
Debit Card
(Point of Sale)
Typical Consumer/Merchant
Usage Fees
Description
Interac
Association;
Maestro
• No per-transaction costs
• Merchants may offer cash discounts to consumers
• Significant cost to cash handling for merchants including
bank fees, theft and opportunity costs
• Sender: $0-$1.25 per cheque, or bundled into a monthly
account fee typically ranging from $0 - $14 (max $25)
• Recipient: $0-$3.00 per cheque depending on account plan
• Significant processing and handling costs to all including
approval administration, cheque processing costs and fraud
•
Card issued by a financial institution that provides instant
access to funds online or at a merchant’s checkout for purchase
of goods & services. Funds are instantaneously withdrawn from
•
the user's account
Consumers: $0-1.25 per transaction or bundled into
monthly service fee. International transactions more
expensive
Merchants: Fixed fee of $0.08-$0.15 per transaction or
0.15% + $0.05 plus acquirer fees plus monthly account fees
Card issued by a financial institution that permits the withdrawal
of cash at Automated Banking Machines (ABMs). Withdrawals
Cirrus Network;
made at the same bank as the card issuer are considered “onPlus Network
us”, while withdrawals made at another institution’s ABM are
considered “not on-us”
• On-Us Transaction: $0-$0.50, or bundled into a monthly
account fee
• Not On-Us Transaction : $1.50 - $3.00 each to issuer and
acquirer (or more if international). May be free under
reciprocal bank arrangements
Visa Inc.;
MasterCard
Worldwide
Card issued by a financial institution that allows online and
point-of-sale purchases to be charged to a credit account, line
of credit or other loan facility
• Consumers: No per-transaction fees for credit cards.
Annual fees from $0 - $200 or more. $0-$5 for cash
advances. 10%-30% annual interest on revolving balances
• Merchants: Merchant discount rate is composed of
interchange ranging from 1.2%-2% per transaction plus
acquirer processing and periodic account fees
AFT Debit
Canadian
Payments
Association
Automated Funds Transfer (AFT) Debits are Pre-Authorized
Debits (PAD) . Permits direct periodic (usually monthly) billing
from a bank account to a merchant or other Recipient. Typically
used for recurring bill payments. Processed over the Canadian
Payment Association’s (CPA) Automated Clearing and
Settlement Service (ACSS)
• Consumer: $0.65-1.25 per debit or bundled into monthly
service fee
• Merchants: Varies according to merchant banking
agreement
AFT Credit
Canadian
Payments
Association
Identical to AFT Debit, except funds flow from merchant to
consumer. Most common use is for payroll and government
disbursements (such as EI, CPP and tax returns)
• Consumer: No per transaction fee to user
• Merchants: Varies according to merchant banking
agreement
Debit Card
(Cash
Dispensing)
Credit Card
Note: Detailed descriptions are provided in Section 3
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2. Payments Overview: A. What is a Payment?
A variety of payment methods can be employed to enable the transfer of funds
between parties, cont…
Payment Type
Examples
Description
Typical Consumer/Merchant
Usage Fees
Electronic Data Interchange (EDI) payments are corporate-tocorporate transfers routed through the CPA’s ACSS. Electronic
(EDI) Remittances are similar to AFT Debits, except that they are
one-time instead of recurring
Consumer: $0.65-1.25 per debit or bundled into
monthly service fee
Businesses: Varies according to merchant banking
agreement
Proprietary/
Starbucks
Prepaid Closed
Corporation
Loop Card
Similar to a credit card, except that it is only accepted at certain
retail merchants. Transactions are processed using proprietary
networks rather than open-loop networks such as Visa or American
Express
Consumer: No transaction fees. Usage fees of
$0.50-$2.50 for activities such as activation, card
replacement or customer service
Canadian
Payments
Association
The Large Value Transfer System (LVTS), an electronic wire
transfer system for instant transfers between financial institutions of
$50,000 or more. Often used for settlement of stock/bond market
trades or corporate procurement. Processed by the CPA
Businesses: $10 for incoming wire transfers. $16 $80 for outgoing wire transfers plus foreign bank fees
(exact amount based on amount and if funds are
being sent to home banks’ branch)
Society for
Worldwide
Interbank Financial
Telecommunication
The Society for Worldwide Interbank Financial Telecommunication
(SWIFT). Enables payments between member financial institutions.
Used for sending funds domestically (via LVTS) and internationally
Businesses: Varies according to amount sent and
Sender/Recipient location, typically $30 (send and
receive)
Western Union
Company
Sender: 1.2%-20% of the remitted value depending
Person-to-person overseas funds transfer where the Recipient does on the location money is sent from and where it is
sent to
not require a bank account to receive the funds. Funds generally
flow over a proprietary payment network (e.g., Western Union)
Recipient: $0 or more depending type of service
used
EDI and
Electronic
Remittances
LVTS Wires
SWIFT
Transfer
International
Remittances
Canadian
Payments
Association
Digital Wallets/
PayPal, Inc.
eWallets
Funds stored outside of financial institution for conducting
transactions online or via mobile phone. Also manages billing and
shipping information to enable online purchases. Allow users to
make electronic commerce transactions quickly and securely, and
provides an easy way for individuals and business to collect online
payments
Personal Transfer
Sender: 2.9% + $0.30 CAD per funds transfer that
comes from a Credit Card (Sender decides who pays
this fee), free when money comes from PayPal
balance or a bank account
Recipient: No fees, except where funds are
transferred from a Credit Card wherein the Sender
may decide that the Recipient is to pay the fee which
is 2.9% + $0.30 CAD per funds transfer
Note: Detailed descriptions are provided in Section 3
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Prepared by Deloitte
2. Payments Overview: A. What is a Payment?
A variety of payment methods can be employed to enable the transfer of funds
between parties, cont…
Payment Type
Examples
Typical Consumer/Merchant
Usage Fees
Description
Purchases
Sender: No fees
Recipient: Standard rate of 2.9% + $0.30 CAD.
Lower fee rates are based on monthly sales volume
for the previous calendar month (PayPal)
•Sales volume between $0-$3,000 CAD incurs a 2.9%
fee per transaction + $0.30 CAD
•Sales volume between $3,000.01-$12,000 CAD
incurs a 2.5% fee per transaction + $0.30 CAD
•Sales volume between $12,000.01-$125,000 CAD
incurs a 2.2% fee per transaction + $0.30 CAD
•Sales volume greater than $125,000 CAD incurs a
1.9% fee per transaction + $0.30 CAD
Digital Wallets/
PayPal, Inc.
eWallets
Funds stored outside of financial institution for conducting transactions
online or via mobile phone. Also manages billing and shipping
information to enable online purchases. Allow users to make electronic
commerce transactions quickly and securely, and provides an easy way
for individuals and business to collect online payments
A Recipient must meet PayPal’s Merchant Rate
criteria and complete a onetime application
Cross-Border Purchases
Sender: No fees
Recipient: Standard rate 3.9% + $0.30 CAD.
Transaction fees for cross-border purchases are
applicable to Recipients who have sold goods or
services to Senders outside of Canada or the US.
Lower rates are based on monthly sales volume from
the previous calendar month (PayPal)
•Sales volume between $0-$3,000 CAD incurs a 3.9%
fee per transaction + $0.30 CAD
•Sales volume between $3,000.01-$12,000 CAD
incurs a 3.5% fee per transaction + $0.30 CAD
•Sales volume between $12,000.01-$125,000 CAD
incurs a 3.2% fee per transaction + $0.30 CAD
•Sales volume greater than $125,000 CAD incurs a
2.9% fee per transaction + $0.30 CAD
A Recipient must meet PayPal’s Merchant Rate
criteria and complete a onetime application
Note: Detailed descriptions are provided in Section 3
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Prepared by Deloitte
2. Payments Overview: A. What is a Payment?
A variety of payment methods can be employed to enable the transfer of funds
between parties, cont…
Payment Type
Mobile
Payment
Examples
Zoompass
Typical Consumer/Merchant
Usage Fees
Description
Person-to-person or consumer-to-business payment made using a
mobile phone. Can draw/deposit funds from/to a consumer’s bank/credit
card account or maintain balances like an eWallet
Sender: 3.5% per transaction on credit card
transactions (Zoompass), but free from a Zoompass
account
Recipient: No fee (Zoompass)
Usage Fees: $0.50 per withdrawal to bank account,
no fee to add funds to Zoompass account from bank
account, $10 penalty for insufficient funds
(Zoompass)
Note: Detailed descriptions are provided in Section 3
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Prepared by Deloitte
2. Payments Overview: A. What is a Payment?
Consumers, businesses and governments make use a variety of payment types when
transferring funds between parties
Examples of Payment Types between Parties
Cash
Cheque
Debit
Credit
Prepaid Card
P2P
Mobile Network
Loyalty/Rewards
Bill Payments
AFT Debit
eWallet
C2B/B2C/B2E
Cash
Cheque
Prepaid Card
Int’l remittances
Mobile Network
P2P Transfer
eWallet
C2G/G2C
Consumer
Cash
Cheque
Debit
Credit
AFT Debit
AFT Credit
Prepaid Card
Mobile Network
EDI
eWallet
Transaction Flow
Person-to-Person
P2P
Consumer-to-Business
Business-to-Consumer
Business-to-Employee
Business-to-Business
Business-to-Government
Government-to-Citizen
Government-to-Business
C2B
B2C
B2E
B2B
B2G
G2C
G2B
Government-to-Government
G2G
Cash
Cheque
Credit
Debit
AFT Debit
Prepaid Card
B2G/G2B
Business
B2B
Cash
Cheque
Credit
Debit
AFT Debit
AFT Credit
Prepaid Card
Government
G2G
Cheque
EDI
LVTS
AFT Debit
AFT Credit
Description and Examples
A transaction in which funds are exchanged between two individuals (e.g., money transfer ). Also known as
Consumer-to-Consumer (C2C)
A transaction in which funds flow from a consumer to a business (e.g., purchase of goods or services)
A transaction in which funds flow from a business to a consumer (e.g., a return)
A transaction in which funds flow from a business to an employee (e.g., pay cheque)
A transaction in which funds flow from one business to another (e.g., purchase of input materials)
A transaction in which funds flow from a business to the government (e.g., corporate taxes)
A transaction in which funds flow from the Government to a citizen (e.g., tax return)
A transaction in which funds flow from the Government to a business (e.g., procurement)
A transaction in which funds flow from a one level of Government to another level of Government (e.g., funding for
transit transferred from Federal Government to Regional Government), or between parallel levels of government
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2. Payments Overview: A. What is a Payment?
The Canadian payments industry has been stable for a long period of time, but in
recent years the pace of change has accelerated dramatically
The Era of Paper Payments
The Era of Credit Cards
The Era of Convenience and
Security
The Era of Consumer Choice &
Innovation
Consumers pay for goods with
available funds using cash or cheque.
There is local access to store credit
for big ticket items
The advent of credit cards provides
consumers with easy access to credit
and expands their availability of short
term funds
Debit and credit cards build traction as a
convenient method of payment and are
accepted at POS and eventually online.
There is a focus on security to curb fraud
Technological advancement is a
catalyst for innovation in payments,
spurred by consumer demand for
choice, convenience and speed
1960’s
1970’s
1980’s – 1990’s
2000’s – 2010’s
• Cash and cheques are the primary
method of payment for P2P and
P2B transactions
• Local retailers offer individual credit
accounts to reliable regular
customers in order to increase
sales, especially for big-ticket items
• Problems such as cheque fraud
and bounced cheques start arising
due to the time-consuming and
manual nature of the cheque
clearing process
• The consumer demand for access
to cash outside of regular business
hours leads banks to start installing
24-hour cash dispensing
machines to meet consumer
needs. At this time, consumers can
only withdraw funds from ABMs that
belong to their bank
• Large retailers and gas companies
issue in-house credit cards to
provide consumers with payment
convenience, increase sales,
administer incentive schemes and
collect business intelligence on
customer purchasing patterns
• Open-loop credit cards attract
Canadian consumers with their
convenience and relatively wide
merchant acceptance. By 1978,
there are more than 40 million credit
cards in circulation, providing
consumers with easy access to
personal credit lines
• Consumers, companies and
governments start to leverage
direct debits and direct credits for
re-occurring, fixed-amount
payments such as mortgage, payroll
and rent transactions as these
methods are cheaper and more
convenient than cheques
• Usage of ABMs grows and the
Interac Association is created to
provide consumers with access to a
wider network of ABMs
• More merchants begin to upgrade
to electronic terminals to process
credit card transactions at point-ofsale; this addresses new concerns
related to credit card fraud
• The CPA is formed in 1980 to
oversee the changing payments
landscape. The CPA develops the
LVTS clearing and settlement
system for electronic transactions.
Launched in 1999, LVTS
dramatically decreases cheque
usage
• Interac Direct Payment is rolled out
in 1994, allowing customers to use
debit cards for electronic payment
at point-of-sale
• The advent of the internet and
online shopping generates new
demand for credit cards and fosters
the development of eWallets such
as PayPal. eCommerce drives the
need for new security measures for
online payments
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• Due to the success of the Interac Direct
Payment service, debit card
transaction volumes outpace cheques
for the first time in 2000. By 2003,
Canadians become the highest percapita users of debit cards in the world
• An increase in debit and credit card
fraud leads to the mandated adoption of
Chip & PIN technology for its security
benefits. Interac sets December 2015 as
the adoption deadline for all merchants
• Following the popularity of alternate
payment methods, major Telcos in
Canada form a strategic partnership to
develop Zoompass - Canada’s first
major mobile phone payment service
• Contactless cards, which allow
customers to make signature-free, lowvalue transactions, are released by Visa
and MasterCard in order to capture a
larger segment of small cash payments
• In the face of a changing payments
landscape and the imminent entrance of
branded debit products, the Ministry of
Finance creates the Debit and Credit
Card Code of Conduct to protect
merchant and consumer interests
Prepared by Deloitte
2. Payments Overview: A. What is a Payment?
The pace of change in the payments marketplace is accelerating. This change is
driven by a range of underlying factors
Rapid Growth
of Non
Traditional
Providers
Leadership of
Global, Scaleefficient
Players
Increasing
Security and
Privacy
Challenges
Expansion
and
Convergence
of Form
Factors
Changes
Defining the
Current
Payments
Landscape
Historic
Regulation
Losing
Relevance
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Accelerating
Pace of
Innovation
Increasing
Global
Collaboration
Maturing of
Consumer
Preferences
Prepared by Deloitte
2. Payments Overview: A. What is a Payment?
For example, domestic and global payments innovators are bringing a broadening
range of payment means and methods to mainstream consumers and businesses
Dimensions
Description
Illustrations
Form Factor
Expansion and
Convergence
• More payment methods available
• Increased payment functionality
• Convergence of methods and form factor at
the device level
• Blurring of consumer interfaces
• All-in-one cards (e.g. DBS Visa Prepaid)
• Interac / branded-debit
• Mobile applications for multiple payments
(bills, transfers, buying)
• PC and smartphone apps converging
Accelerating
Pace of
Innovation
• Integrating specific established technologies
into payments
• New uses for proven methods
• Rapid expansion of national tests to global
markets
•
•
•
•
Increasing
Global
Collaboration
• Increasing collaboration among governments
for FS regulations
• Movement toward a global standard for
international settlement
• Harmonizing global standards across networks
• Collaboration events include Basel III, G20,
BIS
• Creation and growing market share of SWIFT
and CLS
• EMV technology mandated across various
form factors
• Payment method preferences not directly
linked to demography
• “Early adopters” of technology not driving
payments
• Multiple payment mechanisms frequently
employed
• Common debit preference driver: “helps me
stick to my budget”
• On-line payment methods such as PayPal
have gone mainstream
• Preferences often category linked (e.g. buy gas
with RFID credit card)
Maturing of
Consumer
Preferences
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Biometric payments
Digital cheque imaging / scanning
PRESTO (stored value for transit)
VISA & MC accelerating global rollout of
successful pilots (e.g. NFC mobile)
Prepared by Deloitte
2. Payments Overview: A. What is a Payment?
Furthermore, changes in the payments landscape are creating significant new
challenges on regulatory and privacy fronts
Dimensions
Description
Illustrations
Historic
Regulation
Losing
Relevance
• Current regulation has built up over time and is
not well integrated
• Most payments regulation does not adapt well
to virtual world
• Some new players basically unregulated (e.g.
PayPal)
• Existing policies (e.g. CPA) do not fully
contemplate payments innovation
• Payments-related elements covered off under
multiple Acts
Increasing
Security /
Privacy
Challenges
• Massive explosion in the volume and
availability of data has created new
opportunities to deploy
• More “complete” identify theft
• New fraud opportunities have outpaced
corporate + government controls
• Electronification of transactional data has
increased the risk of identity theft
• Emergence of joint task forces to tackle
security concerns (e.g. RCMP and
INTERPOL)
Leadership of
Global, Scaleefficient Players
• Card networks (VISA, MC, AMEX) rapidly
deploying multiple methods (credit, debit,
electronic, e-wallets)
• Scale key to ability to innovate and invest in
infrastructure
• VISA pilot with Bank of America on electronic
wallet
• Highly concentrated merchant acquirer
market in Canada
Rapid Growth of
Non Traditional
Players
• Value chain fragmentation and emergence of
specialty payments firms
• Highly successful entry of certain retailers into
financial services
• Emergence of firms built around enabling
virtual / electronic payments
• Apple currently stores credit card data for
150MM+ users through iTunes
• WalMart (US) brings money services (e.g.
cheque cashing, remittances) to the
mainstream
• PayPal has created a business model built
around web retailers and payments
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Table of Contents
1. Introduction
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
3. Review of Payment Methods
4. Review of Participants in the Payments Ecosystem
5. Appendices
a. Participant Profiles
b. Review of Payment-Related Activities
c. Glossary of Terms
d. Further Reading
- 17 -
Prepared by Deloitte
2. Payments Overview: B. The Canadian Payments Ecosystem
The Canadian Payments Ecosystem is a dynamic network of interconnected
participants working together to enable a variety of payment types
Key Players in the Canadian Payments Ecosystem
Payment
Originators
Payment
Recipients
Payment Connectors
Cash
Sender
of Funds
(Consumer)
(Business)
(Government)
Debit Cards
(POS & ABM)
Debit Networks
Payment
Originator’s
Financial
Institution
Credit Cards,
Open-Loop Prepaid
Credit Card
Network
(Issuer)
AFT Credits and
Debits, EDI
CPA Services
Network
Includes
third party
white label
e.g. retailers
Cheques and other
paper remittances
Payment Service
Provider
LVTS
Wires
SWIFT/LVTS
Merchant
Acquirer
White
Label ABM
Operators
Payment
Recipient's
Financial
Institution
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
Canadian Payments Association
Cash in
Circulation
Transaction/
Processing
Support
Cash in
Circulation
Bank of Canada
Transaction/
Processing
Support
Payment Enablers (Simplified)
ABM Service Providers
Money Transfer Companies
Mobile Network Operators
Currency Exchange and Trading Companies
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Service Providers to Industry Participants
eWallet Providers
Payment
Enabler
Business
Relationship
Payment Regulators (Simplified)
Provincial Regulators
Federal Regulators
Department
of Finance
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
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Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IIROC
Prepared by Deloitte
2. Payments Overview: B. The Canadian Payments Ecosystem
Participants in a payments transaction vary according to type, but typically include
senders, recipients, issuing and receiving financial institutions, acquirers and a network
Steps in a typical payments transaction (Debit POS)
Payment
Originators
Payment
Recipients
Payment Connectors
Cash
5
1
Debit Cards
(POS & ABM)
8
6
Sender
of Funds
Payment
Originator’s
Financial
Institution
(Consumer)
(Business)
(Government)
(Issuer)
Debit Networks
Credit Cards,
Open-Loop Prepaid
Credit Card
Network
AFT Credits and
Debits, EDI
CPA Services
Network
Cheques and other
paper remittances
Payment Service
Provider
LVTS
Wires
SWIFT/LVTS
8
Transaction/
Processing
Support
4
Cash in
Circulation
3
Merchant
Acquirer
8
Payment
Recipient's
Financial
Institution
2
White Label
ABM
Operators
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
Canadian Payments Association
Bank of Canada
Cash in
Circulation
Transaction/
Processing
Support
Payment Enablers (Simplified)
7
Service Providers to Industry Participants
1
2
3
4
5
6
7
8
Consumer purchases goods/services
Merchant accepts payment method
Merchant/Acquirer terminals send payment details to Acquirer
Acquirer routes transaction over the appropriate payment network
Issuer validates transaction and confirms payment
Funds are debited from consumer’s account
Processor may assist in enabling transaction
Funds are transferred to merchant via clearing & settlement process
Note:
This is a simplified representation of one type of transaction (POS debit). Specific participation varies according to the type of payment, e.g., cheques do not
require a payments network and cash does not require an issuer or acquirer. Type-specific payment interaction models are provided in the following section.
- 19 -
Prepared by Deloitte
2. Payments Overview: B. The Canadian Payments Ecosystem
Collectively, the Canadian payments system processes an annual volume of almost
24 billion domestic transactions and transfers more than $44 trillion in funds
Transaction Volumes and Value Transferred for Key Payment Types (2009)
Payment
Originators
Payment
Recipients
Payment Connectors
Cash: 8.1B Tx, $131B
Sender
of Funds
(Consumer)
(Business)
(Government)
Payment
Originator’s
Financial
Institution
(Issuer)
POS: 3.3B Tx, $165B
ABM: 7.4B Tx, $111B
Debit Networks
Credit Cards:
2.4B Tx, $267B
Credit Card
Network
AFT Credits/Debits
1.6B, $1,900B
CPA Services
Network
Cheques & Paper
0.96B Tx, $2,800B
Payment Service
Provider
LVTS Wires:
5.6M Tx, $38,700B
SWIFT/LVTS
Merchant
Acquirer
White Label
ABM
Operators
Payment
Recipient's
Financial
Institution
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
Canadian Payments Association
Transaction/
Processing
Support
$55B Cash
in Circulation
Bank of Canada
Cash in
Circulation
Transaction/
Processing
Support
Payment Enablers
Not included: Closed-loop cards, international remittances, eWallets, electronic person-to-person transfers

Observations
The total volume of payments is almost 30 times Canada’s GDP of $1.6 trillion. This is due largely to the $39 trillion processed over LVTS, much
of which is for non-economic activity such as settling securities trades. However, LVTS also processes the smallest number of transactions

Cheque payments represent the second-highest value due to their continued use in business-to-business transactions

Cash volumes and values are extremely challenging to quantify due to the absence of an electronic audit trail. This estimate is based on cash
withdrawals and estimated spending patterns
Sources: Canadian Payment Association; Bank of Canada; Bank for International Settlements; Canadian Bankers’ Association
- 20 -
Prepared by Deloitte
2. Payments Overview: B. The Canadian Payments Ecosystem
Debit, cash and credit cards dominate the landscape by transaction count, while the
vast majority of value is transferred via LVTS
Transaction Volumes and Value Transferred for Key Payment Types (2009)
Number of Transactions by Payment Type
Average Value per Transaction
Right axis
6,964,296
Average Value Per
Transaction
Transaction Volume (M)
Left axis
Transaction Volumes and Value by User Type – Personal/Small Business vs. Commercial/Other (2009)
$2,500
$2,000
364
$1,500
950
$1,000
$500
131
111
1,988
267
165
$0
Cash
Deb.
ABM
Deb.
POS
Credit
AFT
Cheque
Value of Transactions by Corporate and Other Users
Transaction Values ($B)
Transaction Value ($B)
Value of Transactions by Consumers and Small Businesses
$50,000
$40,000
$30,000
$20,000
$10,000
950
38,700
42,086
LVTS
Total
2,436
$0
Total
AFT
Cheque
Methodology:
 Consumer and small business transactions and volumes include all payments using cash, debit cards, credit cards and 50% of AFT
 Consumers were also responsible for approximately 13% of the value of cheque payments, while the remaining may be attributed to business and government transactions
 LVTS transactions were originated by financial institutions on their own behalf or for commercial entities or governments
Sources: Canadian Payment Association; Bank of Canada; Bank for International Settlements; Canadian Bankers’ Association
- 21 -
Prepared by Deloitte
2. Payments Overview: B. The Canadian Payments Ecosystem
As the Canadian payments market matures, paper-based transactions are
increasingly giving way to electronic forms of payment
1
Cheques
$3,000
$2,000
AFT
$0
10,000
Cash
8,000
6,000
4,000
2,000
0
2004 2005 2006 2007 2008 2009
Cheques
Debit ABM
Credit Card
Transaction Volume (M)
$4,000
$1,000
Payments Transaction Volumes (2004-2009)
Transaction Volume (M)
Transaction Values ($B)
Payments Transaction Values (2004-2009)
2004 2005 2006 2007 2008 2009
AFT
Debit POS
Cash
LVTS Transaction Values and Volumes
(2004-2009)
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
$50,000
$40,000
$30,000
$20,000
$10,000
$0
Transaction Values ($B)
Preliminary Payments Value and Volume Trends (2004-2009)
2004 2005 2006 2007 2008 2009
Volume
Value
6-Year CAGR
Value
Volume
Cash
0.84%
0.84%
Credit Card
10.36%
8.20%
Debit POS
4.01%
4.19%
Debit ABM
-0.60%
-33.69%
AFT
9.17%
5.32%
Cheques
-0.58%
-3.70%
6-Year CAGR
Value
2.68%
Volume
4.32%
Observations
 As electronic payment alternatives continue to grow in popularity, cheque usage is expected to continue its declining trend in both value and
volume. Over the past 5 years the value of cheques remained the highest in transactions value compared to other payment types but the number
of cheques written continued to decline
 Credit cards continue to be the fastest-growing payment method (both in terms of the number of transactions and volume), fueled by widespread
acceptance, credit availability, high brand awareness and rewards programs
 Growth in debit card transactions might accelerate with the introduction of contactless and branded debit
 While the value of credit and debit transactions remains relatively low, the number of transactions carried out using these payment methods
continues to increase
Source: CPA, Bank for International Settlements Report prepared by Committee on Payment and Settlement Systems of the Group of Ten Countries, 2009. All figures are estimates
and include on-us transactions.
- 22 -
Prepared by Deloitte
Table of Contents
1. Introduction
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
3. Review of Payment Methods
4. Review of Participants in the Payments Ecosystem
5. Appendices
a. Participant Profiles
b. Review of Payment-Related Activities
c. Glossary of Terms
d. Further Reading
- 23 -
Prepared by Deloitte
2. Payments Overview: C. The Canadian Payments System Regulatory Framework
The regulatory responsibility for payments in Canada is shared by many actors
 Policymaking and oversight responsibility for payments regulation in Canada is primarily shared by the Bank of Canada and the
Ministry of Finance, with the Financial Consumer Agency of Canada (FCAC) being the enforcer of consumer protection provisions in
multiple acts and the Canadian Payments Association developing and enforcing rules that shape important interbank systems
− Bank of Canada has responsibility for oversight of designated payment and other clearing and settlement systems for the
purposes of controlling systemic risk. Systemic risk refers to the domino or spillover effect where the inability of one financial
institution to fulfill its payments obligations results in the inability of other financial institutions to fulfill theirs; or the failure of a
clearing house
− Through the Canadian Payments Act, the Ministry of Finance has directive and oversight powers over the Canadian Payments
Association as well as payment, clearing and settlement systems that it designates for oversight
 The payments system is governed or influenced by a number of statutory and voluntary obligations including the Canadian Payments
Act, the Payment Clearing and Settlement Act, the Bank of Canada Act, the Bills of Exchange Act, Federal and Provincial financial
institutions statutes, federal insolvency laws, federal consumer protection laws, voluntary codes (e.g., The Code of Practice for
Consumer Debit Card Services etc.) as well as by-laws and procedural rules
 There are also a number of participants (e.g., Interac, Visa, MasterCard and SWIFT) whose contracts of membership establish the
foundation for many important types of payments, and whose rules set the terms for use of their payment systems
 Payment card networks such as debit card service providers, credit card service providers and electronic money providers are
becoming increasingly important participants in the payments industry
− Many of the alternative participants are emerging and/or gaining market share. Emerging participants are not all federally
regulated entities and, therefore, are not overseen by OSFI
- 24 -
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2. Payments Overview: C. The Canadian Payments System Regulatory Framework
The payments industry operates under a complex regulatory regime, with an ultimate
goal of promoting systemic efficiency, safety and soundness
Types of
Regulation:
Description
Sample
Legislation
Sample
Policymakers
/Regulators
Sample SelfRegulation
Payments Rules &
Standards
Prudential Oversight
Consumer Protection
Safety and Security
• Rules that govern the
operation of the payments
system and the interaction
of participants
• Controls to monitor the
actions of participants to
ensure the soundness of
the system
• Controls to ensure that
consumer rights and
privacy are respected
• Protection against issues
such as fraud, antiterrorism and anti-money
laundering
• Canadian Payments Act
• Bank Act
• Payments Clearing &
Settlement Act
• Provincial credit union acts
• Bills of Exchange Act
• Bank Act
• Provincial financial
institution acts (e.g.
insurance companies and
credit unions)
• Consumer protection
provisions in various
financial institutions acts
(e.g. Bank Act)
• PIPEDA
• Foreign Corrupt Practices
Act
• Competition Act
• Money Laundering and
Terrorist Financing Act
• United Nations Act
• Special Economic
Measures Act
• Provincial Electronic
Transactions Act
• Electronic Commerce Act
• Criminal Code of Canada
• Minister of Finance
• CPA
• Bank of Canada
• OSFI (oversight of
individual bank health)
• Competition Bureau
• Provincial entities
• FCAC
• Federal/provincial privacy
commissioners
• Competition Bureau
• FINTRAC
• Minister of Finance
• Law enforcement
• Visa, MC, Interac, SWIFT
• Canadian Bankers
Association
• Canadian Payday Loans
Association
• Privacy statements
• Code of Conduct for the
Debit and Credit Industry
• Principles of Consumer
Protection for Electronic
Commerce: A Canadian
Framework
• The Code of Practice for
Consumer Debit Card
Services
Other
Controls
- 25 -
Prepared by Deloitte
2. Payments Overview: C. The Canadian Payments System Regulatory Framework
The regulatory framework governing payment, clearing and settlement systems in
Canada includes acts, statutes and codes of conduct
Sample Regulatory Authority
Description
The Canadian Payments Act
Establishes the role of the Canadian Payments Association and the Minister of Finance in the Canadian
Payments system. It gives the CPA Board the power to make by-laws (which require approval of the
Governor in Council) and rules that set out the procedures and standards governing the daily operations
of participants in its national clearing and settlement systems
The Payment Clearing and
Settlement Act (PCSA)
Gives the Bank of Canada responsibility for the oversight of payment and other clearing and settlement
systems in Canada for the purposes of controlling systemic risk. The Bank designates those systems with
the potential to create systemic risk as being subject to the PCSA and oversees designated systems on a
continuing basis for the appropriate control of systemic risk
Bills of Exchange Act
Sets out the statutory framework governing cheques, promissory notes and other bills of exchange
Federal and Provincial financial
institutions statutes
The federal financial institutions statutes (Bank Act, Trust and Loan Companies Act, Cooperative
Associations act, Insurance Companies Act etc.), coupled with legislation governing provincially
incorporated financial institutions, provide the statutory underpinnings of the Canadian system. These
statutes regulate such things as corporate ownership and business powers and define many aspects of
the relationships between financial institutions and their customers, the government and some
government agencies. OSFI (Office of the Superintendent of Financial Institutions) is responsible for
regulating and supervising federally chartered financial institutions, which includes many of the
intermediaries which provide payment services
Code of Conduct for Credit and
Debit Card Industry (the Code)
A new Code of Conduct was released in May 2010, which aims at:
Ensuring that merchants are fully aware of the costs associated with accepting credit and debit card
payments thereby allowing merchants to reasonably forecast their monthly costs related to accepting such
payments
Providing merchants with increased pricing flexibility to encourage consumers to choose the lowest-cost
payment option
Allowing merchants to freely choose which payment options they will accept
The Code of Conduct includes initiatives such as payment card networks will function with increased
transparency and disclosure, including providing a minimum notice of any fee increases or introduction of
new fees. Networks will also not require merchants to accept both credit and debit payments from their
payment card network, anymore. Further, the payment networks available on payment cards will be
clearly indicated, and issuers will no longer be obligated to give preferential branding to their brand over
others. There are a total of 10 policy elements in the new Code
- 26 -
Prepared by Deloitte
2. Payments Overview: C. The Canadian Payments System Regulatory Framework
Financial institutions are regulated primarily by OSFI and Canadian Payments
Association Standards, but must comply with provincial statutes as well
Key Industry Participants
Description and Sample Regulatory Requirements
Description:
Under the Canada Bank Act, Schedule I are banks that are not a subsidiary of a foreign bank, i.e.
domestic banks, even if they have foreign shareholders. There are over 20 domestic banks in Canada
Schedule II banks are Canadian banks which are subsidiaries of foreign banks .There are over 20
schedule II banks in Canada, although some are under liquidation
Schedule III banks are foreign banks with branches in Canada, which may offer full line of banking
services or engage in lending activities only
Issuers (Financial Institutions)
E.g. Domestic - RBC, TD, CIBC,
Scotiabank, and Foreign - Amex
Bank of Canada, Citibank Canada,
ING Bank of Canada
Sample Regulatory Requirements:
 Subject to oversight by OSFI and must comply with relevant financial services legislation including the
Bank Act and supporting guidelines as well as the Proceeds of Crime, Money Laundering and Terrorist
Financing Act and Basel II
Canadian Payments Association Standards
Consumer Protection (including Compliant handling), Foreign Corrupt Practices Act, Competition Act etc.
Due to the legal structure (public company), would also need to comply with various public company
requirements including Sarbanes Oxley
Provincial Electronic Transactions Act, Electronic Commerce Act
Personal Information Protection and Electronic Documents Act (PIPEDA) and other provincial privacy
legislation
Voluntary codes of conduct including:
− Guidelines for Transfers of Registered Plans
− Small Business Banking Code of Conduct
− Principles of Consumer Protection for Electronic Commerce: A Canadian Framework
− CBA Code of Conduct for Authorized Insurance Activities
− Code of Conduct for Credit and Debit Card Industry
- 27 -
Prepared by Deloitte
2. Payments Overview: C. The Canadian Payments System Regulatory Framework
Financial institutions are regulated primarily by the Canadian Payments Association
Standards*, but must comply with provincial statutes as well
Key Industry Participants
Description and Sample Regulatory Requirements
Description:
Acquirers may be domestically owned or subsidiaries of a foreign parent, privately-held or publicly
traded, independent or owned by a parent financial institution
In addition to the common regulatory elements, each acquirer is additionally regulated in accordance
with their ownership structure (e.g, disclosure rules for publicly traded corporations)
Acquirers
E.g. Moneris, Chase Paymentech,
Global Payments, TD Merchant
Services
Sample Regulatory Requirements:
Must comply with Proceeds of Crime, Money Laundering and Terrorist Financing Act and Basel II for
certain transactions
Canadian Payments Association Standards
Consumer Protection (including Compliant handling), Foreign Corrupt Practices Act, Competition Act etc.
Provincial Electronic Transactions Act, Electronic Commerce Act
Personal Information Protection and Electronic Documents Act (PIPEDA) and other provincial privacy
legislation
Voluntary codes of conduct including:
− Small Business Banking Code of Conduct
− Principles of Consumer Protection for Electronic Commerce: A Canadian Framework
− CBA Code of Conduct for Authorized Insurance Activities
− Code of Conduct for Credit and Debit Card Industry
Description:
The CPA operates in a highly-controlled and managed structure
Limited to performing tasks within its government-provided mandate
Clearers and Settlers
E.g. Canadian Payments
Association
Sample Regulatory Requirements:
Governed by the Canadian Payments Act with oversight from the Minister of Finance
Relevant privacy and other legislation
* For prudential purposes, Financial institutions are also regulated by OSFI
- 28 -
Prepared by Deloitte
2. Payments Overview: C. The Canadian Payments System Regulatory Framework
While payment service providers are subject to indirect oversight by OSFI (incl. Bank
Act), payment networks are subject to limited regulation at the federal & provincial levels
Key Industry Participants
Payment Service Providers (PSPs)
E.g. Symcor and Intria are
controlled by federally-regulated
financial institutions, and are
therefore subject to oversight by
OSFI
Payment Networks (not-for-profit)
E.g. Interac Association
Description and Sample Regulatory Requirements
Description:
As outsourcing partners of financial services (banking, wealth management, brokerage, insurance),
retail, utility and/or telecommunications organizations, PSPs are financial processing companies providing
infrastructure services for transactions involving currency (ABM and commercial deposits, treasury
management), cheques, remittance (retail and wholesale lockboxes), information management and
delivery (statement production services) and/or credit cards
Sample Regulatory Requirements:
As a result of ownership structure, payment service providers controlled by federally-regulated financial
institutions are subject to oversight by OSFI including Bank Act and supporting guidelines as well as the
Proceeds of Crime, Money Laundering and Terrorist Financing Act and Basel II
PIPEDA and various provincial privacy legislation
Provincial Consumer Protection, Competition Act etc.
Due to the legal structure, would also need to comply with various public company requirements
including Sarbanes Oxley
Description:
The Interac Association is currently a not-for-profit organization, governed by a 14-Member Board of
Directors, appointed annually based on the business sector and the volume of transactions processed.
Composed of a diverse group of members, including banks, trust companies, credit unions, caisses
populaires, merchants, and technology and payment related companies. The Board operates under a
Consent Agreement, designed to enhance competition, as well as outline requirements for the
organization's governance, access to the network and revenue model
Sample Regulatory Requirements:
Canadian Code of Practice for Consumer Debit Card Services (CBA voluntary code)
Global Payment Card Industry / Data Security Standards (Industry Standard)
Personal Information Protection and Electronic Documents Act (PIPEDA) and other provincial privacy
legislation
Consumer Protection and Competition Acts
Provincial Electronic Transactions Act, Electronic Commerce Act
- 29 -
Prepared by Deloitte
2. Payments Overview: C. The Canadian Payments System Regulatory Framework
Payment networks are subject to limited regulation at the federal and provincial levels
Key Industry Participants
Description and Sample Regulatory Requirements
Description:
 Visa operates the world's largest retail electronic payments network and facilitates global
commerce through the transfer of value and information among financial institutions, merchants,
consumers, businesses and government entities
 MasterCard Worldwide has a role as a franchisor, processor and advisor in developing and
marketing secure, convenient and rewarding payment solutions, processing more than 16 billion
payments each year, and providing analysis and consulting services that drive business growth
for its banking customers and merchants
Payment Networks
Sample Regulatory Requirements:
 Personal Information Protection and Electronic Documents Act (PIPEDA) and provincial privacy
legislation
 Consumer Protection, Foreign Corrupt Practices Act, and Competition Acts etc.
 Provincial Electronic Transactions Act, Electronic Commerce Act
E.g. Visa and Mastercard
Additional Notes:
 Both Visa and MasterCard became public companies with the past few years (historically
operated as bank run associations) providing them with more strategic flexibility. In Canada, the
federal government has introduced new regulations governing credit cards. While the full
implications of these proposed changes are still unclear, they are expected to have a significant
impact on financial institutions that issue credit cards
 Globally, central banks and competition authorities in a number of jurisdictions have taken an
interest in regulating bankcard payment networks including imposing restrictions on interchange
rates. In Australia, regulation of interchange rates by the Reserve Bank of Australia, resulted in
unintended consequences including higher costs for consumers
- 30 -
Prepared by Deloitte
2. Payments Overview: C. The Canadian Payments System Regulatory Framework
Cheque-cashing providers, money service companies and loyalty & rewards program
providers are not considered financial institutions and are not regulated as such
Key Industry Participants
Description and Sample Regulatory Requirements
Description:
In Canada, most most cheque-cashing providers are independent, privately-owned companies
Cheque-cashing Providers
E.g. Money Mart
Money Service Companies
E.g. Western Union
Sample Regulatory Requirements:
Provincial acts related to usury and other lending terms
Privacy regulations
Description:
In Canada, most money service companies are privately-held companies or subsidiaries of domestic or
foreign parents
Money service companies are generally not financial institutions and are not regulated as such
Sample Regulatory Requirements:
Money Laundering and Terrorist Financing Act
Provincial Electronic Transactions Act
Electronic Commerce Act
Description:
Private/public companies that operate loyalty programs, or retailers who have a loyalty offering as part of
their business
Generally not financial institutions, and are not regulated as such
Loyalty & Rewards Programs
E.g. Aeroplan, Air Miles
Sample Regulatory Requirements:
Redemption of loyalty points for goods & services is not covered under the bank act, nor any of the
payments-specific legislation
Consumer protection laws
Federal/provincial privacy laws
- 31 -
Prepared by Deloitte
Table of Contents
1. Introduction
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
3. Review of Payment Methods
4. Review of Participants in the Payments Ecosystem
5. Appendices
a. Participant Profiles
b. Review of Payment-Related Activities
c. Glossary of Terms
d. Further Reading
- 32 -
Prepared by Deloitte
3. Review of Payment Methods
This section provides an overview of key payment types used in the Canadian
economy
 The Canadian payments landscape features a multitude of payments options, from cash to cheques to contactless mobile payments. In this
section, a number of established and emerging payment types are profiled, including:
− Cash
− Cheques
− Debit Cards (Point-of-Sale)
− Debit Cards (Cash Dispensing)
− Credit Cards
− AFT Debits
− AFT Credits
− EDI/Electronic Remittances
− Proprietary/Closed Loop Prepaid Cards
− Large Value Transfer System (LVTS)
− SWIFT Transfers
− International Remittances
− Rewards & Loyalty1
− eWallets
− Person-to-Person Electronic Transfers
− Mobile Network Payments1

1A
Estimating the market size and outlining historical trends for each payment type is challenging due to a number of factors such as:
–
Differences in methodologies employed by agencies that track the value and volume of payment transactions in Canada. For example, the
Bank of International Settlements (BIS) excludes LVTS transactions while the Canadian Payments Association (CPA) includes these in their
market totals. Unless specified otherwise, the data shown in this section is based on publically available CPA estimates
–
Cash usage in payments is unknown and is not easily determined due to anonymity of cash transactions. A model based on the estimated
number of cash transactions and the value of cash retail payment was adopted to estimate the size of the cash payments market
more detailed review of these payment related activities plus payday loans are provided in Appendix b.
- 33 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Cash
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
.
P2P Trans
Remittance
Rewards
eWallet
Description
 Cash is the ultimate open payment technology, in that it is legal tender and is freely and anonymously (within certain limits) used for payments for goods and
services and transfer of value between individuals
 The volume of cash in circulation is managed by the Bank of Canada through the Bank Note Distribution System
 While cash continues to be an important part of the payments landscape, it is increasingly being displaced by electronic forms of payment. The rate of further
cash displacement will depend on technological innovation and willingness of the participants in the Payments System to adopt emerging payment forms.
However, cash will certainly continue to play an important role in payments due to low perceived transaction costs, universal acceptance, instantaneous
processing time and associated privacy attributes
Characteristics
Cash Volumes
 Cost: Consumers do not encounter transaction costs with cash payments,
and in some cases are even incented to pay by cash. However, for
merchants and issuers there are real storage costs, transactional costs (e.g.,
cash management), opportunity costs (e.g., forgone interest) and security
risks for holding cash (e.g., shrinkage, theft and counterfeit currency). The
government incurs significant expenses during the printing/minting of legal
tender
 Acceptance: Cash has almost universal acceptance
 Time: Transfer of value occurs immediately upon payment of cash
 Security: There is limited traceability of a cash payment without a secondary
tracking mechanism (i.e. receipt). Cash exposes the merchant to the risk of
theft (internal or external) and counterfeiting, as well as to the risk of human
error during the exchange. Personal safety can be compromised by carrying
large amounts of cash. Government revenue is lost when cash-based
transactions are used as part of the underground economy
Cash Trends
 Cash transactions as a portion of the total payments in the economy are
believed to be in decline
 Emerging substitutes over the last decade have been debit and credit cards,
and electronic funds transfer
Challenges of Estimating Cash Transaction Volumes:
 The volume and aggregate value of cash transactions is impossible to
calculate with certainty
 Unlike electronic or paper-based transactions, there is no reliable audit trail
of cash transactions
 The Bank of Canada maintains approximately $55B of currency in the
Canadian market. However, this does not indicate the “velocity” of the
currency, which is the aggregate value of cash which changes hands
Methodologies for Estimating Cash Transactions
 One unpublished report used ABM and teller withdrawals combined with
Examples of Usage
Form Factors
• Government-to-Citizen • Citizen-to-Government
• Paper currency
• Government-to-
• Coins
Business
• Business-to-Business
• Business-to-Employee
• Consumer-to-Business • Business-to-Consumer
• Person-to-Person
• Business-to-Consumer
average purchase assumptions to estimate that the Canadian market
currently transfers $131B in value using 8.1B transactions annually
• Foreign currencies
used in place of
Canadiandenominated cash
Sources: Bank of Canada; Bank for International Settlements Report prepared by Committee on Payment and Settlement Systems of the Group of Ten Countries, 2009; Trends in
Retail Payments and Insights from Public Survey Results, 2006; Bank for International Settlements Remarks by Pierre Duguay, Deputy Governor of the Bank of Canada, to the
Senate Committee on National Finance, Ottawa, Ontario, 2010
Prepared by Deloitte
- 34 -
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Cash
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
.
P2P Trans
Remittance
Rewards
eWallet
Simplified Payment Interaction Model
Illustrative
Payer
Payee
Funds
Key Players
• Bank of Canada controls the Canadian Money Supply
• Financial Institutions hold and dispense cash to their customers
Sample Revenue and Cost Items of Participants
Participants
Revenues
Costs
Payer
 No fees are associated with cash payments, although there are very real costs associated with the safekeeping and processing of cash by both
Payee
merchants and financial institutions
Sources: Deloitte Research and Analysis
- 35 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Cheque and Other Paper Remittances
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Description
 A cheque is a paper instrument instructing a financial institution to pay a specific amount of a specific currency to a specific Recipient. Cheques are still
frequently used in business-to-business transactions and certain person-to-person transactions, but have limited acceptance at point of sale
 Cheques continue to exist in paper form, although processing is conducted in the electronic state, with cheque images and electronic recognition
 In addition to cheques, paper remittances include paper bill payments MICR-encoded with a Corporate Creditor Identification Number (CCIN), for credit to a
corporate entity
 Many comparable countries (e.g., Norway, UK, Australia) have initiatives in place to eliminate cheques in the short to medium term, while some have already
eliminated cheques (e.g., Netherlands, Sweden)
 Cheques are payment mechanisms that are used to withdraw funds from chequing and savings accounts
Characteristics
Historical Trends
 Cost: There may be nominal costs associated with cheques for the
Cheque Transactions and Purchase Value (1998-2009)
accountholder in addition to their monthly chequing account fees, including
charges for account debits, cheque ordering, imaging costs, etc. Paperbased payment methods are costly to process for businesses and financial
institutions involved due to the handling and imaging required
 Acceptance: Cheques are still frequently used in business-to-business, and
some person-to-person transactions, but have limited consumer-to-business
acceptance at the point of sale. This may be attributed to increased
penetration of debit cards, which allow similar access to personal funds with
lower processing time
Volume CAGR: -2.17%
Value CAGR: -13.91%
 Time: Cheques can take 1-3 days to clear; the recipient’s financial institution
may hold the funds beyond this period before granting clear access to funds
 Security: Cheques include personal information, such as name and account
number, and are therefore easy to forge, making them a target for fraud. The
risk of non-payment due to bounced cheques is also high
Examples of Usage
Form Factors
 Cheques suffered a drop in usage in 1999 with the introduction of LVTS
• Government-to-Citizen • Business-to-Business
• Paper
• Government-to-
• Electronic, once the
Business
• Person-to-Person
• Business-to-Employee
• Business-to-
Government
paper cheque has
been imaged
 The number of transactions and total value continue to decline. Average
cheque values have remained relatively constant
 A part of this downward trend may be explained by the disappearance of
small value cheque transactions by retail users, including purchases and bill
payments, as these transactions are moving to other payment types, like
credit and debit cards, and electronic funds transfers
• Citizen-to-Government • Consumer-to-Business
Sources: Bank for International Settlements Report prepared by Committee on Payment and Settlement Systems of the Group of Ten Countries, 2009; Royal Bank of Canada;
Citizens Bank; National City Seminars; Canadian Payments Association http://www.cdnpay.ca/
- 36 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Cheque and Other Paper Remittances
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Simplified Payment Interaction Model
Illustrative
Cheque Issued
Sender of
Funds (Start)
Recipient of
Funds
CPA
3
6
Monthly
Statement
7
5
Clearing and Settlement
Debit
Posted to
Account
3
4
Issuing bank
receives imaged
cheque
Payments
Service
Provider
(PSP)
Credit
Posted to
Account
Recipient’s bank
receives cheque;
sends to PSP
Issuer
(Sender’s FI)
2
Deposit
Cheque
1
Acquirer
(Recipient’s
FI)
Funds
Data
Key Transaction Participants
Issuers: Financial institutions that issue cheques to their customers and where cheques are deposited
Acquirers: Financial institutions that represent the Recipient of funds
Merchants (limited): Accept cheques in exchange for goods and services
Businesses/Government: May Issue cheques to employees and suppliers
Processors/Payment Service Providers: Provide cheque processing services to financial institutions, including converting paper cheques into electronic
documents e.g., Symcor and Intria
CPA: A not-for-profit organization engaged in clearing and settlement of cheques and other payment types
Sources: Deloitte Research and Analysis
- 37 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Cheque and Other Paper Remittances
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Sample Revenue and Cost Items of Participants
Participants
Sender of Funds
(Account holder)
Revenues
 N/A
Costs
 Usage Fee: May range from a portion of a monthly plan to per-debit transaction fees
(typically $0-$1.25 per cheque)
 Insufficient Funds Fees: Charged to Sender if funds are insufficient
 Monthly fees typically range from $0 to $14
 Miscellaneous Fees: Includes cheque book ordering and electronic cheque viewing
 For businesses, internal handling costs for approvals and accounts payable
Issuer (Sender's FI)
 Monthly plan and transaction fees
 Insufficient funds fees: Charged to Sender if
funds are insufficient
 Miscellaneous Fees: including cheque book
ordering and electronic cheque viewing
Cheque Clearing
Company/Processor
 Cheque processing revenues
CPA Services Network
(CSN)
 Association fees from member financial
Acquirer (Recipient's FI)
 Cheque processing fees, in some cases like
 Technology and imaging (may be shared between the Acquirer and Issuer FIs)
 Cheque processing (clearing and settlement) expenses
institutions
commercial accounts, may be charged to the
Recipient
 Insufficient funds fees: Charged to Recipient if
funds in Sender's account are insufficient
Recipient of Funds
Transactional Costs:
 Cheque Processing Fees paid to Cheque Clearing Company
 Cheque Printing and Postage
 Insufficient funds related expenses
Operational Costs
 Personnel and Operational cost, Customer Service
 Fraud Losses, Risk, Fraud Management and Dispute Resolution
 Corporate Support Functions, Technology
 N/A
 Personnel and Operational cost
 Network, EDP and Telecom
Transactional
 Cheque Processing Fees paid to Cheque Clearing Company
 Technology and imaging (may be shared with Cheque Clearing Company)
 Insufficient funds related expenses
Operational
 Personnel and Operational cost, Customer Service
 Fraud Losses, Risk, Fraud Management and Dispute Resolution
 Corporate Support Functions, Technology
 Insufficient funds fees: Charged to Recipient if funds in Sender's account are insufficient
 Cheque processing fees, in some cases like commercial accounts, may be charged to
the Recipient (typically $0-$3 per cheque)
 Manual processing costs in handling and accounts receivable
 Opportunity cost if funds held by financial institution
Sources: Deloitte Research and Analysis
- 38 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Debit Card (Point-of-Sale)
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Description
 Card issued by a financial institution that provides instant access to funds online or at a merchant’s checkout for purchase of goods & services. Funds are
instantaneously withdrawn from the user's account
 Most transactions are processed through Interac Direct Payment (IDP). MasterCard and Visa are in the process of entering the market to compete with Interac.
Interac and MasterCard currently offer fixed transaction fees, while Visa has proposed a fixed plus percentage-based model
 The federal government introduced the voluntary Code of Conduct, which increases transparency for merchants and enables consumer and merchant choice
Characteristics
Historical Trends
 Cost: Consumers or accountholders may incur charges if they exceed the
number of debits permitted on their accounts under their monthly plan.
Interac currently operates on a cost recovery model, where acquirers charge
a merchant discount rate to merchants on debit cards equal to the acquirer
fee plus Interac cost recovery fee. For merchants, processing an Interac card
payment is still lower cost than processing a credit card payment
 Acceptance: Interac enjoys widespread acceptance among merchants and
consumers, although online acceptance of Interac Online is still low.
Acceptance of Visa and MasterCard debit is still being established, as is
acceptance of contactless debit
 Time: Debit transactions occur in real-time where the purchaser’s account is
debited immediately, but the merchant account is settled end of day. The
issuing and acquiring financial institutions settle net positions through the
CPA
 Security: Debit cards are a reasonably secure payment type, although
increased fraud has been observed over the past five years, more than
doubling in value between 2005 and 2009. This was in part due to magnetic
stripe skimming, which may decrease in the future with the introduction of
Chip and PIN technology
Examples of Usage
• Consumer-to-
Business
• Business-toConsumer
• Citizen-toGovernment
• Government-to-
Citizen
• Business-toBusiness
• Business-toGovernment
• Government-toBusiness
Debit Card Transactions and Purchase Value (1998-2009)
Volume CAGR: 7.95%
Value CAGR: 8.39%
Form Factors
 The average value of individual debit transactions has remained relatively
• Card (Magnetic/Chip)
• Internet (Online)
stable over the last decade, while the number of transactions has increased
dramatically
 As debit cards become more widely used, debit as percent of total payments
continues to grow on a merchant-by-merchant basis
• Telephone Banking
 The introduction of Visa and MasterCard debit may spur additional debit
• Contactless (Card/Mobile-
emerging)
• Mobile Network (Emerging)
volumes
Sources: “Payments Systems: The Debit Card Market in Canada” Library of Parliament ; “CPA Canadian Payments Market Forecasting” Canadian Payments Association;
http://www.cdnpay.ca/ , The Nilson Report, 2010
- 39 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Debit Card (Point-of-Sale)
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Simplified Payment Interaction Model
Immediate
Debit to
Account
Illustrative
Merchant/
Recipient of
Funds
Customer \
Sender of
Funds
Transaction
Customer’s
Account
4
Issuing FI
(Start)
1
8
End of Day
Settlement
9
Settlement
3
Transaction
Data
Acquiring FI
5
Transaction
Data
CPA
7
Merchant
Acquirer
2
Payment
Network
Transaction Data
6
Funds
Data
Key Transaction Participants
 Issuers: Any organization that issues debit cards to users, e.g., banks, credit unions
 Acquirers: Members of a payment network that maintain merchant relationships and receive all bankcard transactions from the merchant, e.g., Moneris,
PaymentTech
 Merchants: Any merchant who accepts debit cards from one of the debit card payments networks, e.g., Home Depot, Zellers
 Payment Networks: Provide validation of transactions and system for the transfer of money from the customer or initiator of the POS transaction, e.g. Interac
 CPA: A not-for-profit organization engaged in clearing and settlement of POS transactions executed using debit cards
Sources: Deloitte Research and Analysis
- 40 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Debit Card (Point-of-Sale)
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Sample Revenue and Cost Items of Participants (1 of 2)
Participants
Sender of Funds
(Cardholder)
Revenues
 Loyalty rewards
Costs
 Usage Fee: May range from a portion of a monthly plan to per-use debit transaction
fees (typically $0.50-$1.25 per transaction)
 Merchant can levy a surcharge on Interac transactions (typically $0.05-$0.50)
Issuer (Cardholder's FI)
 Account Service Fee Revenue
 Usage or Convenience Fee Revenue
 Foreign Exchange transaction revenues: Charged
to customers on cardholder transactions where the
debit card issuer country is different from the
country of usage
 Potential interchange revenue ($0 for Interac
transactions)
Payment Service
Provider/Processor
 Processing Fee: Varies with service provided
 Revenue from assisting (small) issuers with record
management, network connectivity and outsourced
call centres and collections, among other services
Transactional Costs
 Switch Fee
Operational Costs
 Marketing and Sales: Includes new account marketing, promotions and collateral
 Customer Service, Card Issuance, Corporate Support Functions
 Personnel and Operational cost
 Fraud Losses, Risk, Fraud Management and Dispute Resolution
 Technology, Network and Telecom
 Cost of cards
Transactional Costs
 Account fees paid by issuer: May include a minimum with the remaining varying with
volumes
Operational Costs
 Personnel and Operational cost
 Customer Service, Corporate Support Functions
 Risk, Fraud Management and Dispute Resolution
 Technology, Network and Telecom
 Marketing and Sales
Sources: Deloitte Research and Analysis
- 41 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Debit Card (Point-of-Sale)
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Sample Revenue and Cost Items of Participants (2 of 2)
Participants
Payment Network
Merchant Acquirer
Recipient of Funds
(Merchant)
Revenues
Costs
 Data processing revenues: Represent revenues earned for
 Personnel and Operational cost
authorization, clearing, settlement, transaction processing services
and other maintenance and support services that facilitate
transaction and information processing among the Company’s
customers globally
 Foreign Exchange transaction revenues: Charged to customers on
cardholder transactions where the cardholder’s issuer country is
different from the country of usage
 Risk, Fraud Management and Dispute Resolution Services fee
(Visa/MasterCard debit only)
 Technology, Network and Telecom
 Merchant Discount Fee: In return for offering them a facility to
 Personnel and Operational cost
accept debit cards, the Acquirer charges the Merchants a discount
fee
 Periodic Account Fees: Including minimum fees the merchant must
pay the acquirer
 Capital Investments: Major costs involve POS Terminals, Mainframe
 N/A
 Merchant Discount Fee
 Marketing and Sales
 Risk, Fraud Management and Dispute Resolution
Computers, Software, Personal Computers for staff, Furniture &
Fittings, Office Renovation, Network and Telecom
 Merchant Sign-up Cost: Includes printing of Merchant Agreements,
Display Decals, Standees
 Interchange Fees: Sharing of Merchant Discount Revenue with the
Issuers and networks whose cardholders used cards at the
Acquirer’s Merchants (currently $0 for transactions)
 Periodic Account Fees: Including minimum fees the merchant must
pay the acquirer
 POS equipment upgrade costs
Sources: Deloitte Research and Analysis
- 42 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Debit Card (Cash Dispensing and Point-of-Sale)
Top 5 Countries in Debit Use (2007)
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Top 5 Countries in Use of ABMs for Cash Withdrawals
 The industry-wide adoption and support of Interac has resulted in Canadians ranking among the heaviest users of debit cards in the world
 The average number of debit card purchases per inhabitant in Canada was over 100 in 2007, second only to Sweden which was closer to 125
 Cash withdrawals per inhabitant were about 30 in Canada, below the UK average of 46 and at par with the Swedish numbers
Debit Card Fraud in Canada (Interac)
250,000
60,000
200,000
40,978
37,200
16,190
16,886
34,699
2002
15,950
2001
26,149
23,447
2000
31,377
10,000
16,160
20,000
2007 2008 2009
Reimbursements
16,624
2005 2006
Losses
16,546
0
2004
18,824
$0
30,000
16,806
50,000
14,748
40,000
100,000
17,174
$100
16,424
150,000
39,138
50,000
Cardholders
Reimbursed
Fraud Losses ($M)
$200
Number of ABMs in Canada by Ownership
2007
2008
0
 While debit card fraud as a percentage of value transferred is still quite low,
debit card fraud has more than doubled to $142 million from 2005 to 2009.
The number of cardholders who have suffered debit card fraud has
increased by over 230% since 2005
 Industry initiatives such as the introduction of chip & PIN and contactless
debit (no PIN to exploit) are efforts to limit losses
2003 2004 2005 2006
White Label Bank Owned
 Over two thirds of all ABMs in Canada are owned and managed by non-
bank participants. While the number of bank-owned ABMs is stable, the
number of private-label ABMs continues to grow
Sources: Canadian Payments Association; Interac website www.interac.ca; Bank of International Settlements (BIS); Canadian Bankers’ Association, Interac Association
- 43 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Debit Card (Cash Dispensing)
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Description
 Card issued by a financial institution that permits the withdrawal of cash at Automated Banking Machines (ABMs) from chequing and savings accounts. Withdrawals made at the
same bank as the card issuer are considered “on-us”, while withdrawals made at another institution’s ABM are considered “not on-us”
 ABM usage has expanded into non-payment functionality including cross sell, basic banking transactions (cheque deposits, address change), and bill payments . These
transactions are not generally considered when calculating cash dispensing volumes
Characteristics
Historical Trends (1998-2009)
 Cost: In addition to chequing and savings account fees, the consumer usually pays
Interac Shared ABM Withdrawals by Transaction/Volume
fees levied for cash withdrawals not made on home bank machines, (e.g., “not-on-us
“transactions). For ‘not on-us transactions’, issuers pay an interchange fee to
acquiring ABM providers to defray the real cost of stocking and maintaining the bank
machine
 Acceptance: Almost every debit card in Canada is set up to access cash through
ABM machines, and almost every ABM machine is set up to support cash withdrawals
through debit and credit cards . Interac, MasterCard Cirrus and Visa Plus-branded
cards enjoy wide acceptance across Canada, while Plus and Cirrus networks have
wide global acceptance. The Exchange Network and ACCULINK cater mainly to credit
unions. Many Canadian credit cards process domestic cash advances over the Interac
network, while relying on Plus and Cirrus for international withdrawals
 Time: The user’s account is debited real-time, during the transaction, and the
settlement between the acquiring and issuing institutions occurs at the end of day, in
the case of ‘not-on-us’ transactions
 Security: Debit cards are trusted because of the CHIP and PIN security required to
use the card, however, fraud still exists as the magnetic stripe can be skimmed and
the PIN may be cracked
 Figures above are for Interac shared cash dispensing only. When on-us withdrawals
are included, current volume is estimated to be 7.4B transactions worth $111B
 The number of ABMs – hence the unattended cash withdrawal locations – has
Examples of Usage
 Person-to-
Person (Self
payment)
Form Factors
 Card (Magnetic/Chip)
increased dramatically since the Competition Bureau permitted private operators to
connect third-party bank machines to the Interac network
 Volumes of ABM cash withdrawals have declined gradually over the past four years,
while the average withdrawal amount has remained high
 Note that most sources include on-us transactions (withdrawals made at your own
bank’s ABMs) as a payment type, while others only count transactions which are
processed as a “not on-us” transaction over the Interac network
Sources: “Payments Systems: The Debit Card Market in Canada” Library of Parliament ; “Canadian Payments Market Forecasting” TSI; http://www.cdnpay.ca/ ; The Nilson Report
2010
- 44 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Debit Card (Cash Dispensing)
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Simplified Payment Interaction Model (Not-on-us cash withdrawal)
Transaction Data
Illustrative
1
External
ABM
Customer’s
Account
Customer
7
(Start)
Immediate
Debit to
Account
4
7
Issuing \
Home FI
Amount Transfer
2
ABM Funds
Replenished
9
Transaction
Data
8
Acquiring
FI
5
Settlement
Transaction
Data
CPA
6
Payment
Network
3
Funds
Data
Key Transaction Participants
 Issuers: Any organization that issues debit and/or credit cards that can be used to withdraw cash from ABMs, e.g., banks, credit unions, monoline card issuers
 Acquirers: Financial institutions with ABMs made available to external customers, non-bank ABM operators, e.g., Laser Cash
 Payment Networks: Provide validation of transactions and system for the transfer of money, e.g., Interac, Plus, Cirrus
 CPA: A not-for-profit organization engaged in clearing and settlement of payments
Sources: Deloitte Research and Analysis
- 45 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Debit Card (Cash Dispensing)
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Sample Revenue and Cost Items of Participants (1 of 2)
Participants
Sender/Recipient of
Funds (Cardholder)
Revenues
Costs
 N/A
 Usage Fee: May range from a portion of a monthly plan to per debit
transaction fees (typically $0.-$0.50)
 Additional Convenience Fees: May be charged by acquirer and
issuer for not on-us transactions (typically $1.50-$3 each to issuer
and acquirer)
 Monthly account fees will typically range between $0 and $14
 Foreign exchange conversion costs may be incurred for international
withdrawals
Issuer (Cardholder's FI)
 Account Service Fee Revenue: Consists of primarily monthly plan
fee revenue
 Usage or Convenience Fee Revenue: May be charged in addition to
monthly plan fee, based on the agreed terms; Also includes revenue
from credit card cash advances made through ABMs
Payment Service
Provider/Processor
 Processing Fee: Varies with service provided
 Revenues from assisting (small) issuers with record management,
network connectivity and outsourced call centres and collections,
among other services
Transactional Costs
 Switch Fee
 Interchange Fees: Paid to acquirer
Operational Costs
 Real estate costs
 Marketing and Sales: Includes new account marketing, promotions
and collateral
 Customer Service, Card Issuance, Corporate Support Functions
 Personnel and Operational cost
 Fraud Losses, Risk, Fraud Management and Dispute Resolution
 Technology, Network and Telecom
 Card costs
Transactional Costs
 Set-up and Recurring fees
Operational Costs
 Personnel and Operational cost
 Customer Service, Corporate Support Functions
 Risk, Fraud Management and Dispute Resolution
 Technology, Network and Telecom
 Marketing and Sales
Sources: Deloitte Research and Analysis
- 46 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Debit Card (Cash Dispensing)
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Sample Revenue and Cost Items of Participants (2 of 2)
Participants
Payment Network
Acquirer (External ABM
Provider)
Revenues
Costs
 Service revenues: Service revenues predominantly represent
 Personnel and Operational cost
payments by customers with respect to their card programs carrying
marks of the Visa brand and are based principally upon spending on
Visa-branded cards for goods and services
 Data processing revenues: Represent revenues earned for
authorization, clearing, settlement, transaction processing services
and other maintenance and support services that facilitate
transaction and information processing among the Company’s
customers globally
 Foreign Exchange transaction revenues: Assessed to customers on
cardholder transactions where the cardholder’s issuer country is
different from the country of usage
 Risk, Fraud Management and Dispute Resolution Services fee
 Technology, Network and Telecom
 Convenience Fee: For permitting use by a customer of a different
 Personnel and Operational cost
issuer
 Interchange from Issuer
 Capital Investments: Major costs involve ABM machines, Mainframe
 Marketing and Sales
Computers, Software, Personal Computers for staff, Furniture &
Fittings, Office Renovation, Armoured vehicles, Network and
Telecom
 Cost of maintaining cash supply
 Security & cash delivery
 Theft
Sources: Deloitte Research and Analysis
- 47 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Credit Card
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Description
 A credit card allows its holder to pay for goods and services from an approved credit line, based on the cardholder’s commitment to pay the issuer for these
purchases, and for an interest on funds borrowed/revolved beyond the grace period
 Credit cards in Canada are typically issued by large banks, credit unions, monolines (financial institutions who only offer credit products), and retailers. Retailer
credit cards are typically white labelled from financial institution issuers, with some retailers, like Canadian Tire and PC Financial, electing to issue their own
 Prepaid cards are processed similarly to conventional credit cards, except that a pre-loaded balance is drawn down rather than charged to a line of credit
Characteristics
Historical Trends
 Cost: The cardholder may pay an annual fee for access to card features e.g.
Credit Card Transactions and Purchase Value (2000-2008)
rewards, float in between statements, and credit limit, or may have a no-fee
card. Interest on revolving balances must also be paid, which is typically
higher than traditional lines of credit interest rates. The merchant must pay a
portion of the transaction amount to the payment network acquirers and
issuers, termed as the switch fees, acquirer fee and interchange respectively.
Credit card payments appear to be more costly than other modes of payment
for both, financial institutions and merchants
 Acceptance: Broad acceptance (~700,000 locations) in Canada and globally
across a range of channels including POS, mail, telephone, online, etc.
 Time: Transactions are instantly authorized, where information of the
purchaser’s available credit and the validity of the transaction are confirmed
via the payment network. The cardholder’s limit is immediately decreased
and the payment details are communicated in the monthly statement. The
merchant parts with the good or service immediately, however, receives
payment at the end of day
 Security: Trusted and relatively secure. Prevalence of fraud on magnetic
stripe technology is driving the move to Chip & PIN. Credit cards offer “zero
liability” for card users in the case of fraud
Examples of Usage
 Consumer-to-
Business
 Citizen-toGovernment
 Business-toBusiness
 Business-to-
Government
 Business-toConsumer
 Government-toCitizen
 Government-toBusiness
Form Factors
Volume CAGR: 9.33%
Value CAGR: 11.74%
 The number of credit cards in Canada has grown between 7 and 10% every
 Telephone Banking
year for the past five years
 This increase is due to the increased acceptance of credit cards at point of
sale, the collection of reward miles by consumers and an increased
willingness of retailers to accept bill payments via credit card
 Mobile Network (Emerging)
 The Canadian market has also seen an increase in competition from
 Card (Magnetic/Chip)
 Internet (Online)
monoline card issuers, where credit cards are often the only significant
Canadian product offering
 Contactless (Card/Mobile-
emerging)
Sources: The Nilson Report, 2010; Bank for International Settlements Report prepared by Committee on Payment and Settlement Systems of the Group of Ten Countries, 2009
- 48 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Credit Card
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Simplified Payment Interaction Model
Placeholder
1
Merchant
Initial Transaction
Customer
Issuer
(Start)
9
7
4
2
Transaction
Data
Merchant
FI
6
5
Clearing & Settlement
Via Visa/MC Network
Payments
Network
Acquirer
Transaction Data
Transaction
Data
3
Funds
Data
Key Transaction Participants
 Issuers: Any organization that issues credit cards to users . e.g., banks, credit unions, monoline card issuers, merchants with in-house credit cards
 Acquirers: Members of a card association that maintain merchant relationships and receive all credit card transactions from the merchant. e.g., Moneris,
Chase PaymentTech
 Merchants: Any merchant that accepts cards from one of the payments networks. e.g., Canadian Tire, Zellers
 Payment Networks: Provide validation of transactions and system for the transfer of money. e.g., Visa, Mastercard
Sources: Deloitte Research and Analysis
- 49 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Credit Card
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Sample Revenue and Cost Items of Participants (1 of 2)
Participants
Sender of Funds
(Cardholder)
Issuer (Sender's FI)
Revenues
Costs
 Loyalty rewards
 Periodic Fees (usually annual)
 Cash Back
 Incremental Discretionary Fees (e.g., overlimit fees)
 Access to “free money” in between statements
 Interest charge or revolving credit expenses
 Interest Revenue or revolving credit revenue
Transactional Costs
 Switch Fees
 Processor costs
Operational Costs
 Cost of Funds
 Marketing and Sales: Includes new account marketing, promotions
and collateral
 Collections, Customer Service, Credit Processing (Adjudication and
Credit Decisioning), Card Issuance, Corporate Support Functions
 Personnel and Operational cost
 Fraud Losses, Risk, Fraud Management and Dispute Resolution
 Technology, Network and Telecom
 Cost of cards
 Fee Revenue: Includes annual fees and incrementals. In some
cases including select prepaid cards, additional fees may be
charged for access to call centres
 Interchange Revenue
Payment Service
Provider/Processor
 Processing Fee: Varies with service provided
 Usually assist issuers with record management, network
connectivity (for smaller issuers) and outsourced call centres and
collections, among other services
Operational Costs
 Personnel and Operational cost
 Collections, Customer Service, Corporate Support Functions
 Fraud Losses, Risk, Fraud Management and Dispute Resolution
 Technology, Network and Telecom
 Marketing and Sales
Sources: Deloitte Research and Analysis
- 50 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Credit Card
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Sample Revenue and Cost Items of Participants (2 of 2)
Participants
Payment Network
Acquirer
Revenues
Costs
Service revenue
 Service revenues predominantly represent payments by issuers with
respect to their card programs carrying marks of the card brand and are
based principally upon spending for goods and services
Data processing revenue
 Revenues earned for authorization, clearing, settlement, transaction
processing services and other maintenance and support services that
facilitate transaction and information processing among the Company’s
customers globally
Foreign Exchange transaction revenue
 International transaction revenues are assessed to customers on
cardholder transactions where the cardholder’s issuer country is
different from the merchant’s country
Other Revenue
 Revenue from providing additional security (e.g., Verified by Visa,
Secure Code, fraud analytics)
 Personnel and Operational cost
 Merchant Discount Fee: In return for offering them a facility to accept
 Merchant Sign-up Cost: Includes printing of Merchant Agreements,
credit cards, the Acquirer charges the Merchants a discount fee
 Periodic Account Fees: Including minimum fees the merchant must pay
the acquirer
 One-time set-up fees paid by merchants
Recipient of Funds
(Merchant)
 N/A
 Technology, Network and Telecom
 Marketing and Sales
 Risk, Fraud Management and Dispute Resolution
Display Decals, Stands
 Capital Investments
 Personnel and Operational costs
 Switch Fees
 Merchant Discount Fee (interchange plus merchant acquirer




transaction fees plus periodic fees): Ranges from 1.2%-2% per
transaction plus acquirer processing and periodic account fees
Periodic Account Fees: Including minimum fees the merchant must
pay the acquirer
POS rental fees
POS equipment upgrade costs
With the liability shift in October 2010 merchants not equipped to
process Chip and PIN transactions will absorb fraud losses
Sources: Deloitte Research and Analysis
- 51 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
AFT Debit
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Description
 Automated Funds Transfer (AFT) Debits are Pre-Authorized Debits (PAD) usually set up by the Recipient based on an underlying PAD agreement between the
accountholder/Sender and the Recipient of funds. This payment type is most commonly used for mortgage and other bill payments, as well as funds transfer
and corporate cash management payments
 The Recipient’s financial institution initiates the automated debit of the Sender’s account; the Recipient’s account is automatically credited at agreed intervals
 Standards for AFT transactions are set by the Canadian Payments Association, which processes all AFTs
Characteristics
Historical Trends
 Cost: AFT Debit transactions are low cost payment options for recurring
funds transfers for Senders and Recipients. The processing costs incurred by
the Sender’s bank cover the steps of validating the payment, confirming debit
instructions and availability of funds, the actual debit, and sending batch files
to the central processor. Most of this process is automated and requires no
manual intervention after set-up, further decreasing the costs
 Acceptance: An increasing number of recurring transactions are being
processed through this system, implying broad and growing acceptance
AFT Debit Transaction Volumes and Values (2000 - 2009)
Volume CAGR: 3.38%
Value CAGR: 6.19%
 Time: AFT Debit transactions take T+1 days for the recipient. Before the
Sender’s and Recipient’s banks settle their accounts, the Sender’s account is
debited and the Recipient’s account is credited (see steps 4 and 6 in the
interaction map)
 Security: With this method, payments are traceable and pose low security
risks. Since payment occurs electronically, there is lower risk of loss of funds
as opposed to paper payment instruments which may be forged, mutilated or
lost. AFT Debit authorizations are revocable by the funder (consumer)
Examples of Usage
 Consumer-to-
Business
 Business-toBusiness
Business
 Citizen-to-
Form Factors
 Electronic funds transfer through
pre-authorized debits
Government
 The growth rate of the value of AFT debits has far exceeded the growth
rate of the volumes of AFT debits, implying that the transaction value of an
AFT debit has been increasing
 Volumes leveled off in 2009 due to the recession, as business-business
transfers were cut back. Growth is expected to resume in 2010
 Government-to-
Sources: Canadian Payments Association; Deloitte Analysis
- 52 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
AFT Debit
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Simplified Payment Interaction Model
Illustrative
Pre-authorized
debit (PAD)
agreement
Recipient of
Funds
1
Sender of
Funds
6
Sender’s
Account is
Debited
Sender’s FI
(Start)
7
2
PAD
Information
Settlement
Recipient’s
Account is
Credited
PAD
Information
CPA
4
5
3
Recipient’s
FI
CPA
Services
Network
(CSN)
PAD Information
Funds
Data
Key Transaction Participants
 Sender’s Financial Institution: Any financial institution the Sender has an account with, which interacts with the CPA. e.g., banks
 Recipient’s Financial Institution: Any financial institution the Recipient has an account with, which interacts with the CPA. e.g., banks
 CPA: A not-for-profit organization engaged in clearing and settlement of payments
 CPA Services Network (CSN): Facilitates the transmission of AFT and EDI files between institutions
Sources: Canadian Payments Association; Deloitte Analysis
- 53 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
AFT Debit
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Sample Revenue and Cost Items of Participants
Participants
Sender of Funds
(Account to be debited)
Revenues
Costs
 N/A
 Usage Fee: May range from a portion of a monthly plan to per debit
transaction fees
 Miscellaneous fees: May include one-time set-up fees and fees
based on size and nature of transaction
Sender's FI
 Monthly plan and transaction fees
Transactional Costs
 CPA Fees
Operational Costs
 Personnel and Operational cost
 Risk, Fraud Management and Dispute Resolution
 Technology, Network and Telecom
 Corporate Support Functions
 Fraud Losses
 Capital Costs
CPA Services Network
(CSN)
 Association fees from member financial institutions
 Personnel and Operational cost
Recipient's FI
 N/A
 Technology, Network and Telecom
 Personnel and Operational cost
 Technology, Network and Telecom
 Capital Costs
Recipient of Funds
(Account to be credited)
 N/A
 N/A
Sources: Canadian Payments Association; Deloitte Analysis
- 54 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
AFT Credit
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Description
 Automated Funds Transfer (AFT) Credits are usually set up by the Sender of funds, and imply a direct deposit in the Recipient's account (e.g., payroll deposits,
payment of dividends, tax refunds)
 The Sender’s financial institution initiates the automated debit of the Sender’s account, and the Recipient’s account is automatically credited at agreed intervals,
with the transaction amount
 Standards for AFT transactions are set by the Canadian Payments Association, which processes all AFTs
Characteristics
Historical Trends
 Cost: AFT Credit transactions are low cost payment options for recurring
funds transfers. The processing costs incurred by the Sender’s bank cover
the steps of validating the payment, confirming credit instructions and
availability of funds, the actual debit and credit, and sending electronic batch
files to the central processor. Most of this process is automated and requires
no manual intervention after set-up, further decreasing the costs
 Acceptance: An increasing number of recurring transactions are being
processed through this system, implying broad and growing acceptance
AFT Credit Transaction Volumes and Values (2000- 2009)
Volume CAGR: 4.16%
Value CAGR: 7.98%
 Time: AFT Credit transactions take T+1 days where the payment settlement
occurs one day after the transaction. Before the Sender’s and Recipient’s
banks settle their accounts, the Sender’s account is debited and the
Recipient’s account is credited (see steps 3 and 5 in the interaction map)
 Security: With this method, payments are traceable and pose low security
risks. Since payment occurs electronically, there is lower risk of loss of funds
as opposed to paper payment instruments which may be forged, mutilated or
lost
Examples of Usage
 Business-to-
Consumer
 Government-toCitizen
Employee
Form Factors
 The growth rate of the value of AFT credits has exceeded the growth rate
of the volumes of AFT credits, implying that the transaction value of an AFT
credit has been increasing
 A significant portion of Canada’s $730 billion in payroll is delivered via AFT
credits
 Electronic funds transfer through
pre-authorized credits
 Business-to-
Sources: Canadian Payments Association; Canadian Payroll Association; Deloitte Analysis
- 55 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
AFT Credit
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Simplified Payment Interaction Model
3
Illustrative
Recipient’s
Account
Sender’s
Account is
Debited
Sender of
Funds
(Start)
Sender’s FI
1
6
Direct Deposit
Information
2
Settlement
Recipient’s
Account is
Credited
Direct
Deposit
Information
CPA
5
4
Recipient’s
FI
Direct Deposit
Information
CPA
Services
Network
(CSN)
Funds
Data
Key Transaction Participants
 Sender’s Bank: Any financial institution the Sender has an account with, which interacts with the CPA. e.g., banks
 Recipient’s Bank: Any financial institution the Recipient has an account with, which interacts with the CPA. e.g., banks
 CPA: A not-for-profit organization engaged in clearing and settlement of payments
 CPA Services Network (CSN): Facilitates the transmission of AFT and EDI files between institutions
Sources: Deloitte Research and Analysis
- 56 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
AFT Credit
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Sample Revenue and Cost Items of Participants
Participants
Sender of Funds
(Account to be debited)
Revenues
Costs
 N/A
 Usage Fee: May range from a portion of a monthly plan to per debit
transaction fees
 Miscellaneous fees: May include one-time set-up fees and fees
based on size and nature of transaction
Sender's FI
 Monthly plan and transaction fees
Transactional Costs
 CPA Fees
Operational Costs
 Personnel and Operational cost
 Risk, Fraud Management and Dispute Resolution
 Technology, Network and Telecom
 Corporate Support Functions
 Fraud Losses
 Capital Costs
Payment Service
Provider/Processor
 Processing Fee: Varies with service provided
 Personnel and Operational cost
CPA Services Network
(CSN)
 Association fees from member financial institutions
Recipient's FI
 N/A
 Technology, Network and Telecom
 Personnel and Operational cost
 Technology, Network and Telecom
 Personnel and Operational cost
 Technology, Network and Telecom
 Capital Costs
Recipient of Funds
(Account to be credited)
 N/A
 Must hold a bank account to receive the credit
Sources: Deloitte Research and Analysis
- 57 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
EDI and Electronic (EDI) Remittances
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Description
 Electronic Data Interchange (EDI) payments are corporate-to-corporate transfers routed through the CPA. Electronic (EDI) Remittances are a variation, in that
the transfer is consumer-to-business. Remittance Recipients must have a Corporate Creditor Identification Number (CCIN). Common uses are for procurement
and bill payments. EDI payments are similar to AFT Debits, but differ in that they are not automated or pre-approved, are processed as a one-time payment and
the Recipient must have a CCIN
 The clearing process for electronic payments is more streamlined than for cheques and other paper-based payment items, as there is no requirement to image
or deliver a physical payment item
Characteristics
Historical Trends
 Cost: For the Sender, the costs are bank charges for each filed payment to
be processed plus system and personnel costs. On the payer institution side,
processing costs incurred cover the steps of validating the payment
instruction against biller files supplied by the central processor, confirming
funds are available, debiting the account, issuing a receipt and sending batch
files to the central processor. On the biller institution side, they cover the
costs of creating and delivering payment files to each of the institution’s
billers, and crediting and reconciling the biller’s account
 Acceptance: Electronic payments are broadly accepted due to the low cost
and elimination of potential errors in processing
Paper and Electronic Remittance Transaction Volumes and Values
(2003- 2009)
Volume CAGR: 13.09%
Value CAGR: 14.23%
 Time: Payment settlement usually occurs one day after the transaction
 Security: With this method, payments are traceable and pose low security
risks. Since payment occurs electronically, there is lower risk of loss of funds
as opposed to paper payment instruments which may be forged, mutilated or
lost
Examples of Usage
 Business-to-Business
 Consumer-to-Business
 Business-to-Consumer
 Business-to-Government
 Government-to-Business
 Citizen-to-Government
Form Factors
 Electronic payments to
organizations with a CPA
Corporate Creditor
Identification Number (CCIN)
 Volumes and Values include EDI (corporate-to-corporate credits carried out
via electronic data interchange), Electronic Remittances and ABM
adjustments made to correct errors from Shared ABM Network
Transactions
 Electronic remittances and EDI have been on the rise over the last decade,
while paper remittances have been on a steep decline
 Volumes leveled off in 2009 due to the recession. Growth is expected to
resume in 2010
Sources: CIBC; Scotiabank; Bank of Montreal; Canadian Payments Association, Issues Paper: Bill Payments in Canada TelPay; Canada Post
- 58 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
EDI and Electronic (EDI) Remittances
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Simplified Payment Interaction Model (Bill Payments)
Illustrative
Recipient’s
Account
Sender’s
Account is
Debited
Sender of
Funds
(Start)
2
Sender’s FI
1
Debit Instruction
3
Settlement
Recipient’s
Account is
Credited
6
Transaction
Data
CPA
5
Recipient’s
FI
CPA
Services
Network
(CSN)
4 Transaction Data
Funds
Data
Key Transaction Participants
 Sender’s FI: Any financial institution the Sender has an account with, which interacts with the CPA. e.g., banks
 Recipient’s FI: Any financial institution the Recipient has an account with, which interacts with the CPA. e.g., banks
 CPA: A not-for-profit organization engaged in clearing and settlement of payments
 CPA Services Network (CSN): Facilitates the transmission of electronic payment files between institutions
Sources: Deloitte Research and Analysis
- 59 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
EDI and Electronic (EDI) Remittances
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Sample Revenue and Cost Items of Participants
Participants
Sender of Funds
(Account to be debited)
Revenues
Costs
 N/A
 Usage Fee: May range from a portion of a monthly plan to per debit
transaction fees
 Miscellaneous fees: May include one-time set-up fees and fees
based on size and nature of transaction
 Often requires specific software and technology to support
Sender's FI
 Monthly plan and transaction fees
Transactional Costs
 CPA Fees
Operational Costs
 Personnel and Operational cost
 Risk, Fraud Management and Dispute Resolution
 Technology, Network and Telecom
 Corporate Support Functions
 Fraud Losses
 Capital Costs
Payment Service
Provider/Processor
 Processing Fee: Varies with service provided
 Personnel and Operational cost
CPA Services Network
(CSN)
 Association fees from member financial institutions
Recipient's FI
 N/A
 Technology, Network and Telecom
 Personnel and Operational cost
 Technology, Network and Telecom
 Personnel and Operational cost
 Technology, Network and Telecom
Recipient of Funds
(Account to be credited)
 N/A
 Often requires specific software and technology to support
Sources: Deloitte Research and Analysis
- 60 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Proprietary/Closed Loop Prepaid Card
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Description
 A closed loop card is a form of prepaid card usually issued by retailers (e.g., Petro Canada Card) or consortiums (e.g., malls)
 Closed loop cards may behave like a standard credit card, but differ from open-loop credit cards in that they can only be used at specific retail locations.
Because they are not processed via Visa, MasterCard or similar, the cost structure of delivering closed loop payments can be different from open-loop cards
 While the closed loop cards are popular for some consumer segments, these transactions represent a very small portion of the Canadian payments landscape
Characteristics
Projected Closed-Loop Volume ($B) (2010-2015)
 Cost: Closed loop and gift cards can be a low-cost payment method for
users. Typical user fees for prepaid closed loop cards can include activation
fees, balance inquiry call centre fees, reloading fees and non-usage fees.
For issuers/merchants, this payment instrument can be attractive due to the
high rate of non-usage, (breakage) where the purchaser loads the card with
an amount paid upfront, but does not redeem the balance for goods or
services. The unutilized balance on the card is generally retained by the
issuer subject to regulatory guidance. Use of a closed-loop instead of an
open-loop card also results in the merchant avoiding paying interchange and
other open-loop card fees
 Acceptance: Closed loop cards have limited acceptance and may be
usually used only within the issuer’s business. With the availability of open
loop cards, the acceptance and popularity of closed loop cards is diminishing
further, although their use as gift cards remains a major portion of their
appeal
 Time: The card balance is deducted immediately upon purchase of a good
or service
 Security: There is low security associated with gift cards as they may be lost
or stolen, though many allow for user registration and protection
Examples of Usage
Form Factors
 Business-to-
 Card (Magnetic/Chip)
Consumer
 Consumer-toConsumer
 Internet (Online)
 Closed loop prepaid cards in Canada are estimated to grow to 1% ($4.5
billion) of the total card volume by 2015; growth rate slower than in the US
 Growth in closed loop payments is leveling off, as prepaid closed loop
cards reach saturation
Source: ‘Payment instrument Choice: The Case of Prepaid Cards’ - Sujit Chakravorti and Victor Lubasi ; Deloitte Research and Analysis; Statistics Canada;
http://www.cbc.ca/consumer/story/2008/12/01/f-giftcards.html ; http://www.statcan.gc.ca/pub/11-621-m/2006051/t/4054404-eng.htm
- 61 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Proprietary/Closed Loop Prepaid Card
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Simplified Payment Interaction Model (Prepaid Version)
Illustrative
Card purchased/loaded
online or at retail
location using credit
card, cash, or debit
Issuer’s
Liability
Account
2
4
Card
Purchaser
1
(Start)
Value loaded to prepaid card
Payment
Processor
Funds booked to revenue
Or transferred to redemption
location (e.g., franchisee)
3
Prepaid card
redeemed
Prepaid card
debited
4
Issuer’s
Revenue
Account
Funds
Data
Key Transaction Participants
 Corporate Accounts: Maintains complete account details of all prepaid card balances
 Franchisees: Sell/activate prepaid closed loop cards and accept payments by prepaid closed loop cards, in lieu of cash/debit/credit cards
 Purchaser of card: May be different from user, and pays for the card through other accepted modes of payment
 User: May be the same as or different from the purchaser of card, and uses the balance on the card to make purchases
Sources: Deloitte Research and Analysis
- 62 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Proprietary/Closed Loop Prepaid Card
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Sample Revenue and Cost Items of Participants
Participants
Purchaser of Card
Revenues
Costs
 N/A
 Activation Fee: May be charged a fee to activate the card
 In some provinces, there may also be an expiry date and/or a fee
for inactivity
 Card Replacement Fees may also be charged in case of lost or
stolen cards
 Balance Inquiry Fees: Some card issuers charge a fee for these
inquiries, typically ranging from 50¢-$1.00 per call, if a toll-free
number is called
 Opportunity cost of funds loaded on card
Issuer (Usually a retailer)
 Activation Fee: May charge a fee to activate the card
 Expiration of unused balances may be an additional source of
revenues, or there may be fees levied for inactivity
 Card Replacement Fees may also be charged in case of lost or
stolen cards
 The revenue from the sale of an unredeemed gift card may be
recognized as revenue
 Balance inquiry fees, etc.
 Float from prepaid balances
Franchisees or
Consortium members
(when different from
issuer)
 The revenue from the sale of an unredeemed gift card may be
recognized as revenue
Transactional Costs
 Processing Fees
Operational Costs
 Marketing and Sales: Includes marketing, promotions and collateral
 Customer Service, Card Issuance, Corporate Support Functions
 Personnel and Operational cost
 Fraud Losses, Risk, Fraud Management and Dispute Resolution
 Technology, Network and Telecom
 Card costs
Transactional Costs
 Processing fees
Operational Costs
 Personnel and Operational cost
 Customer Service
 In-store Risk, Fraud Management and Dispute Resolution
 Technology, Network and Telecom
 Marketing and Sales
Sources: Deloitte Research and Analysis
- 63 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
LVTS Wires
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Description
 The Large Value Transfer System (LVTS), an electronic wire transfer system introduced by the Canadian Payments Association in February 1999, facilitates
the transfer of irrevocable payments in Canadian dollars across the country virtually instantaneously
 Through LVTS, funds can be transferred in real time between participating financial institutions on behalf of clients, and the money is available to the payment
Recipient immediately
 LVTS payments are preferred by corporations for large transfers (>$50,000) as the amounts are immediately transferred and irreversible
Characteristics
Historical Trends
 Cost: LVTS payments are relatively low cost per dollar of amount
LVTS Transaction Volumes and Values (2000 - 2009)
transferred. As they are backed by collateral pledged to the Bank of Canada
by the participating financial institutions, the implicit costs may be higher than
the immediately incurred expenses
 Acceptance: LVTS payments are preferred by large institutions as they are
final and irrevocable in real time. Once sent, a payment cannot be reversed
by the payer or the financial institution that sent it. There is no risk of stop
payment orders, insufficient funds or forged endorsements
Volume CAGR: 5.22%
Value CAGR: 4.50%
 Time: Financial institutions are assured of same-day settlement for LVTS
transactions, even in the unlikely event that a participating institution were to
fail
 Security: The certainty of settlement reduces systemic risk (i.e., the risk that
the inability of one financial institution to meet its settlement obligations could
cause other institutions to fail in a domino effect). Each LVTS payment is
also subject to real-time risk-control tests to confirm sufficient collateral is
available. If a payment does not pass the applicable tests, it is rejected
Examples of Usage
 Business-to-
Business
 Business-toGovernment
 Government-toGovernment
 Government-to-
Business
Form Factors
 LVTS electronic or paper instruction
form
 During the peak of the financial crisis in 2008-09, the value and volume of
LVTS transfers decreased
 The CPA projects the growth rates will be about 7% and 5% for volume
and value respectively, over the next five years
Sources: Bank for International Settlements Report prepared by Committee on Payment and Settlement Systems of the Group of Ten Countries, 2009; Canadian Payments
Association; Canadian Payments Forecast, 2009
- 64 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
LVTS Wires
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Simplified Payment Interaction Model
(Provides funds, transaction fee and recipient
information including IBAN and BIC codes)
Illustrative
1
Recipient
Sender
(Start)
2
Sender’s FI
Sender’s
Account is
Debited
5
3
Transaction
Data
CPA
Settlement may be through the CPA or
directly via Correspondent Accounts
6
Recipient’s
FI
Transaction Data
4
CPA via
SWIFT*
Network
Funds
Data
Key Transaction Participants
 Sender’s FI: Any financial institution the Sender has an account with, which interacts with the CPA. e.g., banks
 Recipient’s FI: Any financial institution the Recipient has an account with, which interacts with the CPA. e.g., banks
 CPA: A not-for-profit organization engaged in clearing and settlement of payments
 SWIFT Network: A not-for-profit organization engaged in transmitting funds transfer information among member banks; SWIFT does not facilitate funds
transfer, rather, it sends payment orders, which must be settled via correspondent accounts that the intuitions have with each other
Sources: Deloitte Research and Analysis
- 65 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
LVTS Wires
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
Sample Revenue and Cost Items of Participants
Participants
Revenues
Costs
Sender of Funds
(Account holder)
 N/A
Issuer (Sender's FI)
 Fee: May range from periodic to transaction-specific fees
Transactional Costs:
 Processing Fees paid to Clearing Company
 SWIFT/CPA Fees
Operational Costs
 Personnel and Operational cost, Customer Service
 Fraud Losses, Risk, Fraud Management and Dispute Resolution
 Corporate Support Functions, Technology
Clearing
Company/Processor
 The CPA does not play a role in the pricing of LVTS services, but
 Technology
SWIFT Network
 Fee: May range from periodic to transaction-specific fees
 Often requires specific software and technology to support
have fees associated with SWIFT. Each financial institution will
establish its own pricing structure for LVTS payments, just as they
do for other products and services
 Association fees from member financial institutions
 Processing expenses
 Processing fee
 Personnel and Operational cost
 Network, EDP and Telecom
Acquirer (Recipient's FI)
 May charge a processing fee
Transactional Costs:
 Processing Fees paid to Clearing Company
 SWIFT/CPA Fees
Operational Costs
 Personnel and Operational cost, Customer Service
 Fraud Losses, Risk, Fraud Management and Dispute Resolution
 Corporate Support Functions, Technology
Recipient of Funds
 N/A
 Often requires specific software and technology to support
Sources: Deloitte Research and Analysis
- 66 -
Prepared by Deloitte
3. Review of Payment Methods
Payment Type Overview:
SWIFT Transfers and Person-to-Person Transfers
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
SWIFT Transfers
Description
Payment Interaction Model
 SWIFT is the Society for Worldwide Interbank Financial
Telecommunication, a member-owned cooperative
− SWIFT is solely a carrier of messages. It does not hold funds, manage
accounts on behalf of customers, or store financial information on an
on-going basis
−
−
As a data carrier, SWIFT transmits messages between two financial
institutions
Used in Canada for international payments
 Often used for, but not limited to, business-to-business payments such as
paying international suppliers
Person-to-Person Electronic Transfers
Description
Payment Interaction Model (Interac Email Money Transfer)
 Person-to-person money transfer using a purpose-built electronic payment
method (as opposed to cash or cheques)
 Interac Email Money Transfers (IEMT) are the primary electronic person-to-
person vehicle in Canada, with emergent products such as Zoompass
gaining traction
 Sending an Interac Email Money Transfer typically costs a consumer $1.50
+ regular withdrawal fees, or is included in a monthly fee package
Source: www.swift.com, interac.ca
- 67 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
International Remittances and Rewards Redemption
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
International Remittances
Description
Payment Interaction Model
 Money that one party sends to another party outside of the country
 Typical usage is for immigrants to send money to family members in their
country of origin
 Differs from SWIFT payments in that the Recipient does not require a bank
account to receive the funds, as the dispensing service is provided by the
payment network (e.g., Western Union)
Rewards Redemption
Description
Payment Interaction Model
 Loyalty programs allow consumers to earn rewards (e.g., discounts,
1
7
6
Accumulated Points
and redemptions held
on account
Merchant B
9
Transaction Data
retain payment/banking customers
 Consumers can use reward points to “pay” for goods or services
(Start)
Rewards Purchase
Amount
2
Transaction Data
 Financial Institutions are heavy users of reward programs to attract and
8 Redemption of Points
Customer
Transaction
Merchant A
Monthly Statement
frequent flier miles), cashback or a combination of the two
 There are closed-loop programs, whereby retailers reward customers
through discounts at their stores, and open-loop programs, whereby an
issuer provides points which can be redeemed at a number of retailers
10
5 Purchase of Points
Acquirer/
Processor
3
Transaction
Data
Loyalty
Program
Issuer
4
Transaction
Data
Rewards
Plan
Provider
Funds
Data
Sources: Multi-Channel Merchant, http://multichannelmerchant.com/mag/loyal_subjects_1001/; Opticard, http://www.optinc.com/programs-services/loyalty-card-programs; American
Express, http://www.americanexpress.com/lacidc/iccsite/pdf/mr_enrol.pdf; Forbes, http://www.forbes.com/2007/01/02/frequent-flyer-miles-ent-sales-cx_kw_0102whartonloyalty.html
- 68 -
Prepared by Deloitte
3. Review of Payment Methods
Cash
Cheque
Debit POS
Debit ABM
Credit Card
AFT Debit
Payment Type Overview:
Digital Wallets/eWallets
AFT Credit
EDI
Closed Loop
LVTS
SWIFT
P2P Trans.
Remittance
Rewards
eWallet
eWallets
Description
Payment Interaction Model
 Software that can hold digital cash, billing, shipping, and payment
information; some eWallets have a digital certificate with a digital signature
for online transactions. eWallets allow users to make electronic commerce
transactions quickly and securely, e.g. PayPal
 Generally unregulated, as providers operate outside of traditional financial
frameworks
Sources: PayPal website, JP Morgan Website, eMarketer report, Gartner report, eBay January 2008 Investor Update
- 69 -
Prepared by Deloitte
Table of Contents
1. Introduction
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
3. Review of Payment Methods
4. Review of Participants in the Payments Ecosystem
5. Appendices
a. Participant Profiles
b. Review of Payment-Related Activities
c. Glossary of Terms
d. Further Reading
- 70 -
Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
This section provides overviews of participant types within the Canadian Payments
Ecosystem

The Canadian payments system is made up of a variety of different players with varying sizes and roles. The following section provides an
overview of the various participant types within the Canadian payments system. These participant types are accompanied by a sample of
company profiles for selected players in the appendix

These overviews and profiles provide a snapshot of the payments industry on a participant level and allows comparison of their various
characteristics, from both a current and historic perspective. The participants within this section all impact the Canadian payments landscape, in
different and often overlapping ways. Profiled groups include:

Issuers

Acquirers

Payment Networks

Clearers & Settlers

Payment Service Providers

Payday Loan Providers

FOREX Providers

ABM White Label Operators

Closed Loop Prepaid Providers

Loyalty and Rewards Programs

eWallet Providers

Alternate Payment Vehicle Providers

Only publicly available information was used in the compilation of this section. As such, information relating to some companies was unavailable,
in particular where those companies are privately owned. Where possible, industry trends were used to replace unavailable information

The most up-to-date information was used in every instance. However, data up to 2009/2010 was not always available. A list of references has
been provided at the end of Appendix 1
- 71 -
Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Competition exists at every stage in the payments process – traditional vertically
integrated value chains are fragmenting and new players are entering
Key Players in the Canadian Payments Ecosystem
Payment
Originators
Payment
Recipients
Payment Connectors
Cash
Sender
of Funds
(Consumer)
(Business)
(Government)
Debit
Networks
Debit Cards
(POS & ABM)
Payment
Originator’s
Financial
Institution
•TD Merchant Services
Credit Card Network
Credit Cards,
Open-Loop Prepaid
(Issuer)
•Chase Paymentech
Canadian
Payments
Association
CPA Services
Network
Payment
Recipient's
Financial
Institution
Payment Service Provider
Cheques and other
paper remittances
•First Data Corporation
•INTRIA Items Inc.
•Symcor Inc.
LVTS
Wires
SWIFT/LVTS
Recipient
of Funds
•Moneris Solutions
•American Express Company
•MasterCard Worldwide
•Visa Inc.
AFT Credits and
Debits, EDI
•Royal Bank of Canada
•Desjardins Group
•Canadian Imperial
Bank of Commerce
•The Toronto Dominion
Bank
•Sears Holdings Corp.
•President’s Choice
Financial
Merchant Acquirer
Interac Association
White Label
ABM
Operators
(Consumer)
(Merchant)
(Business)
(Government)
•Clear Card
Payment
Solutions
•Cash N Go Ltd.
•Royal Bank of Canada
•Desjardins Group
•Canadian Imperial Bank of
Commerce
•The Toronto Dominion Bank
Society for Worldwide
Interbank Financial
Telecommunication
Canadian Payments Association
Cash in
Circulation
Transaction/
Processing
Support
Cash in
Circulation
Bank of Canada
Transaction/
Processing
Support
Payment Enablers (Simplified)
National Cash Register; Cash N
Go Ltd.; Frisco-ATMs
ABM Service Providers
Money Transfer Companies
Western Union Company; PayPal
Inc.
Rogers Communications Inc.;
Telus Corporation; Bell Mobility
Mobile Network Operators
Currency Exchange and Trading Companies
Bank of Canada; Royal Bank of
Canada; Travelex
TelPay Inc.; Zoompass
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Money Tree; Cash Money; Money
Mart
First Data Corporation; INTRIA
Items Inc.; Symcor Inc.
Service Providers to Industry Participants
eWallet Providers
Google Checkout; Facebook
Credits; PayPal Inc.
Payment Regulators (Simplified)
Provincial Regulators
Federal Regulators
Department
of Finance
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
- 72 -
Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IDA
Payment
Enabler
Business
Relationship
Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Participant Type Overview:
Issuers
Role within the Canadian Payments System
 Role: Financial institutions who enable payments on behalf of their customers. In most cases the payment is funded from a chequing or savings account, credit
facility or prepaid account. In addition to enabling the payments transaction, issuers may also extend additional services such as overdraft protection and
revolving credit. Issuers is a broad category which includes large financial institutions, credit unions, monoline issuers (credit cards are the only product line, e.g.,
Capital One) and merchants with closed-loop credit cards, e.g. Petro-Canada
 Degree of Consolidation: Depends on payment type. Approximately 62% of Visa and MasterCard credit cards in Canada are issued by five companies: BMO,
MBNA, TD Canada Trust, RBC and CIBC. Over 80% of debit transactions are processed by the six largest financial institutions. The ‘Big Six’ banks, Desjardins
Caisse network and credit union system have market share of greater than 60% of the savings account and greater than 80% of the chequing account market
 Relative Stability: The market has enjoyed relative stability over recent years. Large financial institutions continue to process the majority of transactions. The
recession has caused some monoline issuers to exit the Canadian marketplace. Smaller players continue to face challenges maintaining profitability
Market Participant Examples
•
•
•
•
•
•
•
•
•
•
American Express Company
Bank of Montreal
Bank of Nova Scotia
Canadian Imperial Bank of Commerce
Capital One
Desjardins Group
President’s Choice Financial
Royal Bank of Canada
The Toronto Dominion Bank
Vancouver City Savings Credit Union
Timeline
 1817: Bank of Montreal founded
 1832: Bank of Nova Scotia is established
 1955: The Bank of Toronto and the Dominion Bank merge to form the
Toronto-Dominion Bank
 1959: BNS first Canadian bank to introduce a revolving credit plan
 1961: CIBC was formed through the merger of The Canadian Bank of
Commerce and the Imperial Bank of Canada
 1996: Capital One began operations in Canada
 2000: TD Bank and Canada Trust merge
 2008: TD Bank Financial Group acquire Commerce Bancorp; Competition
Bureau lifts restriction on issuers and acquirers who simultaneously issue
multiple credit card brands or acquire transactions for multiple card networks
Challenges and Issues
Challenges:
 Offer customers payment mechanisms they want
securely and at a low cost; differentiated offers
 Combating fraud
Issues:
 Increasing regulatory complexity, e.g. Code of
Conduct, Anti-Money Laundering
 Recent industry changes have required very
significant investments, e.g. Chip and PIN,
Truncation and Electronic Cheque Presentment
 Aging technology makes changes costly and slow
Industry Value Drivers
 Revenue is driven by:
− Number of customers
− Volume of transactions and fees
− Chequing account fees
− Interest on accounts
− Spread on revolving balances
− Foreign exchange spread
 Costs are driven by:
− Volume of accounts and transactions
− Straight through processing
− Fraud/risk management effectiveness
− Complexity of customer offerings
Regulatory Framework
 Federal: The Bank Act; Bank of Canada Act; the
Payment Clearing and Settlement Act; the
Canadian Payments Act; oversight by OSFI;
PIPEDA; Competition Act; Bills of Exchange Act;
FSI legislation incl. Proceeds of Crime (Money
Laundering) and Terrorist Financing Act and Basel
II
 Self-Regulated: Canadian Code of Practice for
Consumer Debit Card Services; Global Payment
Card Industry/Data Security Standards
 Provincial: Consumer Protection Act; Electronic
Transactions Act; Electronic Commerce Act
Sources: See end of section
- 73 -
Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Participant Type Overview:
Merchant Acquirers
Role within the Canadian Payments System
 Role: Acquirers connect merchants to payments networks. In addition to providing POS terminals, online payments and telecommunications services, acquirers
may also provide integration with merchant cash registers and computer systems. Acquirers generally perform four key functions: (1) sign up and underwrite
merchants to accept network-branded cards; (2) provide the means to authorize valid card transactions at client merchant locations; (3) facilitate the clearing and
settlement of the transactions through the payment network; and (4) providing other relevant information or processing services, such as loyalty programs.
 Degree of Consolidation: Almost 90% of transaction volume is processed by four companies: Chase Paymentech, Global Payments, Moneris Solutions and TD
Merchant Services
 Relative Stability: Some issuers (e.g., CIBC, Scotia, etc.) sold off their merchant acquiring business in the 1990s and 2000s. Currently, the market is reasonably
stable with emerging players serving online merchants
Market Participant Examples
•
•
•
•
•
•
•
•
Beanstream
Chase Paymentech
Desjardins Group
First Data Corporation
Global Payments Systems
Moneris Solutions
TD Merchant Services
VersaPay
Challenges and Issues
Challenges:
 Growth in types of electronic payments
 Keeping fixed costs low as new payments
products enter the market
 Combating fraud
Issues:
 Increasing regulatory complexity
 Limited ability to influence rates, policies and
network rules
 Significant ongoing capital costs for Chip and PIN,
contactless and mobile
Timeline
 1967: National Data Corporation founded
 1983: Chase Manhattan sells merchant acquiring unit to NaBanco
 1996: Paymentech brand created and IPO executed
 2000: Moneris created as a joint investment between RBC Financial Group
and BMO Financial Group (including Chicago-based Harris Bank)
 2001: Global Payments spun off from National Data Corporation; Global
Payments acquires National Bank of Canada’s and CIBC’s merchant services
businesses
 2002: Paymentech acquired Scotia and Citibank merchant acquiring portfolio
 2003: Global Payments acquired DolEx Dollar Express; Moneris acquires
Ernex Marketing Technologies
 2005: Paymentech integrated with Chase Merchant Services; Interac Online
service launched
Industry Value Drivers
Regulatory Framework
 Acquiring is very much a scale-dependent
 Federal: Code of Conduct for the Credit and Debit
business, with high fixed costs and low transaction
costs. In particular, acquirers require scale in:
− Merchant client base
− Volume of transactions
− Networks supported
 Acquirers collect a relatively small share of the
merchant discount rate, making volume important
 Incremental revenue from consulting and valueadded services can help the bottom line
 Technological innovation to reduce costs of POS
devices and increase efficiency
Card Industry in Canada; Personal Information
Protection and Electronic Documents Act;
Competition Act
 Self-Regulated: Canadian Code of Practice for
Consumer Debit Card Services (CBA voluntary
code); Global Payment Card Industry/Data
Security Standards (Industry Standard)
 Provincial: Consumer Protection Act; Electronic
Transactions Act; Electronic Commerce Act
Sources: See end of section
- 74 -
Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Participant Type Overview:
Payment Networks
Role within the Canadian Payments System
• Role: Payment networks provide the technological and operational frameworks to enable transactions. In addition to operating payment switches and related
technology, payment networks create and develop card brands, set rules for operations, set fees and interchange rates, develop fraud-prevention strategies, act
as intermediary entities between acquirers and issuers and bring new payments innovations to market
• Degree of Consolidation: Visa and MasterCard dominate the credit card space with 40% and 20% of the 2009 Canadian credit and debit purchase transaction
volume respectively, while Interac has almost 100% of the domestic debit market
• Relative Stability: After a period of stability the market is on the verge of significant change. The introduction of duality means that financial institutions can offer
both Visa and MasterCard, while on the debit side Interac is facing competition from Visa Debit and Maestro (MasterCard)
Market Participant Examples
• American Express Company
• Discover Network
• Interac Association
• MasterCard Worldwide
• Visa Inc.
Challenges and Issues
Challenges:
 Combating fraud
 Disintermediation from non-traditional participants
(e.g., eWallets )
 Ability to differentiate
Issues:
 Increasing costs due to regulatory complexity, e.g.
Code of Conduct, AML
 Merchants pressing government to impose limits
on amounts of interchange fees, which would put
downward pressure on rates
Timeline
 1958: Bank of America launch first general purpose credit card; American
Express issue first charge card
1973: National BankAmericard launch first electronic authorization system
1983: MasterCard introduces hologram security device, an industry first
1984: 5 FIs link their own ABM networks in Canada
1986: Launch of Shared Cash Dispensing service in Canada as Interac
1993: Visa is first to apply neural network technologies to payments
1997: Competition Tribunal approves Consent Order, expanding Interac
membership, creating a new marketplace for Interac shared services
 2006: MasterCard becomes a publicly traded company
 2007: Visa launches Visa mobile platform
 2008: Chip technology rolls out across Canada; launch of IPS global platform
for debit and prepaid issuer processing; Visa becomes publicly traded






Industry Value Drivers
Regulatory Framework
 Payment networks require a large volume of
 Federal: Code of Conduct for the Credit and Debit
transactions to amortize fixed cost base. In
particular, networks require scale in:
− Number of issuing FIs and acquirers
− Card base, both issued and active
− Number of accepting merchant locations
− Diversity of payment channels (card, online etc.)
 Volume of cross-border payments, including
currency conversion activities
 Technological innovation to reduce fraud losses
 Value-added services such as consulting
Card Industry in Canada; PIPEDA; Competition
Act; oversight by OSFI; relevant FSI legislation
including Bank Act, the Proceeds of Crime (Money
Laundering) and Terrorist Financing Act and Basel
II
 Self-Regulated: Canadian Code of Practice for
Consumer Debit Card Services; Global Payment
Card Industry/Data Security Standards
 Provincial: Consumer Protection Act; Electronic
Transactions Act; Electronic Commerce Act
Sources: See end of section
- 75 -
Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Participant Type Overview:
Clearers and Settlers
Role within the Canadian Payments System
• Role: Clear (exchange and reconcile payment items that result in a transfer of funds from one FI to another) and/or settle (adjust financial positions of individual
FIs to reflect the net amounts due) non-cash payment transactions. There are two systems in Canada through which all non-cash payments settle:
1. Canadian Payments Association
2. Credit Card Networks: Clear and settle transactions conducted on their networks
 Degree of Consolidation: The majority of payments in Canada are settled through the Canadian Payments Association
 Relative Stability: Reductions in cheque usage and the introduction of branded debit (Visa, MasterCard and Amex do not clear through the CPA) may result in
reduced volumes for the CPA. Unlikely to see a private competitor to the CPA enter the market
Market Participant Examples
• American Express Company
• Canadian Payments Association
• MasterCard Worldwide
• Visa Inc.
Timeline
 1973: National BankAmericard launch first electronic authorization system
(“Base I”)
 1974: National BankAmericard launch electronic clearing and settlement
system (“Base II”), the precursor to VisaNet
 1980: Canadian Payments Association established by an Act of Parliament
 1986: Visa develops multiple-currency clearing and settlement in 21




Challenges and Issues
Issues
 Cost burden created by regulation
Canadian Payments Association:
 Aging technology
 Cheque usage has been declining
 Governance
 Declining volume in some payments
 Emerging global standard choices
currencies
1988: MasterCard acquires the Cirrus ABM network
1998: LVTS is launched in Canada and enters first phase of “live” operation
1999: LVTS begins full operations in Canada
2008: Launch of IPS (Integrated Processing Solution) global platform for debit
& prepaid issuer processing
Industry Value Drivers
 The clearing and settling process is reliant on the
volume of transactions in:
− Cheque transactions
− Credit card transactions
− Bill payments
− Debit card transactions
− LVTS transactions
 Technological innovation – reduction of cost of
clearing and settlement
 Straight through processing
Regulatory Framework
 Federal: The Payment Clearing and Settlement
Act; the Canadian Payments Act;
 Self-Regulated: Consent Order of the
Competition Tribunal; CPA by-laws; CPA rules
and standards
Credit Card Networks:
 See section on Payment Networks
Sources: See end of section
- 76 -
Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Participant Type Overview:
Payment Service Providers
Role within the Canadian Payments System
 Role: Payments Service Providers offer a range of processing services to issuers and acquirers. Some examples include card manufacturing, authorization,
clearing, settlement, customer service, back office functions, diverse infrastructure services for transactions involving currency (ABM, commercial deposits,
treasury management), cheques, remittances (retail and wholesale lockboxes), information management and delivery (statement production services)
• Degree of Consolidation: High degree of consolidation for core activities. Symcor processes approximately 80% of cheques within Canada. Most financial
institutions use either TSYS or First Data to manage their credit card portfolios
• Relative Stability: Whilst the participant landscape remains stable, the market is undergoing product diversification as participants align their product offerings
with the technological changes taking place in the payments industry
Market Participant Examples
• Everlink Payment Services Inc.
• First Data Corporation
• INTRIA Items Inc.
• Symcor Inc.
• Threshold Financial Technologies Inc.
• Total System Services, Inc.
Challenges and Issues
Challenges:
 Achieving scale in response to downward
pressure on rates and volume (in some cases)
 Combating fraud
Issues:
 Disintermediation by different payment types
 Industry changes require significant capital
investments, e.g. Chip and PIN, Truncation and
Electronic Cheque Presentment
Timeline
 1959: TSYS founded as bankcard processing division of Columbus Bank and
Trust Co.
 1976: First Data becomes the first processor of Visa and MasterCard bankissued credit cards
 1994: TSYS launches TS2
 1996: Symcor founded as joint venture between TD, RBC and BMO; Intria
formed by CIBC
 1997: Threshold Financial founded
 1998: TSYS upgraded TS2 to support multiple languages and currencies on a
single platform
 2003: Everlink Payment Services formed
 2004: Everlink becomes Direct Connector on Interac Member Network
 2007: Merger with KKR closes, First Data becomes private equity company
Industry Value Drivers
Regulatory Framework
 Payment service providers depend on a large
 Federal: PIPEDA; Competition Act; indirect
volume of transactions to offset high fixed costs.
In particular, payment service providers require
scale in:
− Merchant client base
− FI client base
− Volume of transactions
 Value-added services such as consulting
oversight by OSFI; relevant FSI legislation incl.
Bank Act, Proceeds of Crime (Money Laundering)
and Terrorist Financing Act and Basel II; in some
instances, public company requirements incl.
Sarbanes Oxley
 Self-Regulated: Appropriate governance policies
and processes outlined by parent companies
 Provincial: Consumer Protection Act
Sources: See end of section
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Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Participant Type Overview:
Money Service Companies (Payday Loan Providers)
Role within the Canadian Payments System
 Role: Payday loan and cheque cashing companies service the unbanked and under-banked population by providing immediate access to cash and bridge
financing at retail locations. These providers may also offer foreign exchange; remit or transmit funds; issue/redeem money orders, traveler's cheques or other
similar negotiable instruments
 Degree of Consolidation: Mixed (money service companies range in size from large companies such as Money Mart to smaller entities such as Cash Money; in
some instances smaller companies partner with larger firms in providing a service (e.g., Cash Money is partnered with Western Union in providing remittance
services)
 Relative Stability: Continuous change with more providers entering the market
Market Participant Examples
• Cash Money
• Money Tree
• National Money Mart Company
Challenges and Issues
Challenges:
 Managing loan portfolio and controlling loan loss
rates
Issues:
 Changes in provincial regulation may place
downward pressure on rates
 Increasing regulatory complexity, e.g. Code of
Conduct, AML
 Treasury management to manage foreign
exchange exposures
Timeline




1982: Money Mart founded
1992: Cash Money founded
1996: Dollar Financial Group, Inc., purchases Money Mart
2004: Canadian Payday Loan Association established
Industry Value Drivers
Regulatory Framework
 Money service companies are dependent on
 Federal: PIPEDA; Competition Act; relevant FSI
transactions for fee revenue. In particular, money
service companies require scale in:
− Number and location retail outlets
− Volume of transactions
 Foreign exchange spread revenue are drivers of
revenue for providers offering remittances
legislation including the Proceeds of Crime
(Money Laundering) and Terrorist Financing Act;
Bill C-26 Criminal Code Amendment (Criminal
Interest Rates);
 Self-Regulated: Code of Best Business Practices
 Provincial: Consumer Protection Act; Fair Trading
Act; Payday Lending Act; Electronic Transactions
Act; Electronic Commerce Act
Sources: See end of section
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Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Participant Type Overview:
Money Service Companies (FOREX Providers)
Foreign Exchange within the Canadian Payments System
 Description: The foreign exchange (FX) market is the largest financial market in the world and is highly liquid. Most of the trading is conducted electronically or
by phone. FIs use the FX markets to manage risks associated with fluctuations in currency rates and to make payments between entities
 Role: Payment instruments in foreign currency requires conversion to the local currency at the market prices for a given time. Businesses and consumers pay
fees and spreads for foreign currency payments
 Degree of Consolidation: Foreign exchange payments are undertaken by a vast majority of financial entities, ranging in size
 Relative Stability: Average daily turnover for traditional foreign exchange markets in April 2007 was $3.2 trillion USD, an increase of 71% at current exchange
rates and 64% at constant exchange rates since April 2004; average daily turnover for the OTC derivatives markets was $2.1 trillion USD in April 2007 (20% 4-yr
CAGR). The foreign exchange market is impacted by shocks experienced in the domestic, regional and global economies
Market Participant Examples
Market Turnover
• Accu-Rate Corporation
• Bank of Canada
• Bank of Montreal
Turnover CAGR: 9.52%
• Custom House Global Foreign Exchange
• Royal Bank of Canada
• Travelex Holdings Limited Company
*Chart represents daily averages for the month of April in US dollars
Challenges and Issues
Challenges:
 Combating money laundering and maintaining
anti-money laundering and know your client (KYC)
compliance
 Managing rate fluctuations
Issues:
 Changes in regulations may place downward
pressure on rates
Industry Value Drivers
Regulatory Framework
 Foreign exchange companies are dependent on
 Federal: Proceeds of Crime (Money Laundering)
transactions as a revenue generator. In particular,
money service companies require scale in:
o Number of branches
o Volume of transactions
 Foreign exchange companies’ largest revenue
base are transactional fees and margin (spread)
on exchange rates, making volume particularly
important
and Terrorist Financing Act; Bank of Canada Act;
Bank Act; the Payment Clearing and Settlement
Act; the Canadian Payments Act; oversight by
OSFI; PIPEDA; Competition Act; Bills of Exchange
Act; Basel II
• Provincial: Consumer Protection Act; Electronic
Transactions Act; Electronic Commerce Act
Sources: See end of section
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Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Participant Type Overview:
ABM White-Label Operators
Role within the Canadian Payments System
 Role: Independent operators who provide an alternate source of cash dispensing for customers through the provision of privately branded ABM machines
commonly referred to as “white labels”. These ABM machines are independent from banks and financial institutions and customers are required to pay an
additional fee to use their service. The companies profiled in this section vary from independent service operators (ISOs) who run their own ABM networks to
outsourcers who manage ABM networks on behalf of other players
 Degree of Consolidation: Large number of small independent players, some concentration at top end (e.g., Frisco-ATMS, Threshold’s Laser Cash)
 Relative Stability: Whilst there have been a number of mergers and acquisitions within recent years, the market is relatively stable with changes mainly
occurring in product development
Market Participant Examples
• Cash N Go
• Frisco-ATMs
• Threshold Financial Technologies Inc.
Timeline
 1884: NCR founded
 1972: Frisco-ATMs (a division of Frisco Bay’s systems) founded
 1996: Changes in regulations by the Competition Tribunal allow




Challenges and Issues
Challenges:
 Complying with mandatory security upgrades,
resulting in additional expenses
 Increasing competition from low-cost banks and
credit union-operated ABMs
 Aggressive competition for ABM locations
Issues:
 Increasing pressure on Government to reduce
ABM fees
 Lower transaction volumes compared to bankoperated ABMs
intermediaries to deploy and operate ABMs
1997: NCR becomes publicly traded company after being spun-off from AT&T
1998: Frisco-ATMs deploy white label ABM machine
1998: Cash N Go founded
2004: Frisco-ATMs acquired by Stanley Works
Industry Value Drivers
 ABM service providers are scale-dependent with
high fixed costs. In particular, ABM service
providers require scale in:
− Volume of transactions
− Number of ABMs
 Technological efficiency - single function cash
dispenser ABM machines are much cheaper to
install than bank multifunction ABMs allowing
ABM providers; manage service costs through
location selection
Regulatory Framework
 Federal: The Canadian Payments Act; PIPEDA;
Competition Act
 Provincial: Consumer Protection Act; Electronic
Transactions Act; Electronic Commerce Act
 Members of the Interac network are subject to the
same security compliance requirements from
Interac, Visa and MasterCard, as bank operated
ABMs
Sources: See end of section
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Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Participant Type Overview:
Closed Loop Prepaid Providers
Role within the Canadian Payments System
• Role: Retailers who offer electronic cash-replacement cards that can be loaded with a dollar value and used like a debit/credit card where accepted. Stored value
cards are typically touted as substitutes for cash, however they only serve as pre-payment for the goods and services of participating stores. Stored value cards
may be reloadable
 Degree of Consolidation: Closed loop cards are provided by a number of businesses in Canada, and are generally operated on behalf of the retailers by
issuers and/or acquirers
 Relative Stability: Closed loop cards are widely popular in Canada. Contactless technology may require some closed loop providers to revamp their cards in the
face of growing competition
Market Participant Examples
• Esso Speedpass
• Shop! Card
• Starbucks Corporation
Timeline
 1997: Esso Speedpass introduced
 2001: Starbucks introduce card targeted at gift-buying market and frequent
Starbucks customers
 2004: Shop! Card introduced as Canada’s first mall-based gift card program
 2008: Starbucks launch gold card and rewards program introduced for
registered Starbucks cards
 2009: Mini Starbucks card introduced
Challenges and Issues
Challenges:
 Closed loop represents a very small portion of the
payments landscape and are usually targeted
value proposition to loyal customers
Issues:
 Slumping economy affects the amount of funds
people are willing to load into card accounts
 Reduced company investment in closed-loop
programs is limiting growth
Industry Value Drivers
 Value drivers for Closed Loop Prepaid Cards are:
− Value loaded on card
− Unused value
− Drives sales to retailer - loyalty
Regulatory Framework
 Federal: PIPEDA; Competition Act; Proceeds of
Crime (Money Laundering) and Terrorist
Financing Act
 Provincial: Consumer Protection Acts (Alberta,
BC, Manitoba, Nova Scotia, Ontario and
Saskatchewan); New Brunswick Gift Cards Act –
legislation generally bans expiry dates and
dormancy fees from being imposed on gift cards;
provincial privacy legislation
Sources: See end of section
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Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Participant Type Overview:
Loyalty & Rewards Programs
Role within the Canadian Payments System
 Role: Offer programs as incentives for card companies and retailers to entice customers to make purchases. There are typically three types of rewards
programs; point-based, cash-back and frequent flyer miles. Rewards companies operate in conjunction with many partners across numerous sectors. Loyalty and
rewards can be offered directly by retailers such as the Hudson’s Bay Company (the Hbc family includes the Bay, Zellers, Home Outfitters and Fields), or as part
of a consortium such as Air Miles. They can also be managed in-house, e.g. Canadian Tire Money, or outsourced to companies such as GE Money
 Degree of Consolidation: Loyalty and rewards are offered by a wide range of businesses of varying sizes. Air Miles and Aeroplan Canada are the most widely
used rewards companies with over 60% of Canadian households participating in one or both of their programs
 Relative Stability: The market for loyalty and rewards has been gaining popularity over recent years with more retailers offering a loyalty and rewards program.
Air Miles and Aeroplan continue to partner with various retailers to offer a wider variety of rewards
Market Participant Examples
• Aeroplan Canada Inc.
• Air Miles
• Hbc Rewards
• Petro-Points (Petro-Canada)
Timeline
 1984: Aeroplan is created by Air Canada
 1992: Airmiles founded
 2002: Aeroplan established as a wholly-owned limited partnership of Air
Canada; Groupe Aeroplan, a publicly held company, owns Aeroplan
 2006: ACE Aviation Holdings approved a special distribution to its
shareholders of units of Aeroplan Income Fund. The distribution represented
in the aggregate approximately 10.1% of the units of Aeroplan Income Fund
on a fully diluted basis
Challenges and Issues
Challenges:
 High competition requires Rewards companies to
reinvent their offering and differentiate themselves
 Tangible benefits are perceived as the minimum
by a more demanding customer
 Dependence on top accumulation partners for
revenues
Industry Value Drivers
 Loyalty and rewards are generally paid for each
point accumulated, which is a direct product of the
number of points collectors and average spend
 Consortium points programs rely on broad
acceptance to drive collection and point
purchasing
 Merchant-specific loyalty programs rely on in-store
spending to drive points profitability
Regulatory Framework
 Federal: Personal Information Protection and
Electronic Documents Act; Competition Act
 Provincial: Consumer Protection Act
 Partner companies operate in highly regulated
environments such as the airline industry and
changes in regulation effecting partners will effect
Rewards companies
Issues:
 Lower redemption rates drive higher profits, but
deliver lower perceived value to consumers
Sources: See end of section
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Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Participant Type Overview:
eWallet Providers
Role within the Canadian Payments System
 Role: Online payment and money transfer with expected growth to $22.8 billion globally by 2010. eWallets conducts online transactions by allowing customers to
store billing, shipping, payment, preference and other similar information; and then use this information to automatically complete a merchant's check-out page
 Degree of Consolidation: As an emerging participant type, the market is made up of few participants with the highest usage rates for PayPal (approximately 4M
active Canadian account holders)
 Relative Stability: Highly-fluid market. The popularity of Facebook may provide increased usage of Facebook Credits, which was fully rolled out in 2009
accommodating 14 currencies. Greater development of mobile technology will also see a change in how eWallet providers operate. Further innovation, such as
PayPal’s Adaptive Payments, also has potential to change the landscape of eWallets
Market Participant Examples
• Facebook Credits
• Google Checkout
• PayPal, Inc.
Challenges and Issues
Challenges:
 Charge for using eWallet payment service stops
many people from using the service
Issues:
 Traditional debit and credit payments are still
dominant in online commerce (an estimated 26%
of online payments are now made using alternate
products)
 Over-coming online payment security concerns for
many people
Timeline




1998: PayPal founded
2002: PayPal acquired by eBay in 2002 for $1.5B USD
2006: Google Checkout introduced by Google
2009: Facebook Credits platform rolled out
Industry Value Drivers
Regulatory Framework
 eWallets are dependent on online transactions to
 Federal: PIPEDA; Competition Act; Proceeds of
generate revenue. They require scale in:
o Volume of transactions
o Merchant client base
o Growth in online transactions
 Consumers value the convenience and security
offered to merchants
 Smaller merchants appreciate the flexibility and
lower cost of eWallets
Crime (Money Laundering) and Terrorist
Financing Act
 Provincial: Consumer Protection Acts; Provincial
Electronic Transactions Act, Electronic Commerce
Act
Sources: See end of section
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Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
Participant Type Overview:
Alternative Payment Vehicles
Role within the Canadian Payments System
• Role: Alternate payment vehicles is a broad catch-all category that includes Mobile Payments Providers, Canada Post ‘s epost and Transit Authorities (e.g.,
PRESTO). These payment vehicles and enablers continue to emerge with the most prevalent being payments by mobile phone
• Degree of Consolidation: As an emerging participant type, the market is made up of a broad range of payment vehicles
• Relative Stability: Highly-fluid market. Continued technological innovation is diversifying alternative payment vehicles. Further development of mobile and
contactless technologies coupled with the continued increase in the popularity of electronic bill payment will drive growth in the use of alternative payment
vehicles and businesses offering these payment types
Market Participant Examples
• ePost (Canada Post Corporation)
Timeline
 1981: TelPay founded as a research and development project of Comcheq
Services Limited
• Presto
• TelPay Inc.
• Zoompass
 1998: Epost founded as a joint venture between Canada Post Corporation
and BMO’s wholly-owned e-commerce subsidiary, Cebra Inc
 2004: Presto project conceived and currently under development by the
Ministry of Transportation and municipal transit service partners
 2009: Zoompass founded and operated by EnStream (a joint venture between
Bell Canada, Rogers Communications Inc. and TELUS Corporation)
Challenges and Issues
Challenges:
 Increased competition from card networks and
eWallets could reduce market share of an already
fragmented market
 Traditional payment types are often required to
“load” the alternate payment vehicle
 Could create collaboration opportunities
Issues:
 Alternative Payment Vehicles are still in the early
stages of development but have great potential
Industry Value Drivers
 Alternative Payment Vehicles are dependent on
transactions to generate revenue. They require
scale in:
o Volume of transactions
o Merchant client base
o Growth in online transactions
 Payment transactions are rapidly moving to
electronic formats due to their convenience, low to
no costs and speed-to-pay
 A decline in paper-based payments will allow
further growth opportunities for Alternate Payment
Vehicles
Regulatory Framework
 Federal: PIPEDA; Competition Act; Proceeds of




Crime (Money Laundering) and Terrorist
Financing Act
Provincial: Consumer Protection Acts
ePost acts primarily as a consolidator of bill
information into the online banking application,
credit card, or by electronic funds payment
Transit Authority has regulatory obligations similar
to closed loop cards
Most countries have not yet specifically regulated
contactless or mobile payments
Sources: See end of section
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Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
References
ABM Service Providers
1.
Arnfield, Robin [8 January 2009] Canadian White-Label ABMs Face an Uncertain Future, ABM and Debit News http://www.allbusiness.com/bankingfinance/banking-lending-credit-services-cash/11969616-1.html
2.
Canadian Bankers Association, http://www.cba.ca/en/media-room/50-backgrounders-on-banking-issues/118-abm-market-in-canada
3.
TNS Smart Network, http://www.tns-smart.net/company.html
Account Fees
1. Financial Consumer Agency of Canada [2009], The Cost of Banking Guide
Alternative Payment Vehicles
1.
Deloitte research and analysis
Clearers and Settlers
1.
American Express, http://home3.americanexpress.com/corp/os/history.asp
2.
Bank of Canada, http://www.bankofcanada.ca/en/financial/financial_gen.html#cpa
3.
Business Wire [28 April 2000] INTRIA-HP Solves Need for Resource Optimization with Account4, Business Wire http://www.allbusiness.com/companyactivities-management/contracts-bids/6430740-1.html
4.
Canadian Payments Association, www.cdnpay.ca
5.
MasterCard, http://www.mastercard.com/us/company/en/ourcompany/company_milestones.html
6.
MasterCard Canada, http://www.mastercard.com/ca/company/en/corp_history.html
7.
O’Connor, Sean [Autumn 2003] Developments, Issues and Initiatives in Retail Payments, Bank of Canada Review
8.
Visa, http://corporate.visa.com/about-visa/our-business/history-of-visa.shtml
Closed Loop Prepaid Cards
1.
ABM & Debit News [15 October 2009] Open-Loop Prepaid is Slowing Funds Loads Into Closed-Loop Accounts, ABM & Debit News
http://www.allbusiness.com/marketing-advertising/market-research-analysis/13221084-1.html
2.
Deloitte research and analysis
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Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
References
eWallet
1.
Deloitte research and analysis
2.
Graeber, Catherine [28 September 2001] PayPal Set to Challenge Banks on Bill Pay, Forrester
3.
PayPal Canada Blog, https://www.paypal-blog.ca/
FOREX Providers
1.
BIS [September 2007] Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2007
2.
Visa Commercial [2006] The Inefficiencies of Cross-Border Payments: How Current Forces are Shaping the Future
3.
Financial Transactions and Reports Analysis Centre of Canada, http://www.fintrac.gc.ca/re-ed/fx-eng.asp
4.
World Trade Organization [2009] International Trade Statistics
5.
Robertson, David [10 July 2006] Measuring and Communicating the Value of a Bank’s Payments Business, Journal of Payments Strategy and Systems Vol.
1 No. 1
6.
US Securities and Exchange Commission, http://www.sec.gov/answers/forcurr.htm
Issuers
1.
Bank of Canada, www.bankofcanada.ca
2.
Bank for International Settlement [2003] Payment Systems in Canada, Bank for International Settlement
3.
Bank of Montreal, http://www2.bmo.com/content/0,1089,divId-4_langId-1_navCode-5001,00.html
4.
Canadian Imperial Bank of Commerce, http://www.cibc.com/ca/about.html
5.
Committee on Payment and Settlement Systems of the Group of Ten Countries [2009] Statistics on Payment and Settlement Systems in Selected Countries,
Bank for International Settlements
6.
Fraser Milner Casgrain [2002] Banking Legislation in Canada: Early Changes in the New Millennium
7.
O’Connor, Sean [Autumn 2003] Developments, Issues and Initiatives in Retail Payments, Bank of Canada Review
8.
Royal Bank of Canada, http://www.rbc.com/canada.html
9.
Scotiabank, http://scotiabank.com/cda/eventdetail/0,1005,LIDen_SID106,00.html
10. The Toronto-Dominion Bank, http://www.td.com/150/index.jsp
11. Deposit and Fixed Income Advisory Service [2010], Investor Economics
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Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
References
Loyalty & Rewards
1. Canadian Newswire [30 April 2010] VersaPay Announces 2009 Year-End Results, Canadian Newswire
http://www.newswire.ca/en/releases/archive/April2010/30/c7306.html
2. Carbo-Valverde, Santiago and Linares-Zegarra, Jose M. [December 2009] How Effective are Rewards Programs in Promoting Payment Card Usage?
European Central Bank
3. Groupe Aeroplan [2008] Annual Information Plan
4. Industry Canada, http://www.ic.gc.ca/app/ccc/srch/nvgt.do?lang=eng&prtl=1&sbPrtl=&estblmntNo=234567098966&profile=cmpltPrfl&profileId=501&app=sold
5. Loyalty One [11 April 2009 ] Over 114 Million Active Canadian Loyalty Program Memberships in First-Ever Measurement of Canadian Loyalty Participation,
According to COLLOQUY Research, Loyalty One http://www.loyaltyone.com/whoWeAre/NewsReleasesItem.aspx?id=0c8362ed-851c-4d7c-a68884e9dafc86ca
6. MX Money, http://cxa.marketwatch.com/TSX/en/Market/companyfinancials.aspx?type=AnnIncomeStmt&symb=VPY&sid=4400368
7. Pilecki, Mary [19 July 2007] New Bank Rewards Programs Improve Customer Retention, Forrester
Merchant Acquirers
1. Bank for International Settlements [2003] Payment Systems in Canada, Bank for International Settlements
2. Canadian Payments Association, www.cdnpay.ca
3. Chase Paymentech, www.chasepaymentech.com
4. Competition Bureau Canada, http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_00148.html
5. Credit Union National Association [6 January 2010] CUNA Issue Summary: Interchange Fees, Credit Union National Association
6. Credit Union National Association [23 June 2010] Senate conferees accept House option on interchange, Credit Union National Association
7. Deloitte research and analysis
8. Department of Justice Canada, http://laws.justice.gc.ca/en/P-8.6/
9. Electronic Funds Transfer Working Group [2004] Consumers and Debit Card: Canadian Code of Practice for Consumer Debit Card Services, Canadian
Bankers Association
10. Financial Transactions and Reports Analysis Centre of Canada, http://www.fintrac-canafe.gc.ca/intro-eng.asp
11. Global Payments Canada, www.globalpaymentsinc.com/Canada/
12. Kjos, Ann [October 2007] The Merchant-Acquiring Side of the Payment Card Industry: Structure, Operations, and Challenges, Federal Reserve Bank of
Philadelphia
13. Ministry of Consumer Services Ontario, http://www.sse.gov.on.ca/mcs/en/pages/default.aspx
14. Moneris, www.moneris.com
15. Mutual Funds Dealers Association of Canada [23 January 2003] Member Regulation Notice: Electronic Signatures, Mutual Fund Dealers Association of
Canada
16. O’Connor, Sean [Autumn 2003] Developments, Issues and Initiatives in Retail Payments, Bank of Canada Review
17. PCI Security Standards Council, www.pcisecuritystandards.org
18. TD Bank Financial Group, www.tdbank.com
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Prepared by Deloitte
4. Review of Participants in the Payments Ecosystem
References
Payday Loan Providers
1.
Canadian Payday Loan Association, http://www.cpla-acps.ca/english/aboutcpla.php
2.
Cash Money, http://www.cashmoney.ca/about-us.aspx
3.
Financial Transactions and Reports Analysis Centre of Canada, http://www.fintrac.gc.ca/re-ed/msb-eng.asp
4.
Money Mart, http://www.moneymart.ca/about/
5.
Western Union, http://corporate.westernunion.com/history.html
Payment Networks
1.
American Express, http://home3.americanexpress.com/corp/os/history.asp
2.
Canadian Payments Association, www.cdnpay.ca
3.
Competition Bureau Canada, http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_00148.html
4.
Credit Union National Association [6 January 2010] CUNA Issue Summary: Interchange Fees, Credit Union National Association
5.
Credit Union National Association [23 June 2010] Senate conferees accept House option on interchange, Credit Union National Association
6.
Deloitte research and analysis
7.
Department of Justice Canada, http://laws.justice.gc.ca/en/P-8.6/
8.
Electronic Funds Transfer Working Group [2004] Consumers and Debit Card: Canadian Code of Practice for Consumer Debit Card Services
9.
Financial Transactions and Reports Analysis Centre of Canada, http://www.fintrac.gc.ca/re-ed/msb-eng.asp
10. Interac, http://www.interac.ca/about.php
11. MasterCard, http://www.mastercard.com/us/company/en/ourcompany/company_milestones.html
12. MasterCard Canada, http://www.mastercard.com/ca/company/en/corp_history.html
13. Ministry of Consumer Services Ontario, http://www.sse.gov.on.ca/mcs/en/pages/default.aspx
14. Mutual Funds Dealers Association of Canada, http://www.mfda.ca/regulation/notices/MR-0016.pdf
15. PCI Security Standards Council, www.pcisecuritystandards.org
16. Sullivan, Richard J. [21 May 2010] The Changing Nature of US Card Payment Fraud: Issues for Industry and Public Policy, Federal Reserve Bank of Kansas
City
17. Visa, http://corporate.visa.com/about-visa/our-business/history-of-visa.shtml
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Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
7. Money Service Companies
a. Participant Profiles
8. ABM Service Providers
b. Review of Payment-Related Activities
9. Closed Loop
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 89 -
Prepared by Deloitte
Appendix A: Participant Profiles
Background
Scope
•
This appendix should be read in conjunction with Section 4, Review of Participants in the Payments Ecosystem
•
The Canadian payments system is made up of a variety of different players with varying sizes and roles. These players can be
divided into eleven broad types:
Merchant Acquirers
Payment Networks
3. Payment Service Providers
4. Issuers
5. Clearers and Settlers
6. Money Service Companies
7. ABM Service Providers
8. Closed Loop
9. eWallet
10. Alternative Payment Vehicles
11. Loyalty and Rewards
1.
2.
Content
•
This appendix provides overviews of a representative sample of players from each category, including a range of ownership types
and market size
•
Only publicly available information was used in the compilation of this section. Information relating to some companies was
unavailable, particularly where they are privately owned or part of a larger organization. Where possible, industry trends were used
to replace unavailable information
•
While the most up-to-date information was used in every instance, data up to 2009/2010 was not always available
•
A list of references has been provided at the end of the Appendix
- 90 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
7. Money Service Companies
a. Participant Profiles
8. ABM Service Providers
b. Review of Payment-Related Activities
9. Closed Loop
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 91 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Type Overview:
List of Merchant Acquirers
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Introduction
• Role: Acquirers connect merchants to payments networks. In addition to providing POS terminals, online payments and telecommunications services, acquirers
may also provide integration with merchant cash registers and computer systems
• Degree of Consolidation: Almost 90% of transaction volume is processed by four companies: Chase Paymentech, Global Payments, Moneris Solutions and
TD Merchant Services
• Relative Stability: Some issuers (e.g., CIBC, Scotia, etc.) sold off their merchant acquiring business in the 1990s and 2000s. Currently, the market is
reasonably stable with emerging players serving online merchants
• See Section 4 of main document for more details
List of Merchant Acquirers (Non-Exhaustive)
Major Players
• Chase Paymentech Solutions*
Payments Landscape
Payment
Originators
Payment
Recipients
Payment Connectors
Cash
• Desjardins Group (Focus on serving Quebec merchants and credit
union customers)
Debit Cards
(POS & ABM)
• TD Merchant Services*
Merchant
Acquirer
Credit Cards,
Open-Loop Prepaid
• Global Payments Systems*
• Moneris Solutions*
Debit Networks
Payment
Originator’s
Financial
Institution
Sender
of Funds
(Consumer)
(Business)
(Government)
Credit Card Network
White Label
ABM
Operators
AFT Credits and Debits,
EDI
CPA Services
Network
(Issuer)
Cheques and other paper
remittances
Niche Players
LVTS
Wires
• Directcash Management Inc. (Primarily white-label ABMs)
Payment
Recipient's
Financial
Institution
Payment Service
Provider
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
SWIFT/LVTS
• TELUS Financial Services (Previously Emergis Inc.)
Canadian Payments Association
• Everlink Payment Services Inc. (Focus on credit union customers)
Transaction /
Processing
Support
• First Data Acquisition Corp. (Primarily core banking systems, but also
provides acquiring and processing)
Cash in
Circulation
Cash in
Circulation
Transaction /
Processing
Support
Bank of Canada
Payment Enablers (Simplified)
• Online Service Corp. (Primarily white-label ABMs)
• Open Solutions Canada (Primarily core banking systems, but also
provides acquiring and processing)
• Petro-Canada (Self-acquires rather than contract with a third party)
• TNS Smart Network Inc. (Largest white label ABM provider in Canada
with over 13,000 machines)
ABM Service Providers
Money Transfer Companies
Mobile Network Operators
Currency Exchange and Trading Companies
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Service Providers to Industry Participants
eWallet Providers
Payment Regulators (Simplified)
Provincial Regulators
Federal Regulators
Department of
Finance
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IIROC
*Profiled in this section
Sources: See end of section
- 92 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Chase Paymentech Solutions
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
•
Summary: Chase Paymentech is a global provider of electronic payments transaction processing services
Ownership: Wholly-owned subsidiary of JPMorgan Chase & Co.
Founded: In 1985. Began operations in Canada in November 2002 after purchasing Scotiabank's merchant acquiring point-of-sale portfolio
Headquarters and Employees: Dallas, Texas, United States with an estimated 2,100 employees globally
Markets Served: Canada, United States, United Kingdom, and the European Union
Value Proposition: Offers a comprehensive line of processing solutions and services via new technologies, and has a globally recognized brand
Sample of Merchants: Tim Hortons, Sobeys
Key Financial Metrics
Historical Trend
• Users: Approximately 110,000 merchants locations in Canada (estimated).
• Total transactions: 900 million transactions processed in 2010 in Canada,
Transactions (Millions)
Total Credit and Debit Card Transactions in Canada for the Payments
Industry, 2004-2008
(estimated)
Canadian Business
• Merchant Acquiring Market Share: 15-20% (estimated)
4,000
Credit Card CAGR: 9.97% Debit Card CAGR: 7.07%
3,000
2,000
1,000
0
2004
2005
2006
2007
2008
Credit Card Transactions (Millions)
Debit Card Transactions (Millions)
Suppliers / Partners
Sample Networks:
• American Express
Product Suite
• Point-of-Sale Debit / Credit Card
• Interac
Terminals and Equipment
• eCommerce Solutions
• MasterCard
• Gift Card Programs
• Visa
• Merchant Support
Recent Developments
 On November 23, 2010, Chase Paymentech renewed and enhanced its
contract with Tim Hortons, introducing Interac as a payment option
 On July 2, 2010, Chase Paymentech along with other leading acquirers
decided to support American Express’ new chip cards
 In May, 2010, Chase Paymentech Canada announced that it will accept the
Code of Conduct for Credit and Debit Card Industry in Canada, introduced by
The Honorable Jim Flaherty, Minister of Finance, on April 16, 2010
Resellers/Sales Partners:
• Scotiabank
 In June, 2009, Chase Paymentech simplified Chip and PIN migration for
• VersaPay
integrated merchants with its new product suite
Sources: See end of section
- 93 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Global Payments Systems
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
•
Summary: Global Payments Inc. is a provider of electronic payments transaction processing services
Ownership: Publicly listed
Founded: In 1967, purchased CIBC’s merchant acquiring business in 2001
Headquarters and Employees: Atlanta, Georgia, United States with 5,844 employees
Markets Served: Canada, United States, Latin America, the United Kingdom, the Asia-Pacific region, the Czech Republic and the Russian Federation
Value Proposition: It offers a comprehensive line of processing solutions and services via new technologies and has a globally recognized brand
Sample of Merchants: The GameSpot
Key Financial Metrics
Historical Trend
• Revenue: $398.5M USD (11% growth YOY, Q3 2010, Globally)
• $301.2M USD (2009, Canada)
• Expenditure: $324.7M USD (9% growth YOY, Q3 2010, Globally)
• Profit: $48.5M (third quarter)
• Users: Millions of merchant locations (Globally)
• Total transactions: Billions (Globally)
Transactions (Millions)
Total Credit and Debit Card Transactions in Canada, 2004-2008
Canadian Business
• Merchant Acquiring Market Share: 20-30% (Estimated)
4,000
Credit Card CAGR: 9.97% Debit Card CAGR: 7.07%
3,000
2,000
1,000
0
2004
2005
2006
2007
2008
Credit Card Transactions (Millions)
Debit Card Transactions (Millions)
Suppliers / Partners
Sample Networks:
• American Express
• Interac
• MasterCard
• Visa
Resellers/Sales Partners:
• CIBC
• HSBC
Product Suite
Recent Developments
• Offer a comprehensive line of
• On July 2, 2010, Global Payments along with other leading acquirers decided
processing solutions for credit and
debit cards; business-to-business
purchasing cards; gift cards;
electronic cheque conversion and
cheque guarantee, verification, and
recovery, including electronic
cheque services, as well as terminal
management
to support American Express’ new chip cards
• On May 17, 2010, Global Payments Canada announced that it will accept the
Code of Conduct for Credit and Debit Card Industry in Canada, introduced by
The Honorable Jim Flaherty, Minister of Finance, on April 16, 2010
• On June 12, 2009, the Company acquired the remaining 49% interest in
HSBC Merchant Services LLP, from HSBC Bank plc.
• On June 21, 2001, Global Payments Canada purchased the National Bank of
Canada’s merchant card services business and entered into a 10 year
alliance for marketing merchant payment-related products/services to National
Bank's customers
• National Bank
Sources: See end of section
- 94 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Moneris Solutions
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
•
Summary: Moneris Solutions is Canada’s largest processor and acquirer of non-cash payments transactions
Ownership: Owner in partnership by RBC Royal Bank and BMO Bank of Montreal
Founded: In 2000 as a joint investment between RBC Royal Bank and BMO Bank of Montreal
Headquarters and Employees: Toronto, Ontario with +1,900 employees
Markets Served: Canada and the United States
Value Proposition: Processes transactions for debit cards, all major credit card types and loyalty transactions with new technologies
Sample of Merchants: McDonald’s, Coles, Pharma Plus, and The Source
Key Financial Metrics
Historical Trend
• Users: +350,000 merchant locations (Canada and United States)
• Total transactions: +2.5B credit and debit card transactions a year
Transactions (Millions)
Total Credit and Debit Card Transactions in Canada, 2004-2008
Canadian Business
• Merchant Acquiring Market Share: 30-40% (Estimated)
4,000
Credit Card CAGR: 9.97% Debit Card CAGR: 7.07%
3,000
2,000
1,000
0
2004
2005
2006
2007
2008
Credit Card Transactions (Millions)
Debit Card Transactions (Millions)
Suppliers / Partners
Sample Networks:
• American Express
• Interac
• MasterCard
• Visa
Resellers/Sales Partners:
• RBC
• BMO
Product Suite
Recent Developments
• Processes transactions for debit
• On July 2, 2010, Moneris Solutions along with other leading acquirers decided
cards, all major credit card types,
and loyalty transactions
to support American Express’ new chip cards
• Moneris Solutions, is among the suitors on a shortlist to buy Global Merchant
• Provide Point of Sale (POS) options
for all types of merchant
requirements
Services (04/16/2010)
• Moneris Solutions, Inc. provides the Interac Online Service at Birks.Com
(07/05/2010)
• Chegg.Com selects Moneris Solutions, Inc. to process payments (12/17/2009)
• Moneris Solutions Inc. and Access Development partner to increase revenue
for merchants (06/01/2009)
Sources: See end of section
- 95 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
TD Merchant Services
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Processor and acquirer of non-cash payments transactions
• Ownership: Part of the TD Bank Financial Group (TD and Desjardins are the only major FIs that have not outsourced its merchant services division to a third
•
•
•
•
party)
Headquarters: Toronto, Ontario
Markets Served: Canada and the United States
Value Proposition: TD Merchant Services remains bank-owned, which allows TD to provide integrated services to its business customers
Sample of Merchants: Richtree Market Restaurants and Rocky Mountain Chocolate Factory
Key Financial Metrics
Historical Trend
• Financial data is not publicly available, as TD does not break this information
Total Credit and Debit Card Transactions in Canada, 2004-2008
Transactions (Millions)
out in its annual reports
Canadian Business
• Merchant Acquiring Market Share: 10-20% (Estimated)
4,000
Credit Card CAGR: 9.97% Debit Card CAGR: 7.07%
3,000
2,000
1,000
0
2004
2005
2006
2007
2008
Credit Card Transactions (Millions)
Debit Card Transactions (Millions)
Suppliers / Partners
Sample Networks:
• American Express
• Interac
• MasterCard
• Visa
Product Suite
Recent Developments
• Processes transactions for debit
• On July 2, 2010, TD Merchant Services along with other leading acquirers
cards, all major credit card types,
and loyalty transactions
decided to support American Express’ new chip cards
• TD Merchant Services purchased a number of MasterCard accounts from
• Provide Point of Sale (POS) options
for all types of merchant
requirements
First Data in December 2009, providing MasterCard processing services
directly
Sources: See end of section
- 96 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
7. Money Service Companies
a. Participant Profiles
8. ABM Service Providers
b. Review of Payment-Related Activities
9. Closed Loop
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 97 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Type Overview:
List of Payment Networks
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Introduction
• Role: Payment networks provide the technological and operational frameworks to enable transactions. In addition to operating payment switches and related
technology, payment networks create and develop card brands, set rules for operations, set fees and interchange rates, develop fraud-prevention strategies, act
as intermediary entities between acquirers and issuers and bring new payments innovations to market
• Degree of Consolidation: Visa and MasterCard dominate the credit card space with 40% and 20% of the Canadian market share respectively, according to
purchase volume in 2009, while Interac has almost 100% of the domestic debit market
• Relative Stability: After a period of stability the market is on the verge of significant change. The introduction of duality means that financial institutions can offer
both Visa and MasterCard, while on the debit side Interac is facing competition from Visa Debit and Maestro (MasterCard)
• See Section 4 of main document for more details
List of Payment Networks
Global Networks
• American Express Company*
Payments Landscape
Payment
Originators
Payment
Recipients
Payment Connectors
Cash
• Discover Network (Limited footprint in Canada)
Debit Cards
(POS & ABM)
Debit Networks
• MasterCard Worldwide*
• SWIFT Network
• Visa Inc.*
Merchant
Acquirer
Credit Cards,
Open-Loop Prepaid
Sender
of Funds
Payment
Originator’s
Financial
Institution
(Consumer)
(Business)
(Government)
Credit Card Network
White Label
ABM
Operators
AFT Credits and Debits,
EDI
CPA Services
Network
(Issuer)
Domestic Networks
Cheques and other paper
remittances
• ACCULINK (Credit union ABM network)
LVTS
Wires
• CPA Services Network
Payment
Recipient's
Financial
Institution
Payment Service
Provider
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
SWIFT/LVTS
• Interac Association*
Canadian Payments Association
• THE EXCHANGE NETWORK (FICANEX Services) (No-fee shared
ABM network serving credit unions and some banks)
Transaction /
Processing
Support
Cash in
Circulation
Cash in
Circulation
Transaction /
Processing
Support
Bank of Canada
Payment Enablers (Simplified)
ABM Service Providers
Money Transfer Companies
Mobile Network Operators
Currency Exchange and Trading Companies
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Service Providers to Industry Participants
eWallet Providers
Payment Regulators (Simplified)
Provincial Regulators
Federal Regulators
Department of
Finance
*Profiled in this section
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IIROC
Sources: See end of section
- 98 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
American Express Company
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Provides payment and travel related services including network operation, card issuing and merchant acquiring. Unlike Visa and MasterCard, Amex
issues their own cards, which were initially charge cards. Amex began issuing credit cards in 1987
Founded and Ownership: In 1965; publicly held company
Headquarters and Employees: New York, NY, with 60,000 employees worldwide
Markets Served: Cards accepted in over 200 countries globally
Main Clients: High-spending consumers, small businesses, corporations and merchants
Value Proposition: Connect high spending customers with merchants, help small businesses and corporations track and control their spending, offer premium
service and rich benefits and rewards programs to all customers
Key Financial Metrics
Transactions and Purchase Value, 2004-2009
200
Transactions (M)
Data unverified by American Express Canada.
Global
• Revenue: $26.7B USD in 2009 (-16.26% growth YOY, -7.94% 2-yr CAGR)
• Expenses: $16.4B USD in 2009 (-13.78% growth YOY, -4.00% 2-yr CAGR)
• Profit: $2.1B USD in 2009 (-21.08% growth YOY, -27.14% 2-yr CAGR)
• Market Share: Third largest payment network
Canada
• Cards: 4.1M cards in 2009 (-8.9% growth YOY, -2.36% 2-yr CAGR)
• Total volume: $21.66B USD in 2009 (-5.5% growth YOY)
• Total transactions: 163M in 2009 (-0.9% growth YOY)
• Canadian Market Share: 5.3% of combined credit/debit transactions, based
on 2009 purchase volume
Historical Trend
150
$30
Volume CAGR: 10.31%
Value CAGR: 12.17%
$25
$20
100
$15
$10
50
$5
0
$0
2004
2005
2006
2007
Volume
Processors / Partners
Product Suite
Processors
• Consumers: credit & charge cards
• Chase Paymentech, Global
• Businesses: charge & credit cards;
Payments, Moneris Solutions, TD
Merchant Services, and Desjardins
Partners
• Air Miles, Costco, Holt Renfrew,
Starwood Preferred Guest, and
Aeroplan
travel and expense management
services; business travel cards
• Merchants: acquiring, processing,
servicing and relationship
management; POS & back-office
products/service
• Traveler's cheques
Value ($B)
•
•
•
•
•
2008
2009
Value
Recent Developments
• American Express offered home mortgage payments on card in 2007 in the
United States; no indication if this program will be offered in Canada
• New rewards cards such as Points Advance launched, giving cardholders the
ability to use points in lieu towards rewards
• Launch of Centurion ultra-luxury card tailored to highly affluent card users
• American Express will be issuing EMV Chip and PIN in Canada in the near
future
• Debit card products are currently not a focus for the company
Sources: See end of section
- 99 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Interac Association
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Not-for-profit association that owns and operates Canada’s largest debit network (ABM & point-of-sale)
• Founded and Ownership: In 1984 by a consortium of Canadian FIs; not-for-profit association governed by a 14-Member Board of Directors, appointed annually;
Acxsys Corporation operates cross-border debit and Interac Online. Acxsys is owned by a consortium of Canadian FIs and offers a for-profit product suite
Headquarters and Employees: Toronto, Ontario with approximately 100 employees
Markets Served: Canada
Main Canadian Issuers: Almost every Canadian deposit-taking financial institution
Value Proposition: Merchants - Low fees ($0 interchange fee, small switching fee); Consumers – widespread acceptance at POS and ABMs within Canada
Key Financial Metrics
Historical Trend
Interac Direct Payment Transactions and Value, 2002-2009
• Revenue: Approx. $70M
• Expenses: Approx. $70M
5,000
• Profit: ~$0 as Interac operates on a cost-recovery model
4,000
Transactions (M)
• Cards: 37.4M cards in 2009 (3.3% growth YOY, 1.66% 3-yr CAGR)
• Total volume: $151.61B USD in 2009 (1.4% growth YOY, 3.85% 4-yr
CAGR)
• Total transactions: 3,882M in 2009 (4.8% growth YOY, 5.64% 3-yr CAGR)
• Canadian Market Share: 35% of combined credit/debit transactions, based
on 2009 purchase volume
$180
Volume CAGR: 7.09%
Value CAGR: 7.27%
$150
$120
3,000
$90
2,000
$60
1,000
$30
0
$0
2002
2003
2004
2005
Volume
Suppliers / Partners
• INSIDE Contactless – developing
chips containing the specifications
for INTERAC’s contactless debit
payment enhancement
Value ($B)
•
•
•
•
Product Suite
2006
2007
2008
2009
Value
Recent Developments
• POS & ABM Network: via Interac
• Government introduced Code of Conduct for the Canadian Credit and Debit
Direct Payment and Interac Shared
Cash Dispensing respectively
Card Industry
• In 2010, the Competition Bureau denied a proposal to convert the Association
to a for-profit organization. The Bureau indicated a willingness to consider a
new proposal addressing governance, structure and funding
• Interac Association has partnered with INSIDE Contactless to bring
contactless debit to Canada. Using Scotiabank debit cards and TD Merchant
Services' POS terminals, Interac Association successfully carried out a series
of contactless debit transactions. Interac Flash enabled debit cards are
expected to become available in 2011
Sources: See end of section
- 100 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
MasterCard Worldwide
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
Summary: Global payments network, providing authorization, clearing and settlement for issuing and acquiring FIs; provide debit card through Maestro brand
Founded and Ownership: In 1968 as the Interbank Card Association; MasterCard Incorporated became a publicly traded company in 2006
Headquarters and Employees: Purchase, NY with 5,500 employees worldwide
Markets Served: Credit cards accepted in over 210 countries; Maestro accepted at over 10M merchants in 60 countries and 11,000 POS terminals in Canada
Main Canadian Issuers: BMO, JP Morgan Chase, Canadian Tire Financial, MBNA/Bank of America
Value Proposition: Issuers - high interchange revenue; Merchants - increased spending by consumers; Businesses - cost control, expense management, and
rewards; Consumers - rewards and convenience (e.g., unanimous acceptance, free access to credit, etc.)
Key Financial Metrics
Historical Trend
Transactions and Purchase Value, 2004-2009
Global
• Revenue: $5.0B USD in 2008 (22.7% growth YOY, 30.3% 2-yr CAGR)
• Expenses: $5.5B USD in 2008 (86.75% growth YOY, 33.58% 2-yr CAGR)
• Profit: $-0.25B USD in 2008 (-123.39% growth YOY)
• Payments Vol.: $2.53T in 2008 (11.5% growth YOY, 23.65% 2-yr CAGR)
• Market Capitalization: $25.63B USD (as at 19th July 2010, 13:42)
• Maestro Cards: More than 652 million globally (0.3% growth YOY)
Canada
• Cards: 47M cards in 2009 (10.5% growth YOY, 14.25% 2-yr CAGR)
• Total volume: $92.9B USD in 2009 (-2.7% growth YOY, 1.05% 2-yr CAGR)
• Total transactions: 1.03B in 2009 (4.3% growth YOY, 7.96% 2-yr CAGR)
• Canadian Market Share: 20% of combined credit/debit transactions, based
on 2009 purchase volume
Suppliers / Partners
• Citibank and Bell – trial mobile
payments technology
• Obopay – to offer person-to-person
mobile payment service
• Sears – provides Sears MasterCard
• Bank of Montreal – provides BMO
MasterCard
• Capital One – provides Capital One
MasterCard
• Moneris – processes MasterCard
Transactions ( M)
1,200
1,000
$180
Volume CAGR: 10.52%
Value CAGR: 12.98%
$150
800
$120
600
$90
400
$60
200
$30
0
$0
2004
2005
2006
2007
Volume
Product Suite
Value ( $B)
•
•
•
•
•
•
2008
2009
Value
Recent Developments
• Credit and debit cards
• Since late 2008, MasterCard has been working with acquirers to facilitate
Maestro acceptance for merchants who choose to accept it
• PayPass contactless technology
• Mobile phone payment platform
• MasterCard completed a trial of mobile payments technology using PayPass
• Prepaid products
• MasterCard is enhancing card security by introducing EMV technology on its
(using PayPass under development)
• Traveler's cheques
• Bill payment via MasterCard’s
Automatic Bill Payment service
• LVTS for wholesale
• Cross-border transactions
through a partnership with Citibank and Bell
cards and EMV acceptance at merchant terminals
• Both BMO and CUETS have Canadian cardholders with Maestro active on
their cards. However, Code of Conduct forcing BMO to take either Maestro or
Interac off debit cards. MasterCard discussing Maestro with other issuers
• RBC became first Canadian bank to take advantage of the lifting of a ban on
Canadian credit card issuers offering both MasterCard and Visa cards
Sources: See end of section
- 101 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Visa Inc.
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
Summary: Operates world’s largest payments network (VisaNet), providing authorization, clearing, and settlement for issuing and acquiring FIs
Founded and Ownership: In 1958 by Bank of America as the BankAmericard. Became a public company in March 2008 through an IPO
Headquarters and Employees: San Francisco, California with 5,765 employees worldwide
Markets Served: Cards accepted in over 170 countries worldwide
Main Canadian Issuers: RBC, CIBC, Scotia, TD, Desjardins
Value Proposition: Issuers - high interchange revenue; Merchants - increased spending by consumers; Businesses - cost control, expense management, and
rewards; Consumers - rewards and convenience (e.g., unanimous acceptance in-store and online, free access to credit if bills paid on time, etc.)
Key Financial Metrics
Suppliers / Partners
• Monitise – joint venture to provide a
technology platform for financial
institutions and mobile network
operators
• Bancomer Transfer Services -
launch of money transfer service
• MoneyGram International - launch
MoneyGram's first cash-to-Visa card
program
• Rogers and RBC - launch
contactless payment solution
Transactions and Purchase Value, 2004-2009
2,000
Transactions ( M)
Global
• Revenue: $6.9B USD in 2009 (10.35% growth YOY, 38.75% 2-yr CAGR)
• Expenses: $3.4B USD in 2009 (-32.96% growth YOY, -18.15% 2-yr CAGR)
• Profit: $2.35B USD in 2009 (192.66% growth YOY)
• Payments Vol.: $2.68T USD in 2009 (0.9% growth YOY)
• Market Capitalization: $59.79B USD (as at 19th July 2010, 14:06)
Canada
• Cards: 32.1M cards in 2009 (4.0% growth YOY, 3.27% 2-yr CAGR)
• Total Volume: $180.35B USD in 2009 (-1.6% growth YOY, -0.28% 2-yr
CAGR)
• Total Transactions: 1,618M in 2009 (4.7% growth YOY, 5.75% 2-yr CAGR)
• Canadian Market Share: 40% of combined credit/debit transactions, based
on 2009 purchase volume
Historical Trend
1,500
Canada) and credit cards
• payWave contactless technology
$150
$120
1,000
$90
$60
500
$30
0
$0
2004
2005
2006
2007
Volume
Product Suite
• Debit cards (soon to be available in
$180
Volume CAGR: 7.46%
Value CAGR: 11.59%
Value ( $B)
•
•
•
•
•
•
2008
2009
Value
Recent Developments
• Visa debit likely to be introduced in Canada
• US Senate voted to accept a House proposal that would modify current
interchange practices
• Mobile phone payment platform
• Visa is enhancing its value proposition to consumers through innovative
• Prepaid cards
• International regulatory changes may allow Visa to penetrate new markets
• Bill payment and traveler's cheques
• New rebate cards and contactless payments technology targeted at low-value
(under development in Canada)
• Visa ePay (bill payments platform,
not available in Canada)
product/service offerings
everyday items (e.g., coffee, convenience store)
• Recurring payments: launched Automatic Bill Payment program
• Visa Money Transfer
Sources: See end of section
- 102 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
a. Participant Profiles
7. Money Service Companies
b. Review of Payment-Related Activities
9. Closed Loop
8. ABM Service Providers
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 103 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Type Overview:
List of Payment Service Providers
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Introduction
• Role: Payments Service Providers offer a range of processing services to issuers and acquirers. Some examples include card manufacturing, authorization,
clearing, settlement, customer service, back office functions, diverse infrastructure services for transactions involving currency (ABM, commercial deposits,
treasury management), cheques, remittances (retail and wholesale lockboxes), information management and delivery (statement production services)
• Degree of Consolidation: High degree of consolidation for core activities. Symcor processes approximately 80% of cheques within Canada. Most financial
institutions use either TSYS or First Data to manage their credit card portfolios
• Relative Stability: Whilst the participant landscape remains stable, the market is undergoing product diversification as participants align their product offerings
with the technological changes taking place in the payments industry
• See Section 4 of main document for more details
List of Payment Service Providers (Non-Exhaustive)
Global Providers
• EFT Canada Inc. (provides advanced electronic payment services and
tools for small and medium sized businesses)
• First Data Corporation*
• Global Collect (provides local online payment solutions for
international customer not-present channels such as internet, mail and
telephone orders)
• iCongo, Inc. (next generation e-commerce and marketing system
with integrated modules)
• PSiGate (provides electronic payment processing services, allowing
credit card acceptance and Interac Online payments)
• Symcor Inc.*
• Total System Services Inc. (TSYS)*
• Versapay*
Payments Landscape
Payment
Originators
Payment
Recipients
Payment Connectors
Cash
Debit Cards
(POS & ABM)
Debit Networks
Merchant
Acquirer
Credit C ards,
Open-Loop Prepaid
Sender
of Funds
Payment
Originator’s
Financial
Institution
(Consumer)
(Business)
(Government)
Credit Card Network
White Label
ABM
Operators
AFT Credits and Debits,
EDI
CPA Services
Network
(Issuer)
Cheques and ot her paper
remittances
Payment
Recipient's
Financial
Institution
Payment Service
Provider
LVTS
Wires
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
SWIFT/LVTS
Canadian Payments Association
Transaction /
Processing
Support
Local Providers
• DebitWay (certified INTERAC Online Payment (IOP) Service Provider;
exclusively offers IOP)
• Everlink Payment Services Inc.*
• Intria Items Inc.*
• Threshold Financial Technologies Inc.*
Cash in
Circulation
Cash in
Circulation
Transaction /
Processing
Support
Bank of Canada
Payment Enablers (Simplified)
ABM Service Providers
Money Transfer Companies
Mobile Network Operators
Currency Exchange and Trading Companies
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Service Providers to Industry Participants
eWallet Providers
Payment Regulators (Simplified)
Provincial Regulators
Federal Regulators
Department of
Finance
*Profiled in this section
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IIROC
Sources: See end of section
- 104 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Everlink Payment Services Inc.
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Provides payment solutions and services for transactions including electronic transaction switching, ABM certification, ABM management, POS
certification, debit and credit processing, and EMV chip technologies and capabilities. Everlink is EMV-certified with Interac, Visa and MasterCard
• Founded and Ownership: Founded in 2003. Privately held subsidiary of Fidelity National Information Services, which acquired Metavante Corporation in 2009,
•
•
•
•
and Celero Solutions. Everlink is owned 51% by FIS and 49% by Celero Solutions (which is itself owned by the three Prairie credit union centrals)
Headquarters and Employees: Markham, Ontario; 60 employees
Markets Served: Canada
Main Clients: Mainly credit unions, also FIs including several domestic and foreign-subsidiary banks and ISO’s across Canada
Value Proposition: Integrated suite of payment solutions and services and size of Everlink allows nimble and effective execution and customization
Key Metrics
Historical Trend
• Customer base includes 3.3M cardholders
• 99.997% Reliability (2008 and 2009); 99.991% 2010 YTD
• Yearly transaction volumes:
o 600M debit and credit transactions
o $15 B CDN in transactional value
• Market Share:
o 75% of Canadian credit unions use Everlink driving and switching solutions
o 90% of all Canadian credit unions and many other financial (FI) services
• Everlink Payment Services Inc. was formed in 2003 in partnership with its
shareholders Metavante Corporation (now part of FIS) and Celero Solutions
(a joint venture of the prairie Credit Union Centrals)
• Everlink became a Direct Connector on the INTERAC® Inter-Member
Network (IMN) in 1998 and acquired the CGI/CDSL switching assets in
December 2005
use Everlink processing and switching services
• Everlink services the payment transaction business needs of over 370
organizations
Suppliers / Partners
• Interac – direct connector on the
Interac Member Network
• Rycom Transaction Exchange
Network – provides POS and ABM
transaction services to ISO
community
• Strategic Information Technology –
provider of Portfolio Plus
• IBM – provides self service solutions
Product Suite
• Transaction processing
• ABM solutions e.g. ABM
certifications, ABM driving and
monitoring and web reporting
• POS solutions e.g. POS
certifications, direct connect debit,
credit processing, and POS
settlement
• EMV chip migration
Recent Developments
• Everlink partnered with Chase Paymentech to offer a new merchant credit
acquiring program
Sources: See end of section
- 105 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
First Data Corporation
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Provider of electronic commerce and payment solutions globally. First Data also provides processing software and services to Canadian FIs.
• Ownership: Privately held company through a merger transaction with an entity controlled by affiliates of Kohlberg Kravis Roberts & Co. (“KKR”)
• Founded: Incorporated in 1989 and was spun-off from American Express in 1992
• Headquarters and Employees: Atlanta, Georgia with approximately 25,000 employees worldwide
• Markets Served: Operates in 36 countries serving approximately 6M merchant locations
• Main Clients: Merchants, FIs and card issuers, e.g. Citigroup, General Electric, RBC, ScotiaBank, etc. No client represents more than 10% of total revenues
• Value Proposition: Single platform for multiple payment solutions; partnership with financial institutions create transaction efficiency and reduces fraud losses
Key Financial Metrics
Historical Trend
Suppliers / Partners
• Standard Chartered Bank –
partnership creates Merchant
Services
• Allied Irish Bank – partnership
creates AIB Merchant Services
• Allianz Bank – agreement allowed
entry into Polish market
• EUFISERV – form Trionis, enabling
greater access to ATMs, POS
terminals and card accounts in EU
Domestic and International Transactions, 2007-2009
• Data security and PCI compliance
• POS terminals and peripherals
• Loyalty, gift and incentive card
program provider
• Internet- and telephone-based
40
1.50
30
1.00
20
0.50
10
0
0.00
2007
2008
Volume
Product Suite
• POS payment solutions
2.00
Volume CAGR: 5.59% Value CAGR: -9.55%
Value ( $Tr)
50
Transactions ( B)
Global
• Revenue: $9.31B USD in 2009 (5.68% growth YOY, 7.55% 2-yr CAGR)
• Expenses: $9.16B USD in 2009 (-18.9% growth YOY, 10.5% 2-yr CAGR)
• Profit: $154.8M USD in 2009 (-106.25% growth YOY, -52.81% 2-yr CAGR)
• Total transaction volume: 46.31B in 2009 (4.54% growth YOY, 5.59% 2-yr
CAGR), includes debit and credit cards within the US and internationally
• Total transaction value: $1.3Tn USD in 2009 (-12.43% growth YOY, -9.71%
2-yr CAGR)
• Market Share: Payment services (75% market share); merchant services
(40% market share); card issuing services (25% market share)
Canadian Data
• Not published
2009
Value
Recent Developments
• First Data and INSIDE Contactless expanded their partnership by introducing
a MasterCard® PayPass™ contactless payment tag product in June 2010
• First Data announced an agreement in February 2010 to integrate bill
payment processing services from TIO Networks Corp., a leading North
American multi-channel bill payment processor, with First Data’s Money
Network electronic payroll distribution service
payment capabilities
• Prepaid solutions for payroll and
disbursement
• Mobile commerce
Sources: See end of section
- 106 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
INTRIA Items Inc.
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Provides financial and business information processing services. Its comprehensive, integrated suite of services includes cheque clearing, remittance
processing, currency management, and print and mail services
• Founded and Ownership: Established in 1996, INTRIA Items Inc. (“INTRIA”), a corporation incorporated under the laws of Canada and a wholly owned
•
•
•
•
subsidiary of the Canadian Imperial Bank of Commerce (“CIBC”)
Headquarters and Employees: Mississauga, Ontario with 2,750 employees, plus 17 processing centres across Canada
Markets Served: Canada
Main Clients: The company, through a network of processing centres, serves clients in the financial, utility, retail, and governmental sectors in Canada
Value Proposition: To provide clients with exceptional service, increased customer satisfaction, stringent risk management, and superior return on investment
Key Metrics
Historical Trend
• Currency processing per annum
o Approximately 104M ABM deposit envelopes
o Over 10M commercial deposits
o Approximately 6B bank notes
o Maintains cash levels in over 5,200 ABMs nationwide
• Process 52M consumer-to-business and business-to-business payments
Volume of Cheque Transactions by Non-Banks, 2004-2008
Transactions ( M)
1,600
processed annually
• Over 472M cheques are processed each year
• Produces more than 171M statements annually
Volume CAGR: -3.35%
1,200
800
400
0
2004
2005
2006
2007
2008
Volume
Suppliers / Partners
• CIBC – provides technology, finance
and taxation, and legal services
Sources: See end of section
Product Suite
• Remittance services (i.e. retail and
Recent Developments
wholesale lockbox)
• Cheque services (e.g. cheque
clearing, image archiving, and
exceptions processing)
• Currency services (e.g. ABM
envelope, treasury, commercial and
night deposit processing, and ABM
cash forecasting and reconciliations)
• Information management & delivery
services (e.g. customized
messaging, and mail fulfillment)
• Cash processing automation-implementation of high speed counting and
sorting equipment in the processing centres that results to notes being
counted, authenticated, sorted, and confirmed for fitness in one pass;
automation of manual processes
• Deposit processing and cash ordering platform -successfully rolled out the
highly regarded COMPASS platform to centrally support the company’s
national operations; COMPASS is a proven solution with benefits that
include: interactive voice response, automated receipt and adjustment
notification, more effective customer profile tracking, and enhanced business
continuity capabilities
• ABM platform replacement-currently in the pilot phase of the implementation
of a new ABM Platform that will allow the company to be a leader in Remote
Deposit Capture (RDC), the ability to capture cheque images from ABMs,
branches, and eventually directly from retailers and home users
- 107 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Symcor Inc.
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Provides the infrastructure services for transactions involving cheques, lockboxes and credit cards, as well as statement-to-payment services to the
•
•
•
•
•
banking, wealth management, brokerage, insurance, telecommunications and retail industries
Founded and Ownership: Founded in 1996. Privately held joint venture between BMO Bank of Montreal, RBC Royal Bank, and TD Bank Financial Group
Headquarters and Employees: Toronto, Ontario; close to 7,000 employees across North America
Markets Served: North America
Main Clients: Supports major banks and retail and telecommunications companies in Canada, as well as large-scale financial institutions in the U.S.
Value Proposition: Common-platform processing solutions bridge paper and electronic environments, enabling cost-effective streamlining of operations
Key Metrics
Historical Trend
• Over 100 customers in North America
Volume of Cheque Transactions by Non-Banks, 2004-2008
• Manages more than 8,600 lockbox accounts
1,600
Transactions ( M)
• Yearly transaction volumes:
o Approximately three billion cheques
o 197M customer payments
o Produce 675M customer statements
o Process over 250 million lockbox payments
• Canadian Market Share
o Cheque Processing: 70%
o Payment Processing: 80%
o Print Production: 60%-70%
Volume CAGR: -3.35%
1,200
800
400
0
2004
2005
2006
2007
2008
Volume
Suppliers / Partners
• Océ - provider of digital document
management technology and
services
• Bank of Montreal – wholesale
lockbox services, including cheque
and document imaging, remittance
data entry processing and reporting
services
• Scotiabank – manage all cheque
and bill payment processing
Product Suite
Recent Developments
• Cheque processing - all components
• Cheque usage has been declining year over year with the volume of cheques
from receiving and capturing to
archiving financial transaction data
• Payment processing - retail and
wholesale lockbox processing,
image remittance services,
electronic payment
• Statement production
cleared by the CPA in 2009 at 0.93B (-7.0% growth YOY, -3.96% 3-yr CAGR)
with their value at $1.05T CDN (-7.89% growth YOY, -2.99% 3-yr CAGR)
• Variable print is relatively flat, with a marginal decline
• Corporate cheques track to the overall health of economy, with a marginal
move to make business-to-business payments electronic
Sources: See end of section
- 108 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Threshold Financial Technologies Inc.
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Provides outsourced transaction switching, equipment provision, network administration, ABM management services, and POS and ABM solutions to
Key Financial Metrics
Historical Trend
• Has relationships with over 100 corporate retailers, banks and credit unions
• Approximately 1,700 machines across Canada
Shared Cash Dispensing Transactions and ABMs, 2005-2009
Number of Shared
ABMs ( thousands)
Volume of ABMs CAGR: 3.56% Volume of Transactions CAGR: -4.48%
60.00
350.00
58.00
300.00
56.00
250.00
54.00
200.00
52.00
150.00
50.00
100.00
48.00
50.00
46.00
0.00
2005
2006
2007
Volume of A BMs
Suppliers / Partners
Threshold works with its partners to
deliver programs, service and support
in ABM and POS solutions
• Brinks
• Universal ABM Services
• Carreker
• Wincor Nixdorf
• NCR
• Triton
• IBM
Product Suite
• Financial Institutions:
o ABM network management
o ABM equipment solutions
o Switching services
o ABM compliance upgrades
• Retailers
2008
2009
Number of S hared Cash D ispensing
Transactions ( M)
•
•
•
•
•
Canadian FIs, corporate retailers and ABM deployers. Threshold also owns and operates a nationwide private-label ABM network in Canada, branded 'Laser
Cash‘
Founded and Ownership: Founded in 1997; wholly owned subsidiary of Versent Corporation, a privately owned Canadian company
Headquarters and Employees: Mississauga Ontario with approximately100 employees
Markets Served: Canada
Main Clients: Retailers and FIs
Value Proposition: FIs – lower operating costs; Retailers – custom-branded ABMs, an ABM program aligned with the business’ objectives
Volume of T ransactions
Recent Developments
• Appointed Central Switch Provider for The Exchange Network, Canada’s only
national surcharge free ABM network
• Threshold is also currently building a new C2C (Coast to Coast) node
gateway solution for Central 1; the C2C node provides access to Canadian
payment networks, as well as debit card and ABM processing services, to
Canadian credit unions
o ABM capitalization, transport,
installation and commission,
communications
o 24 hour status monitoring
Sources: See end of section
- 109 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Total System Services, Inc. (TSYS)
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
•
Summary: Provides electronic payment processing, merchant services, and related services to FIs and companies around the globe
Ownership: Publicly traded company
Founded: In 1959 as part of Columbus Bank and Trust Co.; TSYS became separate publicly traded company in 1983 and spun-off from Synovus in 2008
Headquarters and Employees: Columbus, Georgia with approximately7,898 employees worldwide
Markets Served: Operates in 85 countries serving more than 300 clients, including relationships with more than half of the top-20 global banks
Main Clients: FIs and merchants
Value Proposition: Creators of TS2 and TS1; only company with a single platform capable of serving a client's portfolio on more than one continent
Key Financial Metrics
Historical Trend
Canada
• Revenue: $139.7M USD in 2009 (9.91% growth YOY, 4.96% 2-yr CAGR)
• Market Share: 2009 market share for issuer processing services for the
Canadian credit card market was 44%
Global
• Revenue: $1.69B USD in 2009 (-1.95% growth YOY, 0.77% 2-yr CAGR)
• Expenses: $1.35B USD in 2009 (-0.51% growth YOY, 1.24% 2-yr CAGR)
• Profit: $342M USD in 2009 (-7.23% growth YOY, -1.02% 2-yr CAGR)
• Global total transaction volume: 7.27B (-5.47% growth YOY, -12.54% 2-yr
CAGR)
• Total transaction value: N/A
Transaction Volume, 2007-2009
Transactions ( B)
10,000
2007
• TS1/TS2 – processing platforms that
integrated healthcare payment
solution
• Serverside Group - to launch TSYS
Card Shop
• First National Bank of Omaha – joint
venture to form First National
Merchant Solutions, LLC
Sources: See end of section
•
•
•
•
2008
2009
Volume
• mPay Gateway and Nova Libra – to
• Lighthouse1 - to provide an
4,000
0
Product Suite
scale and support multiple
languages and currencies on a
single platform
Card production, statements and
digital archiving; Compliance
Customer service, risk mitigation,
collections, and chargebacks
New account acquisition, data
management and reporting
End-to-end turnkey card
management system for mid-tier
and community banks
6,000
2,000
Suppliers / Partners
verify FSA and HSA eligibility at
POS for healthcare providers
Volume CAGR: -12.54%
8,000
Recent Developments
• TSYS signed Investment Agreement with First National Bank of Omaha on
March 1, 2010, to enter into a joint venture arrangement as a direct merchant
acquirer
• TSYS Healthcare announced an agreement in May 2010 with Lighthouse1, an
industry leader in consumer-driven healthcare (CDH) administration software
solutions, to provide an integrated end-to-end healthcare payment solution
• TSYS partnered, in April 2010, with Serverside Group for digital card solution
• TSYS Program Solution partnered with BancVue in September 2010, a
product development and marketing company to support community financial
institutions
- 110 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
VersaPay
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: A Canadian payment processor of debit, credit and gift card transactions which provides POS terminals to small to large business merchants.
VersaPay also offers online billing platforms for electronic funds transfers and credit card processing, and provides merchant accounts which integrate with
accounting software
• Founded and Ownership: In 2005. Listed
• Headquarters and Employees: Vancouver, British Columbia with approximately 45 employees
• Markets Served: Canada, United States and United Kingdom
• Partnerships: Payment processing for VersaPay’s Canadian merchant clients is provided by Chase Paymentech
• Value Proposition: Chase Paymentech partnership allows an aggressive rate offering; low-cost infrastructure allows cost savings to be passed to merchant
Key Financial Metrics
Historical Trend
Revenue: $8.41M CDN in 2009 (61.54% growth YOY)
Expenditure: $9.8M CDN in 2009 (Non-Interest Expense)
Profit: - $1.3M CDN in 2009
Total Volume:
Total transactions: $404M CDN in 2009 Yr (value processed) up 75% from
$231M CDN in 2008
• Market Share: Less than 5%
•
•
•
•
•
VersaPay Assets and Liabilities, 2006-2009
$2.00
CAD MIllions
$1.60
Assets CAGR: 85.02%
Liabilities CAGR: 224.04%
$1.20
$0.80
$0.40
$0.00
2006
2007
Assets (CAD Millions)
Suppliers / Partners
Sample Networks:
• American Express
• Interac
• MasterCard
• Visa
Resellers/Sales Partners:
• Chase Paymentech
Product Suite
2008
2009
Liabilities (CAD Millions)
Recent Developments
• Processes transactions for debit
• In April 2010, VersaPay agreed to sell its 75% ownership stake in Positive
• Provide Point of Sale (POS) options
• On January 20, 2010, shares of VersaPay began to be sold on the Toronto
cards, all major credit card types,
and loyalty transactions
for all types of merchant
requirements
Inc., a Canadian provider of wireless point-of-sale terminals and merchant
services
Stock Exchange under the letters “VPY”
• In July, 2009, VersaPay signed the Board of Trade of Metropolitan Montreal to
preferential credit, debit and ecommerce rates
• PsiGate
Sources: See end of section
- 111 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
a. Participant Profiles
7. Money Service Companies
b. Review of Payment-Related Activities
9. Closed Loop
8. ABM Service Providers
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 112 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Type Overview:
List of Issuers
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Introduction
• Role: Financial institutions who enable payments on behalf of their customers. In most cases the payment is funded from a deposit account, credit facility or
prepaid account. In addition to enabling the payments transaction, issuers may also extend additional services such as overdraft protection and revolving credit.
Issuers are required to be a member of their supported payment networks (e.g., member of Interac Association or Visa/MC/Amex license-holder). Non-FI
retailers with self-managed closed-loop cards are also considered issuers
• Degree of Consolidation: Depends on payment type. Approximately 62% of Visa and MasterCard credit cards in Canada are issued by five companies: BMO,
MBNA, TD Canada Trust, RBC and CIBC. Over 80% of debit transactions are processed by the six largest financial institutions. The ‘Big Six’ banks, Desjardins
Caisse network and credit union system have market share of greater than 60% of the savings account and greater than 80% of the chequing account market
• Relative Stability: The market has enjoyed relative stability over recent years. Large financial institutions continue to process the majority of transactions. The
recession has caused some monoline issuers to exit the Canadian marketplace. Smaller players continue to face challenges maintaining profitability
List of Issuers (Non-Exhaustive)
Full-Service Financial Institutions
• ATB Financial
• BMO Bank of Montreal*
• CIBC*
• Desjardins Group*
• HSBC Bank Canada
• RBC Royal Bank*
• Scotiabank (including Montreal Trust)*
• TD Canada Trust*
• National Bank of Canada
• Vancouver City Savings Credit Union*
Payments Landscape
Payment
Originators
Payment
Recipients
Payment Connectors
Cash
Debit Cards
(POS & ABM)
Debit Networks
Merchant
Acquirer
Credit C ards,
Open-Loop Prepaid
Sender
of Funds
Payment
Originator’s
Financial
Institution
(Consumer)
(Business)
(Government)
Credit Card Network
White Label
ABM
Operators
AFT Credits and Debits,
EDI
CPA Services
Network
(Issuer)
Cheques and ot her paper
remittances
Payment
Recipient's
Financial
Institution
Payment Service
Provider
LVTS
Wires
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
SWIFT/LVTS
Canadian Payments Association
Monoline Financial Institutions (niche players with limited product
offerings and a focus on credit cards)
• Canadian Tire Bank*
• GE Money (Hbc credit card)
• JPMorgan Chase and Co.*
• Capital One*
• Citibank (In process of divesting Canadian card business)
• MBNA Canada Bank*
Transaction /
Processing
Support
Cash in
Circulation
Cash in
Circulation
Transaction /
Processing
Support
Bank of Canada
Payment Enablers (Simplified)
ABM Service Providers
Money Transfer Companies
Mobile Network Operators
Currency Exchange and Trading Companies
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Service Providers to Industry Participants
eWallet Providers
Payment Regulators (Simplified)
Provincial Regulators
Federal Regulators
*Profiled in this section
Department of
Finance
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IIROC
Sources: See end of section
- 113 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Bank of Montreal
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
•
Summary: Bank of Montreal (BMO) is a Canada-based North American bank that offers a range of credit and non-credit products and services
Ownership: Listed
Founded: In 1817, BMO was the first chartered bank in Canada
Headquarters and Employees: Toronto, Ontario with approximately 36,173 employees
Markets Served: North America
Main Clients: Consumers, small business and corporate clients; national footprint
Value Proposition: Provides a full suite of payments products. Only one of two “Big 6” banks to solely issue MasterCard. Offers a full-suite of transactional and
savings account products. Close partnership with Air Miles reward program. Offers reward miles for debit transactions. Acquisition of Diner’s Club makes BMO
one of the largest corporate card issuers in Canada
Key Financial Metrics
Revenue: $11.1B CDN in 2009 (8.4% growth YOY, 3.16% 4-yr CAGR)
Expenditure: $7,391M CDN in 2009 (Non-Interest)
Profit: $1,787M CDN in 2009
Cards: 12.2M credit cards in 2009 (9% growth YOY, 5.28% 4-yr CAGR)
Total Volume: $ 39.83B CDN in 2009
Visa/MasterCard Purchase Transactions: 336.0M in 2009 (up 0.8%)
Active Credit Card Accounts: 2.57M in 2009
Chequing and Savings Account Market Share: 10% as at Q4 2009
BMO Total Credit Card Transaction Volume, 2005-2009
$50.00
Volume CAGR: 6.94%
$40.00
CAD Billions
•
•
•
•
•
•
•
•
Historical Trend
$30.00
$20.00
$10.00
$0.00
2005
2006
2007
2008
2009
Total Volume (CAD Billions)
Recent Developments
Payment Types Offered
Cash
Cheques
Debit POS (Interac/Maestro)
Debit Cash (Interac/Cirrus)
Credit Cards (MasterCard)
AFT Debits/Credits
Electronic Remittances
Closed Loop Cards







• On July 8, 2010, BMO lowered credit card costs for small business owners
LVTS

SWIFT Transfers

• In March 2010, BMO launched first World Elite MasterCard in Canada
International Remittances

• In April 2010, BMO stated that they will abide by the new voluntary Code of
Loyalty (Air Miles)

eWallets
P2P Electronic Trans. (Interac)
Mobile Network Payments

with introduction of two new MasterCard products
Conduct for the Credit and Debit Card Industry in Canada
• In January 2010, BMO introduced Smart Steps for business customers, a
service which helps customers optimize their suite of core banking and
payment services
• In 2009, BMO purchased the North American Diner’s Club portfolio from
Citibank
• In 2009, BMO launched the Smart Saver Account, an online savings account
- 114 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Bank of Nova Scotia
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
•
Summary: BNS offers a range of products/services, including retail, commercial, corporate and investment banking in the Canadian and international markets
Ownership: Listed
Founded: In 1832
Headquarters and Employees: Toronto, Ontario with approximately 67,802 employees
Markets Served: ~50 Countries worldwide
Main Clients: Consumers, small business and corporate clients; national footprint
Value Proposition: Provides a full suite of payments products including a full suite of transactional and savings accounts. Close partnership with Cineplex
Entertainment through the SCENE rewards program. Offers reward points for debit transactions
Key Financial Metrics
Revenue: $7,763M CDN in 2009 (9.57% growth YOY, 1.71% 3-yr CAGR)
Expenditure:
Profit: $ 1,977M CDN in 2009 (in Canada)
Cards: 3.1M credit cards in 2009 (6.5% growth YOY, -4.96% 4-yr CAGR)
Total Volume: $20.55B CDN in 2009
Visa/MasterCard Purchase Transactions: 135.5M in 2009 (up 8.4%)
Active Credit Card Accounts: 1.77M in 2009
Chequing and Savings Account Market Share: 9% as at Q4 2009
Bank of Nova Scotia Total Credit Card Transaction Volume, 2005-2009
$25.00
Volume CAGR: 7.2%
$20.00
CAD Billions
•
•
•
•
•
•
•
•
Historical Trend
$15.00
$10.00
$5.00
$0.00
2005
Cheques
Debit POS (Interac)
Debit Cash (Interac/Plus)
Credit Cards (Visa)
AFT Debits/Credits
Electronic Remittances
Closed Loop Cards







LVTS

SWIFT Transfers

International Remittances

Loyalty (Scotia SCENE)

eWallets
P2P Electronic Trans. (Interac)
Mobile Network Payments
2007
2008
Total Volume (CAD Billions)
2009
Recent Developments
Payment Types Offered
Cash
2006
• In November 2009, BNS partnered with M-Com, an international mobile
banking and payments solution provider, to bring mobile banking to BNS
customers in the spring of 2010
• In 2008, Scotia introduced ‘Bank the Rest’, a program that bundled a
transaction account with a Scotia Money Master savings account and
automatically transferred funds from the transaction account to the savings
account each time the customer used their debit card at point of sale
• In 2009, Scotia launched the Scotia Power Savings Account, an online-only

high interest savings account offering limited transaction capabilities and
significant fees for POS debit transactions ($5.00 per transaction)
- 115 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Canadian Imperial Bank of Commerce (CIBC)
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
•
Summary: CIBC offers a range of products/services, including retail, commercial, corporate and investment banking in the Canadian and international markets
Ownership: Listed
Founded: In1961, through the merger of the Canadian Bank of Commerce and the Imperial Bank of Canada
Headquarters and Employees: Toronto, Ontario with approximately 32,555 employees
Markets Served: Canada
Main Clients: Consumers, small business and corporate clients; national footprint
Value Proposition: Provides a full suite of payments products. Offers a full suite of transactional and savings account products. Close partnership with Aeroplan
with the Aerogold suite of rewards cards. Targets immigrant populations through innovative payment and remittance programs
Key Financial Metrics
Historical Trend
CIBC Total Credit Card Transaction Volume, 2005-2009
$70.00
CAD Billions
Revenue: $9,549M CDN in 2009 (6.17% growth YOY, 0.74% 3-yr CAGR)
Expenditure: $6,660M CDN in 2009 (Non-Interest Expense)
Profit: $1,174 M CDN in 2009
Cards: 6.8M credit cards in 2009 (-4.9% growth YOY, 1.93% 4-yr CAGR)
Total Volume: $62.83B CDN in 2009
Visa/MasterCard Purchase Transactions: 486.1M in 2009 (down 1.5%)
Active Credit Card Accounts: 3.57M in 2009
Total Transactions: Processes over 2.7B transactions annually across North
America
• Chequing and Savings Account Market Share: 8% as at Q4 2009
(excludes PC Financial market share of 5%)
•
•
•
•
•
•
•
•
Volume CAGR: 2.45%
$65.00
$60.00
$55.00
$50.00
2005
Cheques
Debit POS (Interac)
Debit Cash (Interac/Plus)
Credit Cards (Visa)
AFT Debits/Credits
Electronic Remittances
Closed Loop Cards







LVTS

SWIFT Transfers

International Remittances

Loyalty (Aeroplan/Aventura)

2009
• In June 2010, CIBC broadened its reach in the Canadian marketplace through
the acquisition of a $2.1-billion credit card portfolio from Citigroup's Canadian
MasterCard business
• In April 2010, CIBC introduced an innovative mobile banking experience for
clients using an Internet-enabled BlackBerry or another smartphone, allowing
customers to take advantage of the latest graphics capabilities
• In 2009, CIBC introduced the Renaissance High Interest Savings Account,
eWallets
P2P Electronic Trans. (Interac)
2007
2008
Total Volume (CAD Billions)
Recent Developments
Payment Types Offered
Cash
2006
available via FundSERV to financial advisors

Mobile Network Payments
- 116 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Canadian Tire Bank
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
•
Summary: The financial services arm of Canadian Tire. It is the 8th largest credit card issuer in Canada by total credit card transaction volume in 2009
Ownership: Listed
Founded: In 1961 as Midland Shoppers Credit Limited, but was purchased by Canadian Tire in 1968
Headquarters and Employees: Welland, Ontario (due to move to Oakville, Ontario, effective as of the end of Q1 2011) with approximately 1400 employees
Markets Served: Canada
Main Clients: Consumers. National footprint
Value Proposition: Credit cards are the primary product line. Offers in-store and gas discounts, and the ability to collect “Canadian Tire Money” with every
purchase. Banking product offer is limited to a high interest savings product that offers limited transaction capabilities
Key Financial Metrics
Revenue: $380.6M CDN in Q2, 2010 YTD (2.9% growth YOY)
Profit: $41.0M CDN in Q2 2010 YTD (288.5% growth YOY)
Cards: 5.5M credit cards in Q2 2010 ending
Total Volume: $5.66B CDN in Q2 2010 YTD (6.0% growth YOY)
Active Credit Card Accounts: 1.69M in Q2 2010 ending
Canadian Tire Total Credit Card Transaction Volume, 2005-2009
$12.00
$10.00
CAD Billions
•
•
•
•
•
Historical Trend
Volume CAGR: 8.87%
$8.00
$6.00
$4.00
$2.00
$0.00
2005
2006
2007
2008
2009
Total Volume (CAD Billions)
Recent Developments
Payment Types Offered
Cash
Cheques
Canadian Tire All-in-One account (a hybrid mortgage, transactional bank
account) to National Bank
International Remittances
Debit Cash
AFT Debits/Credits
• In October 2009, Canadian Tire sold their mortgage book, including the
SWIFT Transfers
Debit POS
Credit Cards (MasterCard)
• Canadian Tire moved its standard annual interest rate to 19.99% from 19.5%
LVTS

Loyalty (Canadian Tire Money)

eWallets
Electronic Remittances
P2P Electronic Transfers
Closed Loop Cards
Mobile Network Payments
Sources: See end of section
- 117 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Capital One
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
•
Summary: Capital One is a U.S. based bank holding company specializing in credit cards, home loans, auto loans, banking, and savings products
Ownership: Listed
Founded: In 1988
Headquarters and Employees: McLean, Virginia, United States with approximately 28,000 employees
Markets Served: Canada, United States, and the United Kingdom
Main Clients: Consumers, including consumers with special credit needs
Value Proposition: Credit cards are Capital One’s only Canadian product. Wide range of credit cards tailored to consumers with special needs, such as low
credit scores, limited credit history or a need for revolving credit. Competitive in-house loyalty program
Key Financial Metrics
Revenue: $1,291M USD in 2009 (Non-US Card Revenue)
Expenditure: $482M USD in 2009 (Non-US Non-Interest Card Expense)
Profit: $59M USD in 2009 (Non-US Card Net Income)
Cards: 2.1M credit cards in 2009
Total Transaction Volume: $3.2B in 2009
Active Credit Card Accounts: 880,000 in 2009
Total Credit Card Loans: $3.5B USD in 2009 (Canada)
Purchase Volume: $1.98B in 2009
Capital One Total Credit Card Transaction Volume, 2005-2009
$8.00
$7.00
CAD Billions
•
•
•
•
•
•
•
•
Historical Trend
Volume CAGR: -11.43%
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
2005
2006
2007
2008
2009
Total Volume (CAD Billions)
Recent Developments
Payment Types Offered
Cash
Cheques
International Remittances
Debit Cash
AFT Debits/Credits
(09/10/2009)
SWIFT Transfers
Debit POS
Credit Cards (MasterCard)
• Capital One Canada is counted among the country's top 100 employers
LVTS

Loyalty (Reward Miles)

eWallets
Electronic Remittances
P2P Electronic Transfers
Closed Loop Cards
Mobile Network Payments
Sources: See end of section
- 118 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Desjardins Group
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
•
Summary: Desjardins Group is the largest financial institution in Québec, the first cooperative financial group in Canada and sixth largest in the world
Ownership: Cooperative
Founded: In 1900
Headquarters and Employees: Lévis, Québec. 42 200 employees across Canada
Markets Served: Established in every region of Québec, in Ontario, elsewhere in Canada and in the United States, most notably in Florida
Main Clients: Individuals, businesses and institutions
Value Proposition: Main business segments: Personal and Commercial; Life and Health Insurance; General Insurance; and Securities Brokerage, Asset
Management and Venture Capital. Extremely high penetration in Quebec
Key Financial Metrics
Revenue: $10,670M CDN in 2009
Expenditure: $5,141M CDN in 2009 (Non-Interest Expense)
Profit: $1,077M CDN in 2009
Cards: 3.4M credit cards in 2009
Total Volume: $20.28B CDN in 2009
Visa/MasterCard Purchase Transactions: 170.4M in 2009 (up 11.7%)
Active Credit Card Accounts: 1.73M in 2009
Credit Card Service Revenue: $444M CDN in 2009 (Includes lending fees)
Total deposits: $106.7B in 2009
Desjardins Total Credit Card Transaction Volume, 2005-2009
$25.00
Volume CAGR: 16.95%
$20.00
CAD Billions
•
•
•
•
•
•
•
•
•
Historical Trend
$15.00
$10.00
$5.00
$0.00
2005
2006
2007
2008
2009
Total Volume (CAD Billions)
Recent Developments
Payment Types Offered
Cash
Cheques
Debit POS (Interac)
Debit Cash (Interac/Plus)
Credit Cards (Visa)
AFT Debits/Credits
Electronic Remittances
Closed Loop Cards







LVTS

SWIFT Transfers

International Remittances

Loyalty (BONUSDOLLARS)

• On June 22, 2010, Desjardins Group was announced as one of the top ten
among the 50 Best Corporate Citizens in Canada
• On September 2, 2010, Desjardins Group ranked 4th safest North American
financial Institution and has improved its “World’s 50 Safest Banks” ranking
from 26th to 25th in the world
eWallets
P2P Electronic Trans. (Interac)

Mobile Network Payments
Sources: See end of section
- 119 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
JPMorgan Chase & Co. (Canada)
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Provides financial services, including investment banking, financial transaction processing, asset management and private equity. In Canada,
business activities focus on providing credit cards to consumers and operating card programs on behalf of merchants
• Founded and Ownership: Earliest predecessor founded in 1799, JPMorgan Chase & Co. formed in 2004 through a merger between J.P. Morgan & Co. and
•
•
•
•
Bank One Corp.
Headquarters and Employees: New York, New York with more than 200,000 employees
Markets Served: Operates in more than 60 countries
Main Clients: Sears, Best Buy, Future Shop, Sony, Starbucks, British Airways
Value Proposition: Partnerships with leading retailers, data analytics for merchant clients, competitive rewards offerings for consumers
Key Financial Metrics
Historical Trend
Global
• Revenues: $100.4B USD (49.34% growth YOY, 17.44% 3-yr CAGR)
• Expenses: $52.4B USD (20.35% growth YOY, 10.36% 3-yr CAGR)
• Profit: $11.7B USD (109.24% growth YOY, -6.71% 3-yr CAGR)
Canada
• Market Share: ranked #13 in terms of total volume of credit cards amongst
Visa and MasterCard credit card issuers in Canada in 2009 ; ranked #10 in
terms of number of credit cards amongst Visa and MasterCard credit card
issuers in Canada in 2009
• Total volume: $1.9B USD in 2009 (6% growth YOY, 49.26% 3-yr CAGR)
• Total credit cards: 2.4M in 2009 (20% growth YOY, 85.01% 3-yr CAGR)
Value ( $m)
JPMorgan Chase Total Credit Card Transaction Volume, 20052009
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Volume CAGR: 40.44%
2005
2006
2007
2008
2009
Total Volume (CAD M illions)
Recent Developments
Payment Types Offered
Cash
Cheques
• JPMorgan Chase is planning on expanding how their firm serves clients
through the development of mobile and ecommerce payments
International Remittances
Debit Cash

AFT Debits/Credits
Loyalty (Affiliate Programs)
eWallets

• Launched the new Continental Airlines OnePass Plus Card and announced
improvements to the existing Continental Airlines Presidential Plus Card
• Rolled out two new free mobile banking features to help customers manage
their accounts more effectively
P2P Electronic Transfers
Electronic Remittances
Closed Loop Cards (Sears etc.)
Priority Club® Select Visa® Card
SWIFT Transfers
Debit POS
Credit Cards (MasterCard)
• Launched an all-new credit card product designed by frequent travelers, the
LVTS

Mobile Network Payments
Sources: See end of section
- 120 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
MBNA Canada Bank
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: The largest MasterCard issuer (based on outstandings, cash volume, and active accounts) and one of the largest credit card issuing banks in Canada
• Ownership: Unlisted – Subsidiary of Bank of America
• Founded: In 1982 and was acquired by Bank of America 2006
• Headquarters and Employees: Canadian headquarters are located in Ottawa with approximately 1,258 employees nationwide
• Markets Served: Canada, United States, United Kingdom, Ireland, and Spain
• Main Clients: Credit unions, consumers
• Value Proposition: Customized services for credit union clients, affiliate card offerings with charities, community and sports organizations.
Key Financial Metrics
Historical Trend
Canada
• Cards: 11.2M credit cards in 2009 (7.2% growth YOY)
• Total Volume: $16.92B CDN in 2009
• Visa/MasterCard Purchase Transactions: 121.0M in 2009 (up 3.6%)
• Active Credit Card Accounts: 3.14M in 2009
MBNA Canada Bank Total Credit Card Transaction Volume, 2005-2009
$20.00
Volume CAGR: 21.59%
CAD Billions
$15.00
$10.00
$5.00
$0.00
2005
2006
2007
2008
2009
Total Volume (CAD Billions)
Recent Developments
Payment Types Offered
Cash
Cheques
Debit POS (Interac)
Debit Cash (Interac/Plus)
Credit Cards (MasterCard)
AFT Debits/Credits (No Debits)
Electronic Remittances
Closed Loop Cards
• In March 2009, MBNA entered into a partnership with Shoppers Drug Mart
LVTS


and began issuing Shoppers Drug Mart Optimum MasterCards
SWIFT Transfers
• In 2006, Bank of America acquired MBNA
International Remittances
• In 2007, MBNA Canada Bank acquired CUETS, which was the largest
Loyalty (MBNA, travel,
automotive, and other rewards)
MasterCard credit card issuer for credit unions in Canada

eWallets
P2P Electronic Transfers
Mobile Network Payments
- 121 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
President’s Choice Bank
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: President’s Choice Financial® is a Loblaws Inc. brand and trademark, which has been licensed to, among others, President’s Choice Bank, the issuer
•
•
•
•
•
of the President’s Choice Financial® MasterCard®, and President’s Choice Services Inc., which operates the PC® points rewards program that is a key feature
of the President’s Choice Financial MasterCard
Ownership: Loblaws Inc., President’s Choice Bank and President’s Choice Services Inc. are wholly owned subsidiaries of Loblaw Companies Limited
Founded: In 1998
Markets Served: Canada
Main Clients: Consumers, national footprint through a network of agents in approximately 175 stores, as well as online and via phone
Value Proposition: Offers a credit card. Strategy focuses on no annual fees and the PC® points rewards program
Key Financial Metrics*
Historical Trend
• Revenues: $303M
PC Financial Total Credit Card Transaction Volume, 2005-2009
• Expenses: $178M
$12,000
• Market Share: Ranked #11th in terms of total volume of credit cards amongst
$10,000
CAD Millions
• Profit: $89M
Visa and MasterCard credit card issuers in Canada in 2009 ; ranked #12 in
terms of number of credit cards amongst Visa and MasterCard credit card
issuers in Canada in 2009
• Total volume: $9.2B in 2009 (1.4% growth YOY)
• Total credit cards: 2.2M in 2009 (11.3% growth YOY)
Volume CAGR: 15.44%
$8,000
$6,000
$4,000
$2,000
$0
2005
2006
2007
2008
2009
Total Volume (CAD M illions)
Recent Developments
Payment Types Offered
Cash
Cheques


Debit POS (Interac)
AFT Debits/Credits
brokers in the Fall of 2010
• PC Bank started issuing PC MasterCard Chip cards with Signature in March
SWIFT Transfers
2010
International Remittances
Debit Cash (Interac)
Credit Cards (MasterCard)
• President’s Choice Bank (PC Bank)launched GICs solely through third party
LVTS


Loyalty (PC Points)
• PC Bank launched PC MasterCard with PayPass RFID technology in 2007

and completed installation of PayPass terminals in Loblaw front ends in 2008
eWallets
Electronic Remittances
P2P Electronic Transactions
Closed Loop Cards
Mobile Network Payments
Note: Financial metrics relate to the operations of PC Bank only
- 122 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Royal Bank of Canada
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: RBC is the largest bank in Canada, measured by assets and market capitalization, and among the largest banks in the world, based on market
•
•
•
•
•
capitalization
Founded and Ownership: In 1864; listed
Headquarters and Employees: Toronto, Ontario with approximately 78,000 employees
Markets Served: Canada, the US and 51 other countries
Main Clients: Consumers, small business and corporate clients; national footprint
Value Proposition: Provides a full suite of payments products. Largest dual issuer (Visa and MasterCard) in Canada. Offers a competitive Avion in-house
rewards program. Serves as the “direct connector” to payments networks for a number of smaller financial institutions
Key Financial Metrics
Revenue: $29,106M CDN in 2009
Expenditure: $14,558M CDN in 2009 (Non-Interest Expense)
Profit: $ 3,858M CDN in 2009
Cards: 7.5M credit cards in 2009 (1.6% growth YOY, 1.78% 4-yr CAGR)
Total Volume: $58.36B CDN in 2009
Visa/MasterCard Purchase Transactions: 442.2M in 2009 (up 6.3%)
Active Credit Card Accounts: 3.88M in 2009
Chequing and Savings Account Market Share: 20.05% as of June 2010
RBC Total Credit Card Transaction Volume, 2005-2009
$70.00
$60.00
CAD Billions
•
•
•
•
•
•
•
•
Historical Trend
Volume CAGR: 8.81%
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
2005
2006
2007
2008
2009
Total Volume (CAD Billions)
Recent Developments
Payment Types Offered
Cash
Cheques
Debit POS (Interac)
Debit Cash (Interac/Plus)
Credit Cards (Visa/MasterCard)
AFT Debits/Credits
Electronic Remittances
Closed Loop Cards







LVTS

SWIFT Transfers

International Remittances

Loyalty (RBC Rewards)

eWallets
• RBC launched myFinanceTracker, Canada's first online financial
management tool integrated into an online banking system.
myFinanceTracker will automatically categorize transactions, track expenses
and provide advanced budgeting capabilities for all personal banking and
credit card accounts
• On March 8, 2010 the WestJet reward programs take flight with launch of
new WestJet RBC MasterCard and Frequent Guest Program
• In 2009, RBC launched the RISA high interest savings account distributed
P2P Electronic Trans. (Interac)

Mobile Network Payments

- 123 -
through advisors. The RISA offers very limited transaction capability
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
The Toronto Dominion Bank
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
•
Summary: TD is the second largest bank in Canada by market capitalization and deposits and the sixth largest bank in North America
Ownership: Listed
Founded: In 1955 through the merger of the Bank of Toronto and the Dominion Bank
Headquarters and Employees: Toronto, Ontario with approximately 69,500 employees
Markets Served: Canada, the United States and the UK
Main Clients: Consumers, small business and corporate clients; national footprint
Value Proposition: Provides a full suite of payments products. Offers a competitive in-house rewards program. As the largest financial institution to keep their
acquiring business in-house, is able to offer innovative end-to-end payments services for their corporate and small business clients
Key Financial Metrics
Revenue: $17,860M CDN in 2009
Expenditure: $12,211M CDN in 2009 (Non-Interest Expense)
Profit: $3,120M CDN in 2009
Cards: 9.3M credit cards in 2009 (12.6% growth YOY, 9.88% 4-yr CAGR)
Total Volume: $33.43B CDN in 2009
Visa/MasterCard Purchase Transactions: 295.9M in 2009 (up 4.7%)
Active Credit Card Accounts: 3.87M in 2009
Chequing and Savings Account Market Share: 16% as at Q4 2009
TD Total Credit Card Transaction Volume, 2005-2009
$40.00
$35.00
CAD Billions
•
•
•
•
•
•
•
•
Historical Trend
Volume CAGR: 11.74%
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
2005
2006
2007
2008
2009
Total Volume (CAD Billions)
Recent Developments
Payment Types Offered
Cash
Cheques
Debit POS (Interac)
Debit Cash (Interac/Plus)
Credit Cards (Visa)
AFT Debits/Credits
Electronic Remittances
Closed Loop Cards







LVTS

SWIFT Transfers

International Remittances

Loyalty (TD Travel)

• In June 2010, TD launched a free TD mobile app for BlackBerry and Android
devices that allows customers to pay bills, check account balances, and find a
nearby TD branch or ABM
eWallets
P2P Electronic Trans. (Interac)

Mobile Network Payments
- 124 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Vancouver City Savings Credit Union
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Provides financial services including deposit accounts, credit cards, home mortgages, and insurance, in addition to specialized personal loans such
•
•
•
•
•
as credit for hybrid vehicles and energy-efficient home renovations
Founded and Ownership: In 1946; owned by its members
Headquarters and Employees: Vancouver, British Columbia with approximately 2,384 employees
Markets Served: British Columbia, Canada, with 59 branches province-wide serving over 414,000 members
Main Clients: Consumers and small businesses; BC footprint, primarily Metro Vancouver
Value Proposition: Full suite of consumer payments products. Largest credit union, and only credit union in Canada to manage their own card portfolio. One of
Canada’s largest issuers of pre-paid Visa cards. Offers environmental-themed credit card reward program
Key Financial Metrics
Historical Trend
• Revenues: $381M CDN (-4.05% growth YOY)
Vancity Total Credit Card Transaction Volume, 2004-2009
• Expenses: $305M CDN (-3.57% growth YOY)
• Profit: $54M CDN (14.97% growth YOY)
Value $(m)
• Market Share: Canada’s largest credit union with $14.4B CDN in assets
• Total volume: $1,260MCDN in 2009
• Total accounts: 181,500 accounts with 124,000 active accounts in 2009
• Total chequing and savings deposits: $4B in 2009
1,400
1,200
1,000
800
600
400
200
0
Volume CAGR: 23.51%
2004
2005
2006
2007
2008
2009
Total Volume (CAD Millions)
Recent Developments
Payment Types Offered
Cash
Cheques
Debit POS (Interac)
Debit Cash (Interac/Plus/
Exchange Network)
Credit Cards (Visa)
AFT Debits/Credits
Electronic Remittances
Closed Loop Cards
 LVTS
 SWIFT Transfers

International Remittances
 Loyalty (Enviro)
 eWallets
 P2P Electronic Transfer
 Mobile Network Payments
Open Loop Cards (Prepaid)




• Partnered with Visa in 2010 to offer Olympic-themed prepaid Visa cards for
visitors and residents
• In 2009, Vancity wound up the majority of the banking operations of their
wholly owned subsidiary Citizens Bank, an environmentally focused online
bank that offered a full suite of core banking products
• Citizens bank now focuses on Visa payment cards and foreign exchange

Sources: See end of section
- 125 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
a. Participant Profiles
7. Money Service Companies
b. Review of Payment-Related Activities
9. Closed Loop
8. ABM Service Providers
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 126 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Type Overview:
List of Clearers and Settlers
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Introduction
• Role: Clear (exchange and reconcile payment items that result in a transfer of funds from one FI to another) and/or settle (adjust financial positions of individual
FIs to reflect the net amounts due) non-cash payment transactions. There are two systems in Canada through which all non-cash payments settle:
o Canadian Payments Association
o Credit Card Networks: Clear and settle transactions conducted on their networks
• Degree of Consolidation: The majority of payments in Canada are settled through the Canadian Payments Association
• Relative Stability: Reductions in cheque usage and the introduction of branded debit (Visa, MasterCard and Amex do not clear through the CPA) may result in
reduced volumes for the CPA. Unlikely to see a private competitor to the CPA enter the market
• See Section 4 of main document for more details
List of CPA Clearers and Settlers (Non-Exhaustive)
ACSS Clearers and LVTS
Participants
• Alberta Treasury Branches
• Bank of American National
Association
• Bank of Canada
• Bank of Montreal
• Bank of Nova Scotia
• BNP Paribas (Canada)
• Caisse Centrale Desjardins du
Quebec
• Canadian Imperial Bank of
Commerce
• Toronto-Dominion Bank, The
Payments Landscape
Payment
Originators
Payment
Recipients
Payment Connectors
Cash
Other Clearing and Settlement
Systems
• Canadian Depository for
Securities Limited (clears
securities)
• Canadian Derivatives Clearing
Corporation (clears exchangetraded interest rate and equity
derivative contracts)
Debit Cards
(POS & ABM)
Debit Networks
Merchant
Acquirer
Credit C ards,
Open-Loop Prepaid
Sender
of Funds
Payment
Originator’s
Financial
Institution
(Consumer)
(Business)
(Government)
Credit Card Network
White Label
ABM
Operators
AFT Credits and Debits,
EDI
CPA Services
Network
(Issuer)
Cheques and ot her paper
remittances
LVTS
Wires
• Continuous Linked Settlement
Bank (settles FX transactions)
Payment
Recipient's
Financial
Institution
Payment Service
Provider
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
SWIFT/LVTS
Canadian Payments Association
Transaction /
Processing
Support
• Canadian Payments
Association
Cash in
Circulation
Cash in
Circulation
Transaction /
Processing
Support
Bank of Canada
Payment Enablers (Simplified)
• Credit Union Central of Canada
• HSBC Bank Canada
• Laurentian Bank of Canada
• National Bank of Canada
ABM Service Providers
Money Transfer Companies
Mobile Network Operators
Currency Exchange and Trading Companies
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Service Providers to Industry Participants
eWallet Providers
Payment Regulators (Simplified)
• Royal Bank of Canada
Provincial Regulators
Federal Regulators
• State Street Bank and Trust
Company
Department of
Finance
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IIROC
Sources: See end of section
- 127 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Canadian Payments Association
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
ACSS Historical Trend
LVTS Transactions and Volume, 2004-2009
ACSS Transactions and Volume, 2004-2009
6
$50
$40
$30
$20
$10
$0
2004
2005
2006
2007
Volume
2008
Volume CAGR: 3.11% Value CAGR: 3.12%
$6
5
$5
4
$4
3
$3
2
$2
1
$1
0
2009
$0
2004
Value
Value ( $Tr)
Volume CAGR: 5.21% Value CAGR: 3.22%
Transactions ( B)
7
6
5
4
3
2
1
0
LVTS Historical Trend
Value ( $Tr)
Transactions ( M)
• Summary: A not-for-profit, member-funded association governed by a Board of Directors, which owns and operates national systems for the exchange, clearing
and settlement of payments between financial institutions in Canada (i.e. ACSS, LVTS and USBE). The CPA develops and implements the rules that govern the
clearing and settlement of payments cleared through its systems, promoting the efficiency, safety and soundness of its systems and taking into consideration the
interest of users. The CPA also maintains complementary systems: the Financial Institutions File (FIF), the Corporate Creditor Identification Number file (CCIN)
and the CPA Services Network (CSN) which facilitate the routing and exchange of paper and electronic payments and bill payment remittance processing
• Founded and Headquarters: Created in 1980 by an Act of Parliament; Ottawa, Ontario
• Markets Served: Canada
• Statutory Framework: Oversight responsibilities exercised by the Minister of Finance through the Canadian Payments Act and the Governor of the Bank of
Canada through the Payments Clearing and Settlement Act
2005
2006
Volume
2007
2008
2009
Value
Key Metrics
Recent Developments
CPA and Non-CPA Payments, 2009
• CPA’s 2 years research and broad public consultative process recently
concluded with the release of CPA’s Long Term Strategic Plan: Vision 2020,
released March 2010
• New competitors have announced entry into the debit card space which may
divert significant volumes away from the CPA to private clearing
arrangements
• CPA is developing a long-term strategy to address aging technology and
modernize its national clearing and settlement systems
• CPA is enhancing its processes to better accommodate emerging payments
applications and technologies
Sources: See end of section
LVTS = Large Value Transfer System, ACSS = Automatic Clearing and Settlement System
- 128 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
a. Participant Profiles
7. Money Service Companies
b. Review of Payment-Related Activities
9. Closed Loop
8. ABM Service Providers
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 129 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Type Overview:
List of Money Service Companies
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Introduction
• Foreign Exchange Providers: Payment instruments in foreign currency requires conversion to the local currency at the market prices for a given time.
Businesses and consumers pay fees and spreads for foreign currency payments
• Payday Loan Providers: Payday loan and cheque cashing companies service the unbanked and under-banked population by providing immediate access to
cash and bridge financing at retail locations. They may also offer foreign exchange; remit or transmit funds; issue/redeem money orders, traveler's cheques or
other similar negotiable instruments
• Degree of Consolidation: Western Union Company has 17% of the global transaction volume for remittances. There are many smaller companies providing
money services. In some instances smaller companies partner with larger firms in providing a service
• Relative Stability: Major changes are taking place in product offerings in line with the technological innovations emerging within the payments industry
• See Section 4 of main document for more details
Payments Landscape
Representative List of Money Service Companies (CPLA)
Payday Loan Providers
• Phone Cash Money Transfer
• 1461350 ONT LTD
• Premiere Cash
• Ark Capital
• Quickloans
• Brant Loans ‘Til Payday
• Quik Loans Ltd.
• Cash 4 You
• Speedy Cash Payroll Advances
• Cash Canada Financial
• Western Cash Mart – Best
Investments
• Cash Central
• Cash Money*
• Xtra Cash
Payment
Originators
Cash
Debit Cards
(POS & ABM)
• CashNow Solutions Inc.
• Cornwall Cash Advantage
• Dash Into Cash
• DollarsDirect
• Fast Cash Co., The
Sender
of Funds
Payment
Originator’s
Financial
Institution
(Consumer)
(Business)
(Government)
Credit Card Network
White Label
ABM
Operators
AFT Credits and Debits,
EDI
CPA Services
Network
Cheques and ot her paper
remittances
• Accu-Rate Corporation
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
Payment
Recipient's
Financial
Institution
Payment Service
Provider
LVTS
Wires
Foreign Exchange/Money
Transfer Providers
SWIFT/LVTS
Canadian Payments Association
Transaction /
Processing
Support
• MoneyGram
Cash in
Circulation
Cash in
Circulation
Transaction /
Processing
Support
Bank of Canada
• Travelex
• Western Union Company*
Payment Enablers (Simplified)
• Money Shack, The
ABM Service Providers
Money Transfer Companies
Mobile Network Operators
Currency Exchange and Trading Companies
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Service Providers to Industry Participants
eWallet Providers
• Money Tree, The
• National Money Mart
Company*
Merchant
Acquirer
(Issuer)
• Irvin Money Mart
• National Cash Advance
Debit Networks
Credit C ards,
Open-Loop Prepaid
• Cash Now Hamilton Mountain
• CashMax Payday Loans
Payment
Recipients
Payment Connectors
Payment Regulators (Simplified)
Provincial Regulators
Federal Regulators
*Profiled in this section
Department of
Finance
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IIROC
Sources: See end of section
- 130 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Cash Money
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Provides financial services including payday loans, cheque cashing, money transfers via Western Union, foreign exchange, bill payments, money
orders and prepaid home phone services
Founded and Ownership: Founded in 1992; privately held company
Headquarters: Toronto, Ontario
Markets Served: Canada, with100 locations in 6 different provinces
Main Clients: Consumers
Value Proposition: No hidden fees, cash payouts, convenience
Canadian Consumer Trend
Payday Loan Industry Trend
Average Borrowing Across Payday Frequencies
$350
$60
$60
$40
$20
Size ($ USD
$300
Average Loan
Average Loan Size ( $$USD)
Frequency of Use of Cheque-Clearing or Payday Loan Companies
$250
$40
$200
$150
$20
$100
$50
$0
$0
One M onth
$0
More than once About onc e per
per month
month
Every f ew
months
Once or t wice Less t han once
per year
per year
Frequency
Suppliers / Partners
• Western Union – provides money
transfers
• MasterCard – provides the prepaid
Opus MasterCard
Average Loan Size
• Opus MasterCard
• Cheque cashing
• Gold purchases
One W eek
Missing
Average
Average I nterest Payment
Note: One month denotes loan statistics for borrowers paid monthly; two weeks for borrowers paid
semi-monthly or biweekly; one week for borrowers paid weekly; missing for borrowers with pay
frequency missing in the data.
Product Suite
• Payday loans
Two Weeks
Average Interest P ayment ( $
USD)
•
•
•
•
•
Recent Developments
• Ontario, Nova Scotia and British Columbia have finalized regulation
exempting them from Section 347 of the Criminal Code, enabling them to
implement both a maximum rate and regulations with respect to the
governance of payday lending. Similarly, the Province of Alberta is in the final
steps of completing its exemption from Section 347
• Money transfers
• Foreign exchange
• Bill payments
• Money orders
• Prepaid home phone services
Sources: See end of section
- 131 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
National Money Mart Company
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
Summary: Provides financial services including cheque cashing, payday loans, money transfers via Western Union, currency exchange and bill payments
Founded and Ownership: In 1982; privately held company subsidiary of Dollar Financial Group Inc. after being purchased in 1996
Headquarters and Employees: Victoria, British Columbia with approximately 2,000 employees
Markets Served: North America and the UK, with 460 branches in Canada, 325 branches in the US and 300 branches in the UK
Main Clients: Consumers
Value Proposition: Diverse payment options, expansive global network of agents, large number of locations
Key Metrics
Historical Trend
Global (Dollar Financial Corporation)
• Revenue: $527.9M in 2009(-7.74% growth YOY, 7.63% 2-yr CAGR)
• Expenses: $511.1M in 2009 (5.38% growth YOY, 6.55% 2-yr CAGR)
• Profit: $16.8M in 2009 (-80.73% growth YOY, 74.77% 2-yr CAGR)
Canada (Dollar Financial Corporation)
• Market Share: An estimated 30% of the Canadian market
o Canada makes up ~45% of the total revenue for Dollar Financial
Corporation
Canada (Money Mart)
• Electronic bill payments can be made to more than 2,400 companies
Suppliers / Partners
• Western Union – provides money
transfers
• Visa – provides the Titanium Plus
Prepaid Visa
• Money Mart began as an entrepreneurial venture in 1982 in Edmonton,
•
•
•
•
Alberta
Growth for Money Mart has been continuous
By 1994, there were over 100 franchised and corporate branches
By 2000, Money Mart exceeded the 200-outlet mark
Money Mart’s parent company, Dollar Financial Group, Inc., purchased the
Canadian company from its founders in 1996
Product Suite
• Cheque cashing
• Payday loans
• Western Union money transfer
• Easytax – provide professional tax
expertise
Recent Developments
• Ontario, Nova Scotia and British Columbia have finalized regulation
exempting them from Section 347 of the Criminal Code, enabling them to
implement both a maximum rate and regulations with respect to the
governance of payday lending. Similarly, the Province of Alberta is in the final
steps of completing its exemption from Section 347
• Currency exchange
• Bill payments
• Titanium Plus Prepaid MasterCard
Sources: See end of section
- 132 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Western Union Company
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Provides money transfer and payment services including walk-in money transfer service, online money transfer service, telephone money transfer
•
•
•
•
•
service, mobile money transfer service, business payments services and international business-to-business cross-border, cross-currency payment service
Founded and Ownership: in 1851 as the New York and Mississippi Valley Printing Telegraph Company; publicly held company
Headquarters and Employees: Englewood, Colorado with approximately 6,800 employees
Markets Served: Over 410,000 Agent locations in 200 countries and territories (4,000 agent locations in Canada)
Main Clients: Consumers, government agencies and merchants, including utilities, auto finance companies, mortgage servicers and financial service providers
Value Proposition: Diverse payment options, expansive global network of agents, strong partnerships with financial institutions and retailers
Key Financial Metrics
Historical Trend
Suppliers / Partners
• Scotiabank – send Western Union
money transfers through Scotia
Online Financial Services
•
Absa - joint service offering to Absa
accountholders allowing them to
send or receive cross-border money
transfers using either a cell phone or
Internet banking
• TD Financing Services - Western
Union can be used to make a
payment in person
600
Volume CAGR 16.33%
450
300
150
0
2005
2006
2007
2008
2009
Volume
Note: Total transactions are made up of C2C transactions and Global
Business Payments transactions.
Product Suite
Recent Developments
• Money transfer services and bill
payments via phone, online or walkin
• Inmate trust fund (within the US
Federal Bureau of Prisons)
• Money orders
• Visa prepaid cards
• Prepaid phone services - wireless
Total Transactions, 2005-2009
750
Volume ( M)
Global
• Market Share: 17% worldwide
• Revenue: $5.1B USD in 2009 (-3.8% growth YOY, 1.85% 2-yr CAGR)
• Expenses: $3.8B USD in 2009 (-3.21% growth YOY, 3.06% 2-yr CAGR)
• Profit: $0.85B USD (-7.64% growth YOY, -0.50% 2-yr CAGR)
• C2C Transactions: 196.1M in 2009 (4.3% growth YOY, 8.21% 2-yr CAGR)
• Global Business Payments (GBP) Transactions: 414.8M in 2009 (0.66%
growth YOY, 1.26% 3-yr CAGR)
Canada
• In 2007, consumer-to-consumer transactions between and within the U.S. and
Canada accounted for 11% of Western Union’s revenue
phone bill, prepaid home phone bill,
prepaid long distance cards
• Western Union Company will work with Vienna, Austria-based oil and gas
company OMV AG to provide money transfer services at more than 1,800
OMV gas stations in eight nations
• Western Union Company will conduct a global initiative to simplify its business
processes, move decision-making closer to the marketplace, and leverage its
cost structure. The multi-phased initiative includes a smaller, more
streamlined management and changes to its global operations
• Western Union is working with mobile phone operators in select countries to
introduce money transfers that consumers can send and receive with a cell
phone
• Western Union acquired Custom House in Canada in September 2009
Sources: See end of section
- 133 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
a. Participant Profiles
7. Money Service Companies
b. Review of Payment-Related Activities
9. Closed Loop
8. ABM Service Providers
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 134 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Type Overview:
List of ABM Service Providers
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Introduction
• Role: Independent operators who provide an alternate source of cash dispensing for customers through the provision of privately branded ABM machines
commonly referred to as “white labels”. These ABM machines are independent from banks and financial institutions and customers are usually required to pay
an additional convenience fee to use their service. The companies profiled in this section vary from independent service operators (ISOs) who run their own
ABM networks to outsourcers who manage ABM networks on behalf of other players.
 Degree of Consolidation: Large number of small independent players, some concentration at top end (e.g., Frisco-ATMS, Threshold’s Laser Cash)
 Relative Stability: Whilst there have been a number of mergers and acquisitions within recent years, the market is relatively stable with changes mainly
occurring in product development
• See Section 4 of main document for more details
List of ABM Service Providers (Non-Exhaustive)
Global Providers
• ABM Systems Ltd.
Payments Landscape
Payment
Originators
Cash
• DirectCash Management Inc.
Debit Cards
(POS & ABM)
• Flex-Touch Canada Inc.
Debit Networks
Merchant
Acquirer
Credit C ards,
Open-Loop Prepaid
• National Cash Register Corporation*
• Triton Canada Ltd.
Payment
Recipients
Payment Connectors
Sender
of Funds
Payment
Originator’s
Financial
Institution
(Consumer)
(Business)
(Government)
Credit Card Network
White Label
ABM
Operators
AFT Credits and Debits,
EDI
CPA Services
Network
(Issuer)
Cheques and ot her paper
remittances
Local Providers
• Cash N Go Ltd.*
LVTS
Wires
• Clear Card
• Ezee ATM
Payment
Recipient's
Financial
Institution
Payment Service
Provider
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
SWIFT/LVTS
Canadian Payments Association
• Frisco-ATMs*
Transaction /
Processing
Support
• Inkas Group of Companies
Cash in
Circulation
Cash in
Circulation
Transaction /
Processing
Support
Bank of Canada
• JMS Inc.
Payment Enablers (Simplified)
• King Cash Corp.
• Laser Cash (owned by Threshold Financial Technologies)
ABM Service Providers
Money Transfer Companies
Mobile Network Operators
Currency Exchange and Trading Companies
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Service Providers to Industry Participants
eWallet Providers
Payment Regulators (Simplified)
Provincial Regulators
Federal Regulators
Department of
Finance
*Profiled in this section
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IIROC
Sources: See end of section
- 135 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Cash N Go Ltd.
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Provide ABM sales, leasing, placements and service, electronic transaction processing, and connecting to Interac, MasterCard, Cirrus, Maestro,
•
•
•
•
•
Amex, Visa International, and the Plus Networks
Founded and Ownership: In 1998; privately held
Headquarters and Employees: Edmonton, Alberta with approximately 25 employees, additional office/warehouse in Hamilton, Ontario.
Markets Served: Canada
Main Clients: Businesses including casinos, shopping malls, hotels, nightclubs, grocery chains, professional sports events and FIs
Value Proposition: Offer in-house reconciliation and deposit services, real-time web access, a 90-day money back guarantee and in-house lease financing
Key Financial Metrics
Historical Trend (Industry)
• Privately-held company, with no publicly-available metrics
Shared Cash Dispensing Transactions and ABMs (2005-2009)
60
• Dispenses approximately $1B CDN in cash annually
58
Number of Shared
ABMs ( T)
• Operates a network of approximately 1,200 ATMs throughout Canada
• Owns and operates a payment switch, processing approximately 8M
transactions annually
400
Volume of ABMs CAGR: 3.56%
Volume of Transactions CAGR: -4.48%
300
55
53
200
50
100
48
45
0
2005
2006
Volume of A BMs
Suppliers / Partners
• Triton Systems
• Brinks
• Interac
• Visa Plus
• G4S
• Garda
• Nautilus Hyosung
Product Suite
2007
2008
2009
Number of S hared Cash D ispensing
Transactions ( M)
• Annual Revenue: Approximately $13M CDN
Volume of T ransactions
Recent Developments
• ABM sales, leasing, placements and
• Cash N Go has purchased INETCO Insight™ to guarantee continuous up-
• Electronic transaction processing
• Cash N Go deployed transaction monitoring software from INETCO Insight to
service
time and reliability of their ABM Network in a cost effective manner
provide real-time performance monitoring for its ABM Network
• Web based monitoring
• Cash, asset and project
management
• Connecting to Interac, MasterCard,
Cirrus, Maestro, Amex, Visa
International, and the Plus Networks
Sources: See end of section
- 136 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Frisco-ATMs
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Frisco Bay Industries designs, develops, markets and installs integrated solutions for financial institutions, retail chains, major corporations,
•
•
•
•
•
government agencies and private commercial firms. Frisco Bay's systems include financial transaction processing, ATMs and integrated security systems
Founded and Ownership: Frisco-ATMs is a division of Frisco Bay Industries, which was founded in 1972 and acquired by Stanley Works in 2004
Headquarters and Employees: Frisco Bay Industries has its head office in Montreal, Quebec with 200 employees in Canada
Markets Served: Canada
Main Clients: Merchants; install bases include transportation hubs, universities, hotels, casinos, restaurants, shopping centres, and convenience stores
Value Proposition: No fees; Frisco-ATMs strive to maintain an uptime percentage in excess of 99%
Key Financial Metrics
Historical Trend
• Financial information is not publicly available
• Frisco Bay Industries was founded in 1972
• Over 2000 ABM installations across Canada
• In March of 2004, Frisco Bay Industries was acquired by the Stanley Works
• Process in excess of 15M transactions annually
• Frisco-ATMS, a division of Frisco Bay Industries, deployed their first white-
label ABM machine in February of 1998
• Supply a TurnKey service to over 50% of our clientele
• Maintains the cash replenishment for over 65% of our clientele and provides
vault cash management for other ABM companies
Suppliers / Partners
• Bank of Montreal
• Datawest
• Garda of Canada
• TD Canada Trust
Product Suite
• ABM terminals including customer
Recent Developments
service centre, technical support/call
centre and vault cash management
• MasterCard Canada and the Interac Association have certified three cash-
dispensing ATMs to Chip and PIN card transactions
• By Dec. 31, 2012, all ATMs in Canada must be converted to processing EMV
transactions
• Tech Noor
• Triton
Sources: See end of section
- 137 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
National Cash Register Corporation (NCR)
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
Summary: Provides assisted- and self-service solutions, helping clients enhance customer interactions across channels including online, mobile, kiosk and ABM
Founded and Ownership: In 1884; publicly traded company after being spun-off from AT&T in 1997
Headquarters and Employees: Duluth, Georgia with approximately21,500 employees
Markets Served: NCR has a direct presence in 110 countries and reaches an additional 90 through partners and distributors
Main Clients: Businesses including retail, financial, travel, hospitality, gaming and entertainment
Value Proposition: Only company offering services featuring Interactive InsightSM ; extensive service network; consistent, high quality service across the
spectrum of service needs for every channel, for both NCR products and those of other vendors
Key Financial Metrics
Historical Trend
Global
• Revenue: $4.6B USD in 2009 (-13.23% growth YOY, -3.67% 2-yr CAGR)
• Expenses: $4.7B USD in 2009 (-6.52% growth YOY, -0.41% 2-yr CAGR)
• Profit: $-30M USD in 2009 (-113.22% growth YOY)
• Market Share: Global installed base market share of 30.1%; North American
installed base market share of 26.4%
• Total volume: NCR processes over $200B USD of hosted transaction
volume annually
Americas (excluding the US)
• Revenue: $413M USD in 2009 (-14.32% growth YOY, 0.98% 3-yr CAGR)
Revenue and Expenses (2005-2009)
Suppliers / Partners
• Cisco Systems Inc. – service
partner
• ACI Worldwide Inc. – switch partner
• Cash Management Solutions –
switch partner
• Galitt – tools partner
• Trusted Security Solutions Inc. –
software solutions partner
• Intelity – expand multichannel self-
service convenience
Revenue and E xpenses ($bn)
$5.25
$5.00
• POS solutions
• Software including financial self-
service, retail, and travel
• Printer consumables
• Self-service kiosks
• Cheque and document imaging
• Design, integration, support,
management, networking and
eCommerce services
Revenue CAGR: 0.28%
Expenses CAGR: 1.34%
$5.20
$5.00
$4.80
$4.75
$4.60
$4.50
$4.40
$4.20
$4.25
$4.00
$4.00
2005
2006
2007
Revenue
Product Suite
• ATMs and financial terminals
$5.40
$5.50
2008
2009
Expenses
Recent Developments
• NCR is focused on broadening the scope of their self-service solutions
offerings to customers in newer industry-vertical markets, as evidenced by the
roll-out of their first DVD-rental kiosks by the end of 2009
• NCR partnered with Intelity on commercial and development initiatives to
enhance the overall hotel guest experience
• Introduced the NCR Netkey Loyalty Kiosk, a loyalty and offer management
solution that helps retailers extend the reach of frequent shopper programs
quickly and consistently across channels, such as inside the store, online or
via mobile devices
• NCR signed a seven-year outsourcing contract with RBC in 2001. NCR
assumed complete operational management of RBC's self-service network
Sources: See end of section
- 138 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
a. Participant Profiles
7. Money Service Companies
b. Review of Payment-Related Activities
9. Closed Loop
8. ABM Service Providers
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 139 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Type Overview:
List of Closed Loop Prepaid Providers
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Introduction
• Role: Retailers who offer electronic cash-replacement cards that can be loaded with a dollar value and used like a debit/credit card where accepted. Stored
value cards are typically touted as substitutes for cash, however they only serve as pre-payment for the goods and services of participating stores. Stored value
cards may be reloadable.
• Degree of Consolidation: Closed loop cards are provided by a number of businesses in Canada, and are generally operated on behalf of the retailers by
issuers and/or acquirers
• Relative Stability: Closed loop cards are widely popular in Canada. Contactless technology may require some closed loop providers to revamp their cards in
the face of growing competition
• See Section 4 of main document for more details
Representative List of Closed Loop Participants
Pre-Loaded or Linked to Credit/Debit Card
• Esso Speedpass*
Payments Landscape
Payment
Originators
Cash
• Miscellaneous Retailers (Gift Cards)
Debit Cards
(POS & ABM)
• Shop! Card*
Sender
of Funds
• Hbc
Debit Networks
Merchant
Acquirer
Credit C ards,
Open-Loop Prepaid
• Starbucks*
Earn Points Per Purchase
Payment
Recipients
Payment Connectors
Payment
Originator’s
Financial
Institution
(Consumer)
(Business)
(Government)
Credit Card Network
White Label
ABM
Operators
AFT Credits and Debits,
EDI
CPA Services
Network
(Issuer)
Cheques and ot her paper
remittances
• Petro-Canada
LVTS
Wires
• Sears Canada
• The Brick
Payment
Recipient's
Financial
Institution
Payment Service
Provider
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
SWIFT/LVTS
Canadian Payments Association
Transaction /
Processing
Support
Cash in
Circulation
Cash in
Circulation
Transaction /
Processing
Support
Bank of Canada
Payment Enablers (Simplified)
ABM Service Providers
Money Transfer Companies
Mobile Network Operators
Currency Exchange and Trading Companies
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Service Providers to Industry Participants
eWallet Providers
Payment Regulators (Simplified)
Provincial Regulators
Federal Regulators
Department of
Finance
*Profiled in this section
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IIROC
Sources: See end of section
- 140 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Esso Speedpass
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Speedpass is a keychain RFID device that is linked to one’s credit card/bank account and is used for quick, contactless, electronic payment at Esso
•
•
•
•
•
and Exxon Mobil gas stations
Ownership: Imperial Oil Limited, which is listed
Introduced: In 1997
Headquarters and Employees: Calgary, Alberta with 5,015 employees under the Imperial Oil brand
Markets Served: Canada (1,400 locations) and the United States
Value Proposition: Consumers – Convenience and loyalty rewards; Shipping businesses – Efficiency, tracking of fuel purchases
Key Financial Metrics
Historical Trend
Imperial Oil Limited:
• Revenue: $21.3B CDN in 2009
• Expenditure: $19.2B CDN in 2009
• Profit: $1.7B CDN in 2009
• Volume: As of 2004, more than seven million people possess Speedpass
tags, which can be used at approximately 10,000 Exxon, Mobil and Esso gas
stations worldwide
Speedpass Adoption, 1997-2001
Number of Users (Millions)
6
5
Number of Users CAGR: 44.17%
4
3
2
1
0
1997
1998
1999
2000
2001
Number of Users (Millions)
Suppliers / Partners
Network:
• American Express
• MasterCard
• Visa
Other:
• Aeroplan
Product Suite
• Speedpass
o Contactless payment product
o Links to credit card or RBC
Recent Developments
• Speedpass may face greater competition as open-loop products such as
PayPass and payWave gain popularity
account
o Offers Esso Extra or Aeroplan
rewards
• RBC
Sources: See end of section
- 141 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Shop! Card
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
Summary: A multi-store retail gift card
Ownership: Owned by Cadillac Fairview Corporation Ltd., which is one of North America's largest investors, owners and managers of commercial real estate
Introduced: In 2004 as Canada’s first mall-based gift card program
Headquarters and Employees: Toronto, Ontario with1,800 employees
Markets Served: Canada, United States, United Kingdom, Brazil, and China
Value Proposition: Consumers - Offers convenience and greater flexibility than traditional single-store retail cards; Retailers - 40% of shoppers using a gift card
buy items at full price, versus only 16% of shoppers using other payment methods
Key Financial Metrics
Historical Trend
• Over 2MM Shop! Cards were sold between 2004 and 2007
• Shop! Cards have a 95% redemption within 15 months
• Overall gift card market:
o Between 2001 and 2006 the number of Canadian retailers offering gift
Percentage of Retailers Offer Gift Cards, 2003-2005
Percentage Retailers (%)
90%
cards increased from 33% to 82%
o In 2007, The Canadian gift card market was estimated at $3.5B
80%
Percentage Retailers CAGR: 24.39%
70%
60%
50%
40%
30%
20%
10%
0%
2003
2004
2005
Percentage of Lar ge Retailers that O ffer G ift C ards
Suppliers / Partners
• Retailers locations at Cadillac
Fairview properties
• Shop! Card is operated by Bank of
America on behalf of Cadillac
Fairview
Product Suite
• Multi-store retail gift card for use at
Recent Developments
over 4,000 stores across 29 Cadillac
Fairview properties
• Growth in gift card acceptance and usage
o Gift card stigmas have been eliminated and usage has increased
accordingly: as of 2007, 72% of Canadians would strongly or somewhat
prefer to receive a gift card over a traditional gift
o Available in denominations from
$10 to $500
o Product is not reloadable
o Retailer participation rate is 90%
o Cards must be purchased at
Cadillac Fairview properties; not
available for purchase online
o The US gift card market grew over 20% annually between 2005 and 2007,
growth is expected to continue at a much slower pace – 5% by 2012
• Gift card purchases migrating online
o As of 2007, over 90% of gift cards were purchased in store, and 8% had
migrated to the Internet; a trend that will likely continue
Sources: See end of section
- 142 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Starbucks
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Starbucks is the largest coffee retailer in the world, with over 16,000 stores in over 50 countries. The Starbucks Card program is designed to
•
•
•
•
increase customer loyalty and the frequency of store visits by cardholders
Introduced: In 2001 – targeted at gift-buying market and frequent Starbucks customers
Headquarters and Employees: Seattle, Washington, United States with approximately 142,000 employees
Markets Served: Card is available for purchase most locations in Canada and around the world (Starbucks operates in more than 50 countries)
Value Proposition: “The most convenient way to enjoy Starbucks”, collect rewards points for use, additional free services such as refills for frequent users
Key Financial Metrics
Historical Trend
Global
• Revenue: $9,774.6M USD in 2009
• Expenditure: $9,334.5M USD in 2009 (Operating Expense)
• Profit: $390.8M USD in 2009
• Volume: In Q2 2009 (ending April 2009) , $250M US was loaded on
Starbucks cards, a 7% increase over the same quarter in 2008
• Other: Starbucks gift cards do not have an expiration date and have no
activation or inactivity fees
Income recognized on unredeemed stored value card
balances and gift certificates, 2007-2009
Income (USD Millions)
$30.00
$25.00
Income CAGR: 41.97%
$20.00
$15.00
$10.00
$5.00
$0.00
2007
2008
2009
Income (USD M illions)
Suppliers / Partners
• Starbucks gift cards are internally
managed and operated
Product Suite
• Starbucks Card
o Cards can be loaded for up to
$500 and auto-reload options
available up to a maximum of
$100
o Cards can be registered online
for membership benefits
(purchases must be made with
card for in-store benefits)
Recent Developments
• Starbucks iPhone App launched that to help customers find Starbucks
locations, determine nutrition information and reload their Starbucks Cards
• Starbucks continues to evolve its card offering and has introduced new
products and product enhancements frequently
o June 3, 2008 – Starbucks rewards program introduced for registered
Starbucks cards
o June 20, 2009 – Mini Starbucks Card introduced
o Other features designed to increase card usage are customizable cards,
auto reload (either monthly, or based on minimum balance)
Sources: See end of section
- 143 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
a. Participant Profiles
7. Money Service Companies
b. Review of Payment-Related Activities
9. Closed Loop
8. ABM Service Providers
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 144 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Type Overview:
List of eWallet Providers
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Introduction
• Role: Online payment and money transfer with expected growth to $22.8 billion globally by 2010. eWallets conducts online transactions by allowing customers
to store billing, shipping, payment, preference and other similar information; and then use this information to automatically complete a merchant's check-out
page
• Degree of Consolidation: As an emerging participant type, the market is made up of few participants with the highest usage rates for PayPal
• Relative Stability: Highly-fluid market. The popularity of Facebook may provide increased usage of Facebook Credits, which was fully rolled out in 2009
accommodating 14 currencies. Greater development of mobile technology will also see a change in how eWallet providers operate. Further innovation, such as
PayPal’s Adaptive Payments, also has potential to change the landscape of eWallets
• See Section 4 of main document for more details
List of eWallet Providers (Non-Exhaustive)
Major Providers
• Facebook Credits*
Payments Landscape
Payment
Originators
Cash
• Google Checkout*
Debit Cards
(POS & ABM)
• PayPal*
Niche Providers
• CashU Online Payment
• Neteller
Payment
Recipients
Payment Connectors
Debit Networks
Merchant
Acquirer
Credit C ards,
Open-Loop Prepaid
Sender
of Funds
Payment
Originator’s
Financial
Institution
(Consumer)
(Business)
(Government)
Credit Card Network
White Label
ABM
Operators
AFT Credits and Debits,
EDI
CPA Services
Network
(Issuer)
Cheques and ot her paper
remittances
• PayByCash
Payment
Recipient's
Financial
Institution
Payment Service
Provider
LVTS
Wires
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
SWIFT/LVTS
Canadian Payments Association
Transaction /
Processing
Support
Cash in
Circulation
Cash in
Circulation
Transaction /
Processing
Support
Bank of Canada
Payment Enablers (Simplified)
ABM Service Providers
Money Transfer Companies
Mobile Network Operators
Currency Exchange and Trading Companies
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Service Providers to Industry Participants
eWallet Providers
Payment Regulators (Simplified)
Provincial Regulators
Federal Regulators
Department of
Finance
*Profiled in this section
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IIROC
Sources: See end of section
- 145 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Facebook Credits
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Facebook is the world’s most popular social networking site with over 500 million users. A ‘Facebook Credit’ is a digital currency that can be used for
•
•
•
•
•
purchases on Facebook
Ownership: Private
Founded: 2004
Headquarters and Employees: Palo Alto, California with over 800 employees
Markets Served: Facebook Credits are available everywhere Facebook is available and can be purchased in 14 currencies
Value Proposition: Facebook Credits are the only means to purchase Facebook gifts; purchasers are motivated by social interaction
Key Financial Metrics
Historical Trend
• Facebook does not report usage at a national level, which makes it difficult to
E-Commerce in Canada, 2005 and 2007
find publicly-available information on Canadian usage
• Users: +250M world wide with 12M in Canada
• Credits are purchased in very small denominations
o Average product price on Facebook is 10 credits ($1 US)
o Maximum purchase is 100 credits ($10 US)
• Gift revenue: Not published
o Sept. 2008, Lightspeed Venture Partners estimated $35MM in annual
revenue from Credits, up from a$15MM estimate in Jan 2008
o Complete 2008 revenues are estimated at $265 M US
2005 2007
Canadians
Internet users
(thousands)
Online consumers
(thousands)
16,775 19,233
6,888
8,404
Average value ($)
49,425 69,886
Note:
Average number
Suppliers / Partners
• Independent Facebook application
producers
Product Suite
• Facebook Credits
o Purchased using a credit card,
which is linked to a Facebook
account
o Used to purchase gifts and use
some applications on Facebook
7.2
8.3
2007
7,924,407 12,772,147
Average value per
order ($)
Number of orders
Total number
(thousands)
2005
Value of orders
Total value ($
thousands)
1,150
1,520
160
183
Readers are cautioned when
comparing results to
the 2005 survey, which was
restricted to people aged 18 and
older. In 2007, respondents
aged 16 and 17 accounted for
about 2% of the total online orders
and 1% of their dollar value.
Recent Developments
• Increased application of Facebook Credits
o Payments being tested across a few applications currently with plans to roll
out full platform in fall 2009
o Games are likely expansion area for Facebook Credits
• Use of Facebook Credits on third-party Websites
o Group Card is a service that accepts Facebook Credits
o Recent introduction of “Pay with Facebook” on Group Card Website
• Expanding Facebook Credit purchase options
o Expanded from only USD to support purchase in14 currencies in June 2009
o Mobile payment companies are working to provide alternative to credit card
purchase
Sources: See end of section
- 146 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Google Checkout
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Google Checkout provides an online payment processing service allowing consumers to link a credit or debit card to a Google Checkout account,
•
•
•
•
•
which they can use to pay for purchases from participating websites
Ownership: Listed
Founded: Google was incorporated in 1998 and introduced Google Checkout on June 26, 2006
Headquarters and Employees: Mountain View, California, United States with 20,621 employees
Markets Served: Canada, United States, and United Kingdom
Value Proposition: Merchants: Integration with merchant apps (AdWords, Analytics) and greater checkout conversion; Consumers: Convenience and security
Key Financial Metrics
Historical Trend
• Google does not report usage at a national level, which makes it difficult to
E-Commerce in Canada, 2005 and 2007
find publicly-available information on Canadian usage
• Google has not disclosed the number of users or payment volume
• Google Checkout has approximately 175 merchants
2005 2007
Canadians
Internet users
(thousands)
Online consumers
(thousands)
16,775 19,233
6,888
8,404
Average value ($)
Average value per
order ($)
Number of orders
Total number
(thousands)
2005
Value of orders
Total value ($
thousands)
49,425 69,886
Note:
Average number
Suppliers / Partners
Network:
• American Express
• Interac
• MasterCard
• Visa
Other:
• Online merchants
Product Suite
• A service that provides consumers
7.2
8.3
2007
7,924,407 12,772,147
1,150
1,520
160
183
Readers are cautioned when
comparing results to
the 2005 survey, which was
restricted to people aged 18 and
older. In 2007, respondents
aged 16 and 17 accounted for
about 2% of the total online orders
and 1% of their dollar value.
Recent Developments
with a single log-in for purchases on
multiple websites
o Also available for mobile
o Available free for non-profit
organizations and political
contributions
• Tiered fee structure with rates from
1.9% to 2.9% based on sales
volume (same as PayPal)
• A similar service is offered by
Amazon
• Frequent fee structure changes
o Google Checkout has changed its fee structure three times since it’s
introduction, most recently in 2009
o The recent move to a more “mature” fee structure has been viewed by
some analysts as a potential first step in a phase-out of Google Checkout
o Google Checkout statements express continued commitment to “growth
and development of Checkout and to helping merchants increase sales by
driving more leads and higher conversions”
• Google Checkout has approximately the same number of merchants as it did
in 2006, suggesting that adoption hasn’t reached Google’s expectations
Sources: See end of section
- 147 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
PayPal
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Provides a service that allows members to pay and get paid over the Internet without sharing their financial information. PayPal enables consumers to
•
•
•
•
•
shop online and send money electronically faster and more securely and with the flexibility to pay with PayPal account balances, bank accounts or credit cards.
PayPal empowers merchants, both large and small to sell online by helping reduce the cost and risk of fraud of accepting payments over the Internet
Founded and Ownership: Founded in 1998 and acquired by eBay in 2002 for $1.5B USD; privately owned by eBay
Headquarters and Employees: San Jose, California; number of global employees not available
Markets Served: 190 markets worldwide (including Canada), with 24 currencies available
Main Clients: eBay users and other online shoppers
Value Proposition: Consumer: convenience and security; Merchant: sales and conversion lift, security, flexibility
Key Financial Metrics
Historical Trend
• PayPal does not report usage at a national level, which makes it difficult to
•
•
•
•
•
E-Commerce in Canada, 2005 and 2007
find publicly-available information on Canadian usage
Revenue: $2.8B USD in 2009, up 16% year over year
Accounts: 87M active registered accounts with more than 4M active
accounts in Canada
Transactions: $2,641 USD in total payment volume per second
Total Payment Volume (TPV): $72B USD in 2009
o Represents nearly 15% of global e-commerce
o In 2008, PayPal's TPV off eBay exceeded volume on eBay for the first time
o TPV in Q2 2010 was nearly $21B USD, up 28% year over year
Market Share:
• Canada is estimated to comprise approximately 5-8% of PayPal’s North
American operations
Suppliers / Partners
Network:
• American Express
• MasterCard
• Visa
Total number
(thousands)
merchant’s website. Combined Internet gateway
and merchant account
customer PayPal account
• Launched mobile version in 2006 and now has
Average value ($)
1,150
1,520
Average value per
order ($)
160
183
49,425 69,886
Note:
Average number
7.2
7,924,407 12,772,147
8.3
Readers are cautioned when
comparing results to
the 2005 survey, which was
restricted to people aged 18 and
older. In 2007, respondents
aged 16 and 17 accounted for
about 2% of the total online orders
and 1% of their dollar value.
Adaptive Payments
• Website Payment Pro – payments processed on
• Email and mobile payments and money transfer
8,404
2007
• On July 6th, 2009 news leaked that PayPal is developing a flexible API called
on PayPal’s pages integrates with website
• Financial Institutions
6,888
2005
Value of orders
Total value ($
thousands)
Recent Developments
• Website Payments Standard – payment hosted
• PayPal Express Checkout – button links to
16,775 19,233
Number of orders
Product Suite
Other:
• EBay
mobile apps available for iPhone, Blackberry and
Android
Sources: See end of section
2005 2007
Canadians
Internet users
(thousands)
Online consumers
(thousands)
o Platform will allow third-party developers to build payment applications with
full access to PayPal features, including “chained payments” and “parallel
payments”
o PayPal hopes the move will “unleash developer innovation”
• Google is considering a PayPal option for Android applications (August 2010)
• In October 2009, PayPal opened its secure payment APIs to developers in an
initiative called X.com. There are currently more than 1,600 Canadians
developing on the X.com platform
• In August 2010 PayPal launched its version 2.5 Mobile application for iPhone,
allowing Canadians to donate to 17 Canadian nonprofit organizations
- 148 -
Prepared by Deloitte
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Table of Contents
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
a. Participant Profiles
7. Money Service Companies
b. Review of Payment-Related Activities
9. Closed Loop
8. ABM Service Providers
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 149 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Type Overview:
List of Alternative Payment Vehicles
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Introduction
• Role: Alternate payment vehicles is a broad catch-all category that includes Mobile Payments Providers, Canada Post ‘s epost and Transit Authorities (e.g.,
PRESTO). These payment vehicles and enablers continue to emerge with the most prevalent being payments by mobile phone
• Degree of Consolidation: As an emerging participant type, the market is made up of a broad range of payment vehicles
• Relative Stability: Highly-fluid market. Continued technological innovation is diversifying alternative payment vehicles. Further development of mobile and
contactless technologies coupled with the continued increase in the popularity of electronic bill payment will drive growth in the use of alternative payment
vehicles and businesses offering these payment types
• See Section 4 of main document for more details
List of Alternative Payment Vehicles (Non-Exhaustive)
Card Payment
• Presto*
Payments Landscape
Payment
Originators
Payment
Recipients
Payment Connectors
Cash
Debit Cards
(POS & ABM)
Debit Networks
Online Payment
• ePost*
• Intuit Small Business
• TelPay*
Merchant
Acquirer
Credit C ards,
Open-Loop Prepaid
Sender
of Funds
Payment
Originator’s
Financial
Institution
(Consumer)
(Business)
(Government)
Credit Card Network
White Label
ABM
Operators
AFT Credits and Debits,
EDI
CPA Services
Network
(Issuer)
Cheques and ot her paper
remittances
Mobile Payment
LVTS
Wires
• OneBip
• Verrus
Payment
Recipient's
Financial
Institution
Payment Service
Provider
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
SWIFT/LVTS
Canadian Payments Association
• Zoompass*
Transaction /
Processing
Support
Cash in
Circulation
Cash in
Circulation
Transaction /
Processing
Support
Bank of Canada
Payment Enablers (Simplified)
ABM Service Providers
Money Transfer Companies
Mobile Network Operators
Currency Exchange and Trading Companies
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Service Providers to Industry Participants
eWallet Providers
Payment Regulators (Simplified)
Provincial Regulators
Federal Regulators
Department of
Finance
*Profiled in this section
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IIROC
Sources: See end of section
- 150 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
epost (Canada Post Corporation)
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Document presentment, web-based service provided by Canada Post through which consumers can add, manage, and pay bills, statements, and
•
•
•
•
other documents (including pay statements and tax documents) electronically. Enables Canadians to access their mail content online
Ownership and Markets Served: Canada Post Corporation; Canada
Founded: In 1998 as a joint venture between Canada Post Corporation and BMO’s wholly-owned e-commerce subsidiary, Cebra Inc
Headquarters and Employees: Canada Post, Ottawa, Ontario; 70,000 employees
Value Proposition: Consumers - free and convenient service for bill payment/management; Bill Mailers - cost reduction for billing (paperless, stamps not
required, automated); Organizations – lower costs with paperless statements; available at cpc.ca and integrated with online banking at all major Canadian
financial Institutions
Key Financial Metrics
•
•
•
•
•
Historical Trend
Revenues: 20% growth YOY
Costs: Mailers pay roughly 50% of the cost of physical mail or less
Profit: N/A
Subscribers: 6M Canadians and growing
Bill Mailers: 200+ documents available
Physical Mail Delivery
14,293
14,493
14,696
14,874
2006
2007
2008
2009
-1.3%
-2.6%
-2.9%
-5.5%
Change in pieces of
transaction mail per point
of delivery in Canada over
the previous year
Total points of delivery (in
thousands)
Transaction Mail CAGR: 43.42% Points of Delivery CAGR: 1.00%
Suppliers / Partners
• Financial Institutions
• Intuit
Product Suite
Recent Developments
• Bill and other document
• Providing mobile access to consumers electronic mailbox is on product
presentment, management,
storage and payment
roadmap
o Integrated with online banking at
all major financial institutions in
Canada (single sign on)
o Integrated with QuickTax
software
• Focus for epost is on presentment of documents and increasing the number
of Mailers on epost service
• Ongoing emphasis on enhancing consumer experience and usability via all
of its channels
• Work with Mailers to drive adoption and usage of epost service
Sources: See end of section
- 151 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
PRESTO (Government of Ontario)
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: The Government of Ontario, GO Transit, eight municipal transit systems in the Greater Toronto and Hamilton Area and Ottawa, have partnered to
•
•
•
•
introduce PRESTO – a new electronic fare system. Electronic fare cards are used around the world with great success. PRESTO uses the latest technology to
make it easier to pay your fare while traveling within and between transit systems by the simple tap of a card. The system calculates the fare for your trip and
deducts it from the balance stored on your card– all in less than a second
Founded: Project conceived in 2004, currently under development by the Ministry of Transportation, GO Transit, and municipal transit service partners. The
PRESTO card system is currently in the middle of its rollout, which will be completed in the GTHA in Spring 2011 and in Ottawa in early 2012.
Headquarters and Employees: Toronto, Ontario with 75 employees
Markets Served: Once rollout completed, PRESTO will serve the GTHA and Ottawa. PRESTO will the look to add interested transit agencies within Ontario
Value Proposition: Consumers - easy transfers, faster boarding, no need to carry cash/change, security; Transit service providers - increased convenience for
consumers leading to increased ridership, cost savings through elimination of paper tickets, fraud prevention, improved data gathering
Key Financial Metrics
Presto Rollout Schedule
• Transit Service Providers: 10
• Current Ridership: Based on the 2008 Canadian Urban Transit Association
Stage
One
(field trial)
Report, PRESTO transit agency participants accounted for over 180M
passenger trips (not including the TTC)
• # of Cardholders: As of September 7th, 2010, there were over 10,000
PRESTO cards in circulation, with an average increase of 500 cards a week
• Transaction Volume: As of September 7th, 2010, PRESTO over $3.6M CDN
has been loaded on cards since the rollout began and over 400,000 fare
payments made
Date
GO Transit
Completed
Union, Oakville and Bronte Stations
August – October 2010
Lakeshore West rail line:
• May 10: Oakville Go Station
• May 17: Bronte GO Station
• May 24: Appleby GO Station
• May 31: Burlington GO Station
Lakeshore West rail line:
• June: Aldershot Hamilton,
Clarkson, Port Credit and Long
Branch GO Stations
• July: Mimico and Exhibition GO
Stations
Milton and Georgetown rail line
Fall 2010
Lakeshore East and Barrie rail lines
Completed
Two
Completed
Early 2011
Three
February 2011
Richmond Hill and Stouffville rail
lines
Union subway station
TTC
Other Systems
Three bus routes (22, 32,
110) on Oakville Transit
Bloor-Yonge, College,
Dundas, Queen’s Park, St.
George and St. Patrick
subway stations
May 10: Oakville Transit,
Burlington Transit
Islington and Kipling
subway stations
Don Mills, Downsview and
Finch subway stations
March 2011
Four
Suppliers / Partners
• Brampton
•
•
•
•
•
Transit
Burlington
Transit
Durham Region
Transit
GO Transit
Hamilton Street
Railway
Mississauga
Transit
• Oakville Transit
• OC Transport
• Toronto Transit
Commission
• York Region
Transit
March – June 2011
Early 2012
Product Suite
• Contactless transit fare payment
card
• Business intelligence for transit
service providers (future)
GO Transit Bus Service
Brampton Transit and
Mississauga Transit
Hamilton Street Railway
York Region Transit and
Durham Region Transit
OC Transport
Recent Developments
• Adoption of PRESTO technology by transit users and transit service providers
may lead to increased use of credit and debit, as daily purchasing of tickets
and tokens with cash will be replaced by:
o One-time loading of card in person at transit service provider with cash,
debit, or credit
o Online / over the phone loading by credit card
o Recurring payment loading when balance reaches set level or scheduled
monthly payments by debit or credit
Sources: See end of section
- 152 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
TelPay
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Largest independent bill payment processor. TelPay enables financial institutions, businesses and personal users to transfer money and make
•
•
•
•
•
electronic payments
Ownership: Private
Founded: In 1985 as a research and development project of Comcheq Services Limited
Headquarters: Winnipeg, Manitoba
Markets Served: Canada but can receive and pay international bills
Value Proposition: Provides a cost-effective method for transferring money and making electronic payments
Key Financial Metrics
Historical Trend
• Entities Served: ~250 financial institutions (mainly credit unions), thousands
Funds Processed (CAD Billions)
•
•
•
•
$16.00
of businesses, 40,000 billers
Total Volume: 23M transactions in 2009
Total Transactions: $14B CDN in 2009
Assets: $17.9M in 2008 and $18.4M in 2009
Liabilities: $17.9M in 2008 and $18.4M in 2009
$14.00
Funds Processed by TelPay, 2005-2009
Funds Processed CAGR: 18.06%
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
2005
2006
2007
2008
2009
Funds Processed (CAD M illions)
Suppliers / Partners
Network:
• In-house proprietary system
Other:
• Western Union
• Payline FX
Product Suite
• Consumers: can pay bills
• Business: Allows for electronic
Recent Developments
• TelPay’s rising revenue illustrates the growing trend of consumers and
processing of transactions, payroll
direct deposit to bank accounts,
electronic billing of customers, and
integration with account systems
• Billers: Consolidate customer
payments into one electronic TelPay
payment
• Financial Institutions: linking of
consumer and business TelPay
systems to FI banking systems
businesses transferring from paper-based to electronic bill payment. In
addition, TelPay is a new entrant to the mobile payments field
• TelPay’s business value proposition is higher than that of epost, credit card
networks, and financial institutions’ bill payment systems:
o Business-to-business fees are lower than that of epost and FIs
o Exclusive striata reseller via wholly-owned subsidiary PresentPay
which enables secure e-billing capability
o TelPay's business software works as a accounting solution, or as an
add on to nearly all accounting software packages. TelPay
consolidates the debits to the bill payer, reducing bank charges
Sources: See end of section
- 153 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Zoompass (Enstream)
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
•
•
•
•
•
•
•
Summary: A mobile wallet with a payment solution allowing users to send, request and receive money via their mobile devices or online
Ownership: Operated by EnStream (a joint venture between Bell Canada, Rogers Communications Inc. and TELUS Corporation)
Launched: In 2009
Headquarters: Toronto , Ontario
Markets Served: Canada
Main Clients: Canadian mobile phone users wishing to perform financial transactions on their mobile devices
Value Proposition: A unique mobile wallet application that allows users to send, receive and request money safely and securely using their mobile phone, any
time, any place. Ultimately, the Zoompass Mobile Wallet will expand its offering to include gift cards, loyalty cards and NFC-enabled contactless payments
Key Financial Metrics
Canadian Consumer Mobile Preferences (2008)
• # of Mobile Phone Models Software is Compatible With: 60+
• Market Share: Bell Canada, Rogers Communications Inc. and TELUS
Mobile Commerce and Advanced Features
Corporation collectively cover approximately 95% of the Canadian mobile
subscribers
• Zoompass Software Fees: $0.50 CDN to withdraw funds to bank account,
3.5% to send money from credit card linked to Zoompass account
• Zoompass Prepaid MasterCard Fees: $1.50/month service charge,
$1.50/ABM withdrawal, no charge for purchases
Source: Arcus, http://www.canadianmarketingblog.com/archives/2008/04/trends_in_wireless_phones_and_1.html
Suppliers / Partners
Network:
• MasterCard
Other:
• Bell Canada
• Rogers Communications Inc.
• TELUS Corporation
• PC Mobile
• Fido
• Solo Mobile
• Virgin Mobile
Product Suite
• Peer-to-peer funds transfer
• Contactless payment with
Zoompass MasterCard card
• Group money requests
• Western Union international money
transfers (end of 2010)
Recent Developments
• Zoompass application appeared across Canada on Rogers BlackBerry
devices in April 2010, Bell BlackBerry devices in March 2010 and TELUS
BlackBerry devices in February 2010
• 3 month mobile payments trial using contactless technology launched in May
• Major FIs have shown interest in offering Zoompass to customers. A direct
link between Zoompass accounts and bank accounts may be a future offering
• Partnership with MasterCard and three mobile carriers may give Zoompass
and MasterCard an edge over Visa in entering the mobile contactless
payment market
• Announced a new partnership with Western Union to allow Zoompass users
to send international mobile money transfers to over 200 countries worldwide
Sources: See end of section
- 154 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
a. Participant Profiles
7. Money Service Companies
b. Review of Payment-Related Activities
9. Closed Loop
8. ABM Service Providers
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 155 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Type Overview:
Loyalty and Rewards
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Introduction
• Role: Offer programs as incentives for card companies and retailers to entice customers to make purchases. There are typically three types of rewards
programs; point-based, cash-back and frequent flyer miles. Rewards companies operate in conjunction with many partners across numerous sectors. Loyalty
and rewards can be offered directly by retailers such as the Hudson’s Bay Company (the Hbc family includes the Bay, Zellers, Home Outfitters and Fields), or
as part of a consortium such as Air Miles. They can also be managed in-house, e.g. Canadian Tire Money, or outsourced to companies such as GE Money.
• Degree of Consolidation: Loyalty and rewards are offered by a wide range of businesses of varying sizes. Air Miles and Aeroplan Canada are the most widely
used rewards companies with over 60% of Canadian households participating in one or both of their programs
• Relative Stability: The market for loyalty and rewards has been gaining popularity over recent years with more retailers offering a loyalty and rewards program.
Air Miles and Aeroplan continue to partner with various retailers to offer a wider variety of rewards
• See Section 4 of main document for more details
Representative Sample of Canadian Rewards Issuers
Entertainment
• TD Canada Trust
• Office Depot
• AMC Theaters
• Visa Inc.
• Pet Smart
• Cineplex
Restaurant
• Shopper’s Drug Mart
• Dairy Queen
• Rexall
• American Express
Company
• Starbucks
• Petro-Canada
• Capital One
• CIBC
• Citibank
• Citizens Bank of
Canada
• ING Direct
• GE Money
• HSBC
Payment
Originators
• Pharmaprix
Retail
• Sobeys
• Avis
• Sunoco
• Best Buy
• Walmart
Cash
Debit Cards
(POS & ABM)
Travel
• Canadian Tire
• Aeroplan Canada
Inc.*
• Carlton Cards
• Chapters
• Coles
• MasterCard
Worldwide
• Eddie Bauer
• MBNA
• HMV
• National Bank of
Canada
• Hudson’s Bay
Company, The
• RBC Royal Bank
• La Senza
• Scotiabank
• Metro Canada
• GNC
Debit Networks
Merchant
Acquirer
Credit C ards,
Open-Loop Prepaid
Sender
of Funds
Payment
Originator’s
Financial
Institution
(Consumer)
(Business)
(Government)
Credit Card Network
White Label
ABM
Operators
AFT Credits and Debits,
EDI
CPA Services
Network
Cheques and ot her paper
remittances
Payment
Recipient's
Financial
Institution
Payment Service
Provider
LVTS
Wires
Recipient
of Funds
(Consumer)
(Merchant)
(Business)
(Government)
(Issuer)
• Biotherm
• Blockbuster
Payment
Recipients
Payment Connectors
• Roots
Financial Services
• BMO Bank of
Montreal
Payments Landscape
SWIFT/LVTS
Canadian Payments Association
Transaction /
Processing
Support
Cash in
Circulation
Cash in
Circulation
Transaction /
Processing
Support
Bank of Canada
• Air Miles (Loyalty
One, Inc.)*
Payment Enablers (Simplified)
• Air Canada
• Delta Hotels
• Hilton Worldwide
• InterContinental Hotels
Group
ABM Service Providers
Money Transfer Companies
Mobile Network Operators
Currency Exchange and Trading Companies
Loyalty & Rewards Provider
Payday Cheque Cashiers/Loan Organizations
Service Providers to Industry Participants
eWallet Providers
Payment Regulators (Simplified)
• Marriott
Provincial Regulators
Federal Regulators
• Travelodge
Department of
Finance
Bank of
Canada
Competition
Bureau
CPA
FCAC
OSFI
OCA
Securities
Regulators
Consumer
Protection
Financial Svcs.
Commissions
Self-Regulators
CBA
CPLA
Interac
IIROC
*Profiled in this section
Sources: See end of section
- 156 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Aeroplan Canada Inc.
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: Frequent shopper program by which customers earn points for each dollar spent. Operates as a consortium with Air Canada as the anchor retailer
• Founded and Ownership: Created in 1984 by Air Canada; in 2002, Aeroplan was established as a wholly-owned limited partnership of Air Canada;  Groupe
Aeroplan, a publicly held company, owns Aeroplan
Headquarters and Employees: Montreal, Quebec with approximately 2,000 employees
Markets Served: North America, Middle East and UK
Main Clients: Consumers and businesses
Value Proposition: Points can be redeemed for ‘Rewards’ that include electronics, travel items, tickets to entertainment events, etc.
Key Financial Metrics
Historical Trend
• Revenues: $1.4B CDN (-1.47% growth YOY)
Aeroplan Mile Redemption Activity and Cost of Rewards, 2005–2009
Redemption Activity ( B)
• Expenses: $1.3B CDN (2.74% growth YOY)
• Profit: $89.3M CDN (-109.25% growth YOY)
• Redemption Activity: 68.2B in 2009 (1.79% growth YOY)
• Cost of Rewards: $893.4M CDN in 2009 (4.0% growth YOY)
• Market Share: N/A
• In 2009, over 2.1M rewards were issued to members including more than
1.5M flights on Air Canada and Star Alliance carriers
• To date, more than 600B miles have been redeemed for more than 16M seats
to over 1,000 destinations around the world through Air Canada and the Star
Alliance network
Suppliers / Partners
• Air Canada
• American Express
• CIBC Aerogold Visa Infinite Card
• Avis
• Delta Hotels and Resorts
• Esso
• Fairmont Hotels and Resorts
• Home Hardware
Redemption Activity CAGR: 6.91% Cost of Rewards CAGR: 22.48%
80
$800
60
$600
40
$400
20
$200
0
$0
2005
2006
Redemption A ctivity
Product Suite
$1,000
Cost of R ewards ($M)
•
•
•
•
2007
2008
2009
Cost of R ewards
Recent Developments
• Aeroplan miles and reward program
• Aeroplan launched brand new suite of rewards in April 2010 called “Money
Can’t Buy”, allowing members to redeem Aeroplan miles for a variety of
rewards that are unique to the Aeroplan program
• Aeroplan signed a multiyear agreement in February 2010 with Nestlé in
Canada that will enable members to earn Aeroplan Miles on more than 60
Nestlé and Nestlé Purina PetCare products
• Aeroplan announced the addition of Aegean Airlines to its roster of travel
partners in June 2010
• Aeroplan launched the eStore Gift Card Boutique, featuring a wide choice of
gift cards from more than 40 retailers in 9 categories, in December 2009
• United Airlines
Sources: See end of section
- 157 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
Participant Profile:
Air Miles (Loyalty One, Inc.)
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Company Snapshot
• Summary: LoyaltyOne is a global provider of loyalty strategy and programs, customer analytics and relationship marketing services. The company designs,
•
•
•
•
•
delivers, and manages a suite of loyalty marketing services – consumer data, customer-centric retail strategies, direct-to-consumer marketing, loyalty consulting
and more. Much of its expertise comes from operating the AIR MILES Reward Program – a frequent shopper program by which customers earn points for each
dollar spent
Founded and Ownership: LoyaltyOne is an Alliance Data company. LoyaltyOne (previously The Loyalty Group, then Alliance Data Loyalty Services) was
founded in 1991 in Canada; acquired by Alliance Data in 1998; Alliance Data is a leading provider of loyalty and marketing solutions derived from transaction-rich
data, managing 107 million consumer relationships for North America’s leading brands
Headquarters and Employees: Toronto, Ontario with more than 1,500 employees globally
Markets Served: North America, Brazil, International
Main Clients: Works with over100 of North America’s leading brands in retail, financial services, grocery, petroleum retail, travel, and hospitality industries
Value Proposition: In Canada, AIR MILES reward miles are collected by more than 10 million active customers (known as Collectors) at more than 100 brand
name retailers and service companies (known as Sponsors) and redeemed for more than 1,200 Rewards from a significant Rewards Portfolio
Key Financial Metrics
Historical Trend
• Fiscal 2009 year-end revenue (Loyalty One): $715M USD
• 1992: AIR MILES Reward Program launches in Canada. After 6 months, the
• Manages more than 10M active AIR MILES Collector accounts representing
approximately two-third of Canadian households
• Issued approximately 4.5B miles in 2009
• 3.3B miles redeemed in 2009
•
•
•
•
•
•
Sponsors
Product Suite
• Amex Bank • Jean Coutu
• Loyalty Strategy – counsel in all areas of
loyalty
• Loyalty Programs – customized solutions from
standalone program to multi-partner coalitions
• Customer Analytics – using data insights to
build engagement and profitability
• Relationship Marketing - creating targeted,
relevant and effective customer communication
of Canada • Metro
(American
• Shell
Express)
• Rona
• Safeway
• Rexall
• Sobeys
• LCBO
• IGA
• BMO
program attracted more than 2M Collectors. In its first year, 13 participating
Sponsors joined the Program including Bank of Montreal and Safeway
1994: 1billionth reward mile issued
1998: LoyaltyOne is acquired by Alliance Data
2001: Loyalty One acquires COLLOQUY and COLLOQUY Consulting
2003: airmilesshops.ca launches
2005: 21 billionth reward mile issued: 21 million reward redemptions reached
2008: COLLOQUY Consulting becomes LoyaltyOne Consulting; LoyaltyOne
launches new business Direct Antidote, a creative agency that develops
strategies that foster loyalty; LoyaltyOne launches new business Precima,
which develops and executes customer-centric retail strategies
Recent Developments
• By the end of the first quarter, 2010, Canadians can earn AIR MILES reward
miles for car rentals at participating locations in the U.S.
• LoyaltyOne acquires equity stake in the Brazilian loyalty program, DOTZ, in
2009
• LoyaltyOne opens new AIR MILES Reward Program in 2009 customer care
centre with largest rooftop solar panel installation in Canada
• Named one of the 50 Best Employers in Canada in 2010
Sources: See end of section
- 158 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
1. Background
2. Merchant Acquirers
3. Review of Payment Methods
3. Payment Networks
4. Review of Participants in the Payments Ecosystem
4. Payment Service Providers
5. Issuers
5. Appendices
6. Clearers and Settlers
a. Participant Profiles
7. Money Service Companies
b. Review of Payment-Related Activities
9. Closed Loop
8. ABM Service Providers
10. eWallet
c. Glossary of Terms
11. Alternative Payment Vehicles
12. Loyalty and Rewards
d. Further Reading
13. References
- 159 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Aeroplan Canada Inc.
1.
Groupe Aeroplan, www.groupeaeroplan.com
2.
Groupe Aeroplan [2009] Setting a New Measure in Global Loyalty: 2009 Annual Report, Groupe Aeroplan
3.
Moretti, Stefania [10 June 2010] Aeroplan CEO Bullish on Global Growth, Toronto Sun http://www.torontosun.com/money/2010/06/10/14338536.html
4.
Strauss, Marina [15 June 2010] Retailers Rushing to Join the Loyalty Bandwagon, Globe and Mail http://www.theglobeandmail.com/globe-investor/retailersrushing-to-join-the-loyalty-bandwagon/article1604748/
Airmiles (Loyalty One, Inc.)
1.
Airmiles, www.airmiles.ca
American Express Company
1.
American Express Company, www.americanexpress.com
2.
American Express Company [2009] Right for the Times: Annual Report 2009, American Express Company
3.
Carrick, Rob [9 July 2009] Amex's New Charge Card Offering: Exclusivity, But You'll Pay For It, The Globe and Mail
4.
Credit Cards, www.creditcards.com
5.
DataMonitor Inc. [24 June 2009] American Express Company – Company Profile, DataMonitor http://global.factiva.com
6.
Reuters [8 July 2009] American Express Company Extended Business Description, Reuters http://global.factiva.com
7.
Stilmar, John [15 June 2009] American Express Company, SunTrust Robinson Humphrey Analyst Report
8.
Yahoo! Finance, http://finance.yahoo.com/q/co?s=AXP+Competitors
Bank of Montreal
1.
Bank of Canada, www.bankofcanada.ca
2.
Bank of Montreal, www.bmo.com
3.
Bank of Montreal [2009] Annual Report 2009, Bank of Montreal
4.
Factiva, www.factiva.com
5.
Nilson Report, April 2007, Issue 878
6.
Nilson Report, February 2010, Issue 944
7.
Yahoo! Finance, http://finance.yahoo.com/q?s=BMO
- 160 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Bank of Nova Scotia
1.
Bank of Canada, www.bankofcanada.ca
2.
Bank of Nova Scotia, www.scotiabank.com
3.
Bank of Nova Scotia [2009] 2009 Annual Report, Bank of Nova Scotia
4.
Factiva, www.factiva.com
5.
Nilson Report, April 2007, Issue 878
6.
Nilson Report, February 2010, Issue 944
7.
Yahoo! Finance, http://finance.yahoo.com/q/co?s=BNS+Competitors
Canadian Imperial Bank of Commerce
1.
Bank of Canada, www.bankofcanada.ca
2.
Canadian Imperial Bank of Commerce, www.cibc.com
3.
Canadian Imperial Bank of Commerce [2009] 2009 Annual Report, Canadian Imperial Bank of Commerce
4.
Nilson Report, April 2007, Issue 878
5.
Nilson Report, February 2010, Issue 944
6.
Yahoo! Finance, http://finance.yahoo.com/q/co?s=CM+Competitors
Canadian Payday Loan Association
1.
Canadian Payday Loan Association, www.cpla-acps.ca
Canadian Payments Association
1.
Canadian Payments Association, www.cdnpay.ca
2.
Deloitte research and analysis
Canadian Tire Bank
1.
Canadian Tire Financial Services, www.ctfs.com
2.
Canadian Tire Financial Services [2009] 2009 Annual Report, Canadian Tire Financial Services
3.
Canadian Tire Financial Services [2010] Quarterly Report 2010, Canadian Tire Financial Services
4.
Factiva, www.factiva.com
5.
Flavelle, Dana [3 February 2009] Canadian Tire Tightens Credit Card Rules, The Star http://www.thestar.com/article/581267
6.
Nilson Report, April 2007, Issue 878
7.
Nilson Report, February 2010, Issue 944
- 161 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Capital One
1.
Capital One, www.capitalone.com
2.
Capital One [2009] 2009 Annual Report, Capital One
3.
Factiva, www.factiva.com
4.
Nilson Report, April 2006, Issue 855
5.
Nilson Report, April 2007, Issue 878
6.
Nilson Report, February 2008, Issue 897
7.
Nilson Report, February 2009, Issue 920
8.
Nilson Report, February 2010, Issue 944
Cash Money
1.
Cash Money, www.cashmoney.ca
2.
Kitching, A. and Starky, S. [26 January 2006] Payday Loan Companies in Canada: Determining the Public Interest, Canadian Library of Parliament
3.
Skiba, P. and Tobacman, J. [10 December 2007] The Profitability of Payday Loans
Cash N Go Ltd.
1.
Bloomberg Businessweek, http://investing.businessweek.com/businessweek/research/stocks/private/snapshot.asp?privcapId=25284180
2.
Cash N Go Ltd., www.cashngo.com
3.
Entrepreneur’s Organization [08 December 2009] HDX to Acquire Cash N Go Ltd,
http://eoaccess.eonetwork.org/Edmonton/News/_layouts/EO_WebParts/MemberNews.aspx?eID=5
4.
Industry Canada, http://www.ic.gc.ca/app/ccc/srch/nvgt.do?sbPrtl=&prtl=1&estblmntNo=234567112200&profile=cmpltPrfl&profileId=501&app=sold&lang=eng
5.
Interac, http://www.interac.ca/media/stats.php
6.
Market Wire [17 May 2010] Cash N Go Deploys INETCO Insight Business Transaction Management Software, Market Wire
http://www.marketwire.com/press-release/Cash-N-Go-Deploys-INETCO-Insight-Business-Transaction-Management-Software-1261195.htm
7.
Retail Info Systems News [20 May 2010] Cash N Go Deploys Real-Time Transaction Monitoring Software, Retail Info Systems News
Chase Paymentech
1.
Canadian Newswire [2 July 2010] Major Canadian Payment Processors Support American Express Chip Cards, Canadian Newswire
http://www.newswire.ca/en/releases/archive/July2010/02/c9823.html
2.
Chase Paymentech, www.chasepaymentech.com
3.
Chase Paymentech [2009] Annual Report 2009, Chase Paymentech
4.
Factiva, www.factiva.com
- 162 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Desjardins Group
1.
Canadian Newswire [22 June 2010] Desjardins Group Top Ten Among 50 Best Corporate Citizens in Canada, Canadian Newswire
http://www.newswire.ca/en/releases/archive/June2010/22/c7075.html
2.
Desjardins Group, www.desjardins.com/en/
3.
DesjardinsGroup [2009] 2009 Annual Report, Desjardins
4.
Factiva, www.factiva.com
5.
Nilson Report, April 2006, Issue 855
6.
Nilson Report, April 2007, Issue 878
7.
Nilson Report, February 2008, Issue 897
8.
Nilson Report, February 2009, Issue 920
9.
Nilson Report, February 2010, Issue 944
Esso Speedpass
1.
Business Wire [31 May 2001] Speedpass Expands to More Than 400 McDonald's Restaurants in the Chicagoland Area; Now Five..., Business Wire
http://www.allbusiness.com/retail/retailers-food-beverage-stores-convenience/6080670-1.html
2.
Digital Transactions [1 April 2004] McDonald's' Exit from Speedpass May Be Only a Hiccup for RFID, Digital Transactions
http://www.digitaltransactions.net/newsstory.cfm?newsid=216
3.
Esso Speedpass, https://www.essoextra.com/SpeedpassHome.page
4.
Exxon Mobil, www.exxonmobil.com
5.
Factiva, www.factiva.com
6.
Imperial Oil [2008] Annual Report 2008, Imperial Oil
7.
Imperial Oil [2009] Quarterly Report 1 for the Three Months Ended March 31, 2009, Imperial Oil
8.
Imperial Oil [2009] Summary Annual Report 2009, Imperial Oil
9.
Krakow, Gary, Credit on Your Key Ring, MSNBC http://www.msnbc.msn.com/id/3072638/
10. Liu, Sisi and Rottenberg, Cari [2002] The Mobil Speedpass and Mobile Commerce, MIT Undergraduate Research Journal,
http://web.mit.edu/murj/www/v07/v07-Reports/v07-r2.pdf
11. RFID Journal (24 March 2006) Exxon Mobil Speedpass Enrollment gets Speedier, RFID Journal http://www.rfidjournal.com/article/view/2218/1/1
- 163 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
ePost (Canada Post Corporation)
1.
Canada Post [2009] 2009 Annual Report, Canada Post
2.
Deloitte Analysis
3.
ePost, www.epost.ca
4.
Factiva, www.factiva.com
5.
Factiva [2009] Canada Post Corporation Company Snapshot, Factiva http://global.factiva.com
Everlink Payment Services Inc.
1.
Everlink Payment Services Inc., www.everlink.ca
2.
Hoovers, http://www.hoovers.com/company/Everlink_Payment_Services_Inc/tcyryxftj-1.html
Facebook Credits
1.
The Daily [17 November 2008] E-Commerce: Shopping on the Internet, Statistics Canada http://www.statcan.gc.ca/daily-quotidien/081117/dq081117aeng.htm
2.
Deloitte [2007] Is the Retail Payments Industry Headed for Disruption?, Deloitte http://www.deloitte.com/view/en_BA/ba/insights/deloitteresearch/a6edef747110e110VgnVCM100000ba42f00aRCRD.htm
3.
Facebook, www.facebook.com
4.
Factiva, www.factiva.com
5.
Frommer, Dan [12 January 2009] Zuckerberg: Facebook Revenue Growth 'Really Strong', Still Hiring, Business Insider
http://www.businessinsider.com/2009/1/zuckerberg-facebook-revenue
6.
Gonzales, Nick. [6 July 2007] Facebook Users Up 89% Over Last Year; Demographic Shift, Tech Crunch http://www.techcrunch.com/2007/07/06/facebookusers-up-89-over-last-year-demographic-shift/
7.
Inside Facebook [2 November 2008] Facebook Exchanges Dollars for Virtual Credits, Eyes Expanding Virtual Gifts Revenues, Inside Facebook
http://www.insidefacebook.com/2008/11/02/facebook-exchanges-dollars-for-virtual-credits-eyes-expanding-virtual-gifts-revenues/
8.
Inside Facebook [29 May 2009] Facebook Turns on a New Revenue Stream – Now You Can “Pay With Facebook” Inside Facebook
http://www.insidefacebook.com/2009/05/29/facebook-turns-on-another-revenue-stream-now-you-can-pay-with-facebook/
9.
Inside Facebook [24 June 2009] A $ign of Things to Come? Facebook Ads and Credits Can Now be Purchased in 14 New Currencies, Inside Facebook
http://www.insidefacebook.com/2009/06/24/a-ign-of-things-to-come-facebook-ads-and-credits-can-now-be-purchased-in-14-new-currencies
10. Lightspeed Venture Partners [2 September 2008] Facebook Selling Gifts at $35M Run Rate, Lightspeed Venture Partners
http://lsvp.wordpress.com/2008/09/02/facebook-selling-digital-gifts-at-a-35m-run-rate/
11. Nutt, Christian [10 July 2009] Davis: 'Facebook Credits' Payment Method Could Boost Games, Gamasutra http://www.gamasutra.com/phpbin/news_index.php?story=24378
12. O’Neill, Nick [1 June 2009] Facebook begins publically testing payments platform, All Facebook http://www.allfacebook.com/2009/06/facebook-beginspublicly-testing-payments-platform/
- 164 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
First Data Corporation
1.
BNET [July/August 2003] First Data Corporation, BNET
2.
First Data Corporation, www.firstdata.com
3.
First Data Corporation [2009] SEC Form 10-K, First Data Corporation
4.
First Data Corporation [2010] First Data Fact Sheet, First Data Corporation
5.
Yahoo! Finance, http://biz.yahoo.com/ic/14/14441.html
Frisco-ATMs
1.
ATMs Canada, www.atmscanada.com/
2.
Frisco-ATMs, www.friscoatms.com
3.
Lowe, Frederick H. [01 July 2010] TNS Smart Network continues to Certify ATMs to Process EMV Transactions, ATM Marketplace
http://www.atmmarketplace.com/article.php?id=12089
4.
Lowe, Frederick H. [ 09 July 2010] Is the US Getting in the Mood for EMV? ATM Marketplace http://www.atmmarketplace.com/article.php?id=12103
Global Payments Inc.
1.
Canadian Newswire [2 July 2010] Major Canadian Payment Processors Support American Express Chip Cards, Canadian Newswire
http://www.newswire.ca/en/releases/archive/July2010/02/c9823.html
2.
Factiva, www.factiva.com
3.
Global Payments Inc. [2009] Annual Report 2009, Global Payments Inc.
4.
Global Payments Inc. [31 March 2010] Global Payments Reports Third Quarter Earnings, Global Payments Inc. http://phx.corporateir.net/phoenix.zhtml?c=125339&p=irol-newsArticle&ID=1408610&highlight
Google Checkout
1.
The Daily [17 November 2008] E-Commerce: Shopping on the Internet, Statistics Canada http://www.statcan.gc.ca/daily-quotidien/081117/dq081117aeng.htm
2.
Deloitte [2007] Is the Retail Payments Industry Headed for Disruption?, Deloitte http://www.deloitte.com/view/en_BA/ba/insights/deloitteresearch/a6edef747110e110VgnVCM100000ba42f00aRCRD.htm
3.
Factiva, www.factiva.com
4.
Google Checkout , http://checkout.google.com/
5.
Grau, Jeffrey [December 2008] Canada B2C E-Commerce: A Work in Progress, eMarketer
http://www.emarketer.com/Report.aspx?code=emarketer_2000547
6.
Newton, Alistair and Christophe Uzureau [29 December 2006] PayPal and Google Checkout Show the Way for Banks‘ Payment Operations, Gartner
7.
Wolfe, Daniel [6 July 2009] Facebook Payments System Facing Uncertain Demand, American Banker
- 165 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Interac Association
1.
Flavelle, Dana [13 February 2010] Interac to Remain Non-Profit: Regulator, The Star http://www.thestar.com/business/article/764825--interac-to-remain-nonprofit-regulator
2.
Interac Association, www.interac.com
3.
mPowerTec, www.mpowertec.com
4.
Nilson Report, February 2010, Issue 944
Intria Items Inc.
1.
Business Wire [28 April 2000] INTRIA-HP Solves Need for Resource Optimization with Account4, All Business, http://www.allbusiness.com/companyactivities-management/contracts-bids/6430740-1.html
2.
Committee on Payment and Settlement Systems of the Group of Ten Countries [2009] Statistics on Payment and Settlement Systems in Selected Countries,
Bank for International Settlements
3.
Intria Items Inc., www.intriaitemsinc.com
JPMorgan Chase & Co.
1.
Chase, www.chase.com
2.
JP Morgan, www.jpmorgan.com
3.
JPMorgan Chase & Co., www.jpmorganchase.com
4.
Nilson Report, June 2005, Issue 835
5.
Nilson Report, April 2006, Issue 855
6.
Nilson Report, April 2007, Issue 878
7.
Nilson Report, February 2008, Issue 897
8.
Nilson Report, February 2009, Issue 920
9.
Nilson Report, February 2010, Issue 944
10. Yahoo! Finance, http://finance.yahoo.com/q/co?s=JPM+Competitors
- 166 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
MasterCard Worldwide
1.
Canadian Newswire [12 February 2010] Statement from MasterCard Canada, Canadian Newswire
http://www.newswire.ca/en/releases/archive/February2010/12/c9502.html
2.
Deloitte research and analysis
3.
EMV Canada, www.emvcanada.ca
4.
MasterCard Worldwide, www.mastercard.com
5.
MasterCard Worldwide [2009] 2009 Annual Report, MasterCard Worldwide
6.
New York Stock Exchange, (Retrieved on 19th July 2010 at 13:42) http://www.nyse.com/about/listed/lcddata.html?ticker=MA
7.
Payments Business [10th March 2010] RBC Launches WestJet MasterCard, Payments Business
http://www.paymentsbusiness.ca/News/Mar1010_rbcwestjet.htm
8.
ProBank, http://www.probank.gr/bank_en.php?id=312
9.
Yahoo! Finance, http://finance.yahoo.com/q/co?s=MA+Competitors
MBNA Canada Bank
1.
Canadian Newswire [August 2010] 10 Fast Facts about Shoppers Optimum, Celebrating its 10th Birthday in August 2010,
http://www.newswire.ca/en/releases/mmnr/smr/ShoppersOptimum10thBirthdayFastFacts.pdf
2.
CUETS Financial [30 May 2007] MBNA Canada Bank to Acquire CUETS, CUETS Financial http://www.cuets.ca/news/2007/05-30.htm
3.
MBNA Canada Bank, http://www.mbna.ca/index.html
4.
Nilson Report, June 2005, Issue 835
5.
Nilson Report, April 2006, Issue 855
6.
Nilson Report, April 2007, Issue 878
7.
Nilson Report, February 2008, Issue 897
8.
Nilson Report, February 2009, Issue 920
9.
Nilson Report, February 2010, Issue 944
Moneris Solutions
1.
Canadian Newswire [2 July 2010] Major Canadian Payment Processors Support American Express Chip Cards, Canadian Newswire
http://www.newswire.ca/en/releases/archive/July2010/02/c9823.html
2.
Factiva, www.factiva.com
3.
Mammone, Christopher [22 December 2009] Global Payments Inc. – Initiating Coverage, Thomson Reuters
4.
Moneris Solutions, http://www.moneris.com
5.
Reuters [16 April 2010] Moneris Joins RBS WorldPay Bid Shortlist: Source, Reuters http://in.reuters.com/article/idINTRE63F1M120100416
- 167 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
National Cash Register Corporation
1.
National Cash Register Corporation, www.ncr.com
2.
National Cash Register Corporation [2008] NCR Services: Proactive Management, Maintenance and Support, National Cash Register Corporation
3.
National Cash Register Corporation [2009] 2009 Annual Report, National Cash Register Corporation
4.
Yahoo! Finance, http://finance.yahoo.com/q/co?s=NCR+Competitors
National Money Mart Company
1.
Canadian Payday Loan Association, www.cpla-acps.ca
2.
Dollar Financial Corporation [2009] 2009 Annual Report, Dollar Financial Corporation
3.
Dollar Financial Corporation [n.d.] Corporate Fact Sheet, Dollar Financial Corporation
4.
Money Mart, www.moneymart.ca
PayPal
1.
Bedier, Osama [6 July 2009] News about PayPal’s Platform and Upcoming Event
2.
The Daily [17 November 2008] E-Commerce: Shopping on the Internet, Statistics Canada
3.
eBay Incorporated, http://www.paypal.com
4.
eBay Incorporated [January 2008] Company Update
5.
eBay Incorporated [October 2006] Technical Overview of PayPal as an Additional Payment Option, PayPal
6.
eBay Incorporated, About ACH Payments, PayPal https://www.paypal.com/en_US/vhelp/paypalmanager_help/about_ach_payments.htp
7.
eBay Incorporated, Corporate Fast Facts, PayPal https://www.paypal-media.com/documentdisplay.cfm?DocumentID=2260
8.
Factiva, www.factiva.com
9.
Fowler, Geoffrey A. [4 August 2009] PayPal Users Hit By Global Service Outage, The Wall Street Journal
http://online.wsj.com/article/SB124933612758802715.html
10. Grau, Jeffrey [December 2008] Canada B2C E-Commerce: A Work in Progress, eMarketer
http://www.emarketer.com/Report.aspx?code=emarketer_2000547
11. JP Morgan, PayPal cashes in With Global ACH, JP Morgan
http://www.jpmorgan.com/cm/ContentServer?c=TS_Content&pagename=jpmorgan%2Fts%2FTS_Content%2FGeneral&cid=1136901635711
12. Kirk, Jeremy [8 July 2009] PayPal to Open Platform to Third-party Developers, PC World
http://www.pcworld.com/businesscenter/article/168040/paypal_to_open_platform_to_thirdparty_developers.html
13. McCune, Erin [11 March 2009] eBay Analyst Day: PayPal World Domination, Payments View http://paymentsviews.com/2009/03/11/ebay-analyst-daypaypal-world-domination/
14. Newton, Alistair and Christophe Uzureau [29 December 2006] PayPal and Google Checkout Show the Way for Banks‘ Payment Operations, Gartner
15. PayPal, www.paypal.com
- 168 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Presto (Government of Ontario)
1.
Deloitte [2009] Ontario Transit Service Provider Ridership
2.
Factiva, www.factiva.com
3.
Fragomeni, Carmela [26 June 2007] Board an HSR Bus, Swipe Transit Card - Presto, You're in Oshawa, The Hamilton Spectator
4.
Hill, Bert [29 October 2008] Transit Smart Cards Targeted for 2010; Technology Provides Major Convenience for Commuters, The Ottawa Citizen
5.
Presto, https://www.prestocard.ca/Home/Index
6.
Presto [2009] 2009 Annual Report, Presto
President’s Choice Bank
1.
CIBC Supplementary Financial Information for the Period Ended April 30th, 2010
2.
The Nilson Report, March 2010, Issue #944
3.
OSFI, http://www.osfi-bsif.gc.ca/
4.
PC Financial, http://www.pcfinancial.ca
Royal Bank of Canada
1.
Bank of Canada, www.bankofcanada.ca
2.
Factiva, www.factiva.com
3.
Nilson Report, April 2007, Issue 878
4.
Nilson Report, February 2010, Issue 944
5.
Royal Bank of Canada, www.rbc.com
6.
Royal Bank of Canada [2009] 2009 Annual Report, Royal Bank of Canada
7.
Yahoo! Finance, http://finance.yahoo.com/q/co?s=RY+Competitors
- 169 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Shop! Card
1.
Business Wire [23 February 2009] Payments Study Highlights Continued Growth of Credit, Debit Cards, Reuters
http://www.reuters.com/article/pressRelease/idUS151667+23-Feb-2009+BW20090223
2.
Cadillac Fairview Corporation, http://www.shops.ca/page.ch2?uid=shopCard
3.
Cadillac Fairview Corporation [30 May 2007] Ontario Government Recognizes Difference Between Mall and Retail Gift Cards, Cadillac Fairview Corporation
http://www.cadillacfairview.com/
4.
Cannon, Ellen [12 November 2007] 2007 Gift Card Study: Tops for Holidays, Bank Rate
http://www.bankrate.com/brm/news/cc/20071112_gift_card_study_analysis_a1.asp
5.
CBC News [5 December 2008] Gift Cards: the Lure of Plastic, CBC http://www.cbc.ca/consumer/story/2008/12/01/f-giftcards.html
6.
Factiva, www.factiva.com
7.
Market Wire [5 December 2006] Press Release: Multi-Store Gift Card Coalition Supports Ontario Government's Consumer Protection Legislation, Market
Wire http://www.marketwire.com/press-release/Multi-Store-Gift-Card-Coalition-625606.html
8.
MultiStore Gift Card Coalition, http://multistoregiftcards.com/
9.
Packaged Facts [9 January 2008] Gift Card Market Expected to Grow 5%, Exceeding $52 Billion by 2012, Reuters
http://www.reuters.com/article/pressRelease/idUS161964+09-Jan-2008+PRN20080109
10. Retail Council of Canada [2 April 2008] Retail Council of Canada Welcomes New Gift Card Rules for B.C.
11. Statistics Canada, http://www.statcan.gc.ca/pub/11-621-m/2006051/t/4054404-eng.htm
12. StoreFinancial, http://www.storefinancial.com/sf_solutions_products.php
13. Towergroup [3 January 2007] Press Release: Towergroup: Gift Cards Beckon for Tighter Regulations as they Approach $100 Billion in Volume, Tower Group
https://www.towergroup.com/research/news/news.htm?newsId=1840
14. Watch, Brock [14 December 2007] Gift Cards Going Under Regulatory Microscope, Business Edge
http://www.businessedge.ca/article.cfm/newsID/16869.cfm
Starbucks
1.
Allinson, Melissa [20 December 2007] Starbucks Cards Don’t Sit Idle, Help Drive Sales, Seattle Times
http://seattletimes.nwsource.com/html/businesstechnology/2004083685_giftcard20.html
2.
Associated Press [6 December 2006] Starbucks Cashes in on Loyalty Card, MSNBC http://www.msnbc.msn.com/id/16026540
3.
Davidson, Chuck [26 June 2009] You Asked for it: Introducing the Mini Starbucks Card!!, Starbucks
http://blogs.starbucks.com/blogs/customer/archive/tags/Starbucks+Card/default.aspx
4.
Factiva, www.factiva.com
5.
Starbucks, http://www.starbucksstore.com/StarbucksCard/
6.
Starbucks [2009] 2009 Annual Report, Starbucks
7.
Statistics Canada, http://www.statcan.gc.ca/pub/11-621-m/2006051/t/4054404-eng.htm
- 170 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Symcor Inc.
1.
Australian Payments Clearing Association , Payments Monitor, Q1 FY2010, http://www.apca.com.au/PM/2010_Quarter1/print.html
2.
Committee on Payment and Settlement Systems of the Group of Ten Countries [2009] Statistics on Payment and Settlement Systems in Selected Countries,
Bank for International Settlements
3.
Deloitte research and analysis
4.
Horcher, Karen [2003] The Business of Payments: Part 1, Certified General Accountants Professional Development Network
5.
Symcor Inc., www.symcor.com
TD Merchant Services
1.
Canadian Newswire [2 July 2010] Major Canadian Payment Processors Support American Express Chip Cards, Canadian Newswire
http://www.newswire.ca/en/releases/archive/July2010/02/c9823.html
2.
Factiva, www.factiva.com
3.
Mammone, Christopher [22 December 2009] Global Payments Inc. – Initiating Coverage, Thomson Reuters
4.
TD Bank Financial Group, www.td.com
5.
TD Bank Financial Group [2009] 2009 Annual Report, TD Bank Financial Group
6.
TMX Money, http://cxa.marketwatch.com/TSX/en/Market/news.aspx?symb=TD&sid=103560
TelPay
1.
Burns, Michael [1 May 2004] An Easier Way to Pay, CA Magazine, Volume 137, Issue 14
2.
Canada Post, www.canadapost.ca
3.
Cash, Martin [10 November 2004] Telpay Widens Net Bill Paying Anyone Can Be Paid, Without Using Cheques, Winnipeg Free Press
4.
Factiva, www.factiva.com
5.
TD Canada Trust, www.tdcanadatrust.com
6.
TelPay, www.telpay.ca
7.
TelPay [2009] Annual Report 2009, TelPay http://www.telpay.ca/common/pdf/TelPay_AnnualReport_2009.pdf
8.
TelPay [4 June 2010] TelPay Increases its Biller List to 40,000 Plus!, TelPay
Threshold Financial Technologies Inc.
1.
Hoovers, http://www.hoovers.com/company/Threshold_Financial_Technologies_Inc/rjfxxki1.html?CM_CAT=Google&CM_ITE=Factsheet&CM_PLA=Free&CM_VEN=Biz_Dev
2.
Threshold Financial Technologies Inc., www.threshold-fti.com
- 171 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
The Toronto-Dominion Bank
1.
Bank of Canada, www.bankofcanada.ca
2.
TD Bank Financial Group, www.td.com
3.
TD Bank Financial Group [2009] 2009 Annual Report, TD Bank Financial Group
4.
Nilson Report, April 2007, Issue 878
5.
Nilson Report, February 2010, Issue 944
6.
Yahoo! Finance, http://finance.yahoo.com/q/co?s=TD+Competitors
Total System Services, Inc.
1.
BNET [3 August, 2004] TSYS Acquires Clarity Payment Solutions; TSYS Prepaid Positioned to Emerge as Leading Global Processor for Prepaid Cards
2.
Extra Credit Cards [June 03, 2010] TSYS Completes DnB NOR Conversion, Extra Credit Cards
3.
Total System Services, Inc., http://www.tsys.com/
4.
Total System Services, Inc. [2009] 2009 Annual Report, Total System Services, Inc.
5.
Yahoo! Finance, http://finance.yahoo.com/q/co?s=TSS
Vancouver City Savings Credit Union
1.
Vancouver City Savings Credit Union Internal Report
2.
Nilson Report, June 2005, Issue 835
3.
Nilson Report, April 2006, Issue 855
4.
Nilson Report, April 2007, Issue 878
5.
Nilson Report, February 2008, Issue 897
6.
Nilson Report, February 2009, Issue 920
7.
Nilson Report, February 2010, Issue 944
8.
Vancouver City Savings Credit Union, www.vancity.com
9.
Vancouver City Savings Credit Union [2009] 2009 Annual Report, Vancouver City Savings Credit Union
VersaPay
1.
Canadian Newswire [30 April 2010] VersaPay Announces 2009 Year-End Results, Canadian Newswire
2.
Factiva, www.factiva.com
3.
Industry Canada, http://www.ic.gc.ca/app/ccc/srch/nvgt.do?lang=eng&prtl=1&sbPrtl=&estblmntNo=234567098966&profile=cmpltPrfl&profileId=501&app=sold
4.
TMX Money, http://cxa.marketwatch.com/TSX/en/Market/companyfinancials.aspx?type=AnnIncomeStmt&symb=VPY&sid=4400368
5.
VersaPay, www.versapay.com
- 172 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Visa Inc.
1.
Anisman-Reiner [25 February 2009] Visa, Mastercard May Offer Debit in Canada, Personal Budgeting http://personalbudgeting.suite101.com
2.
Avery, Simon [6 November 2008] Will That Be Cash or Cellphone? Canadian Pilot Project Will Test Consumers' Willingness to Use Mobile Phones as
Method of Payment, The Globe and Mail
3.
Bills, Steve [1 May 2009] Which Comes First, Stickers or The Phones? Frustrated That Mobile Handset Makers Aren't Keeping Pace, Card Companies Are
Slapping NFC Stickers On Phones to Jump-Start Mobile Payments, Bank Technology News
4.
Bloomberg Businessweek, http://investing.businessweek.com
5.
Canadian Banking Association [28 May 2009] Canada’s Credit and Debit Card Marketplace
6.
Canadian Senate Committee on Banking [2 July 2009] News Release: More Transparency and Clarity in Credit and Debit Card Markets is Needed, Library of
Parliament http://www.parl.gc.ca/40/2/parlbus/commbus/senate/com-e/bank-e/press-e/02jul09-e.htm
7.
Chevreau, Jonathan [16 March 2009] And More Premium Cards to Come; Rewards Promote More Day-To-Day Purchase Charges, The National Post
8.
Choi, Candice [9 July 2009] 7-Eleven Rallies Customers Against Credit, Debit Card Fees Banks Charge, The Canadian Press
9.
Credit Union Association of Rhode Island [29 June 2010] House and Senate Conferees Agree to Fed Control of Interchange Fees, CUNA Lending Council
http://www.cunalendingcouncil.org/news/3648.html
10. eBanking and Payment News [28 May 2009] Canada's House of Commons Begins Historic Credit and Debit Card Inquiry, ebanking & Payment News
11. Global Markets Direct [13 July 2009] Visa Inc. – SWOT Analysis, Factiva http://global.factiva.com
12. Hernandez, Will [29 May 2009] Debit Is Becoming Increasingly Important To Credit Card Companies, ATM & Debit News
13. New York Stock Exchange (Retrieved 19th July 2010, 14:06) http://www.nyse.com/about/listed/lcddata.html?ticker=V
14. The Nilson Report, October 2007, Issue 889
15. Perkins, Tara [3 June 2009] Paying With the Wave of a Cellphone, The Globe and Mail
16. Roseman, Ellen [21 May 2008] Counting the Cost of Opting Out in Customer's Time, The Toronto Star
17. Schmidt, Sarah [2 June 2009] Small Grocers Risk Folding Over Credit Card Changes, Feds Told, The Calgary Herald
18. Statistics Canada [2009] Summary Tables, Statistics Canada http://www40.statcan.gc.ca/z01/cs0002-eng.htm.
19. Visa Inc., www.visa.com
20. Visa Inc. [2009] 2009 Annual Report, Visa Inc.
21. Wireless News [14 November 2008] Rogers Wireless Partners with RBC and Visa in Mobile Phone Payment Pilot, Wireless News.
22. Yahoo! Finance, http://finance.yahoo.com/q/co?s=V+Competitors
- 173 -
Prepared by Deloitte
Appendix A: Participant Profiles
Acquirers
Networks
PSPs
Issuers
Clearers
MSCs
References
ABM Service
Closed Loop
eWallet
Alternative
Rewards
References
Western Union Company
1.
Kumar, K. Ram and Nair, Priya [25 September 2009] Western Union to Expand Rural Reach Through Microfinance Cos, The Hindu Business Line
http://www.thehindubusinessline.com/2009/09/26/stories/2009092651190600.htm
2.
TD Financing Services, https://www.tdfinancingservices.com/consumers/payments.aspx
3.
Western Union Company, www.westernunion.com
4.
Western Union Canada, www.westernunioncanada.ca
5.
Western Union Company [2009] 2009 Annual Report, Western Union Company
6.
Yahoo! Finance, http://finance.yahoo.com/q/co?s=WU+Competitors
Zoompass
1.
Avery, Simon [13 June 2009] Cellphone Cash Transfer Service Set to Launch, The Globe and Mail
2.
Avery, Simon and Krashinsky, Susan [30 June 2009] The Satellite Surprise; With Telus Hooking up with BCE to Re-Sell Bell Satellite TV Service, the New
Mantra Seems to Be One of Co-Operation, The Globe and Mail
3.
Bill, Steve [26 June 2009] THE TECH SCENE: Telecoms Get Their Due in Payments, American Banker
4.
Canadian Marketing Association, http://www.canadianmarketingblog.com/archives/2008/04/trends_in_wireless_phones_and_1.html
5.
DataMonitor News and Comment [17 June 2009] Rogers, Bell and Telus Launch New Mobile Payment Service, Factiva http://global.factiva.com
6.
EnStream LP, www.enstream.com
7.
Factiva, www.factiva.com
8.
LaSalle, LuAnn [25 June 2009] Consumers' Mobile Phones are Going to Become More Like Digital Wallets, The Canadian Press
9.
LaSalle, LuAnn [26 June 2009] Cellphones to Soon Be Used as Digital Wallets, Waterloo Region Record
10. Reserve Bank of India, Mobile Banking Transactions in India - Operative Guidelines for Banks, http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=1660
11. Zoompass, www.zoompass.com
- 174 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
3. Review of Payment Methods
4. Review of Participants in the Payments Ecosystem
5. Appendices
a. Participant Profiles
A. Mobile Payments
b. Review of Payment-Related Activities
B. Loyalty & Rewards
c. Glossary of Terms
d. Further Reading
- 175 -
Prepared by Deloitte
Appendix B: Review of Payments-Related Activities: A. Mobile Payments
In order to discuss trends and potential opportunities in mobile payments, it is
important to establish some common definitions
Mobile Person to Person (P2P)
Mobile Commerce (P2B/B2B)
Mobile Contactless
Allows users to send and receive money using
their mobile device, with payments linked either
to a bank account, prepaid virtual account or
credit card
Allows consumers / businesses to make
payments using a mobile device via SMS,
applets, or Web browsers to charge a
transaction to a network bill, credit / debit card,
or via PayPal
Mobile handsets are ‘tapped’ on, or placed
near, POS terminals using near field
communication (NFC) or RFID technology to
pay for goods via debit or credit
Current
Adoption
 Kenya, South Africa, Canada
 Example(s): Zoompass, PayPal Mobile,
Obopay, Visa Money Transfer
 South Korea, USA (limited)
 Example(s): Mint Technology (parking)
 Japan, South Korea
 Example(s): NTT DoCoMo’s contactless
system
Target
Markets
 Low value transactions
 Unbanked, mass markets with poor banking
infrastructure
 Location-based services (e.g., parking)
 Time-sensitive transactions (e.g., tickets)
 Downloadable content (e.g., ringtones,
applications)
 Banked teens and young adults
 Expansion into unbanked developing
Future
jurisdictions
Applications  Replace wires for international fund transfers
Required
Stakeholder
Engagement




Consumers
eWallets
FIs/Issuers
Regulators
 Mobile-related payments (e.g., games, ringtones)
 Merchant payments (e.g., Amazon)






Consumers
eWallets
Mobile Network Operators
Merchants
FIs/Issuers
Regulators
- 176 -
 High-volume, low-value cash transactions
 Quick service market
(e.g., fast food, movie theatres, etc.)
 Banked youth and early adopters of mobile
technology
 Expansion to all debit and credit payments
 mWallet – multiple payment types onto the
contactless chip (e.g., Visa, MasterCard,
prepaid, debit, etc.)








Consumers
Mobile Network Operators
Merchants
Handset Manufacturers
Card Networks
Acquirers
FIs/Issuers
Regulators
Prepared by Deloitte
Appendix B: Review of Payments-Related Activities: A. Mobile Payments
Relative to developing and developed nations, Canada has sizeable gaps to close
before mobile payments can proliferate
Mobile Payment Maturity Relative to Other Jurisdictions
Analysis Criteria
Level of Maturity
Gaps
 Next generation adoption still low
 Large base of non-mobile users
 MNOs control handset supply
Mobile Penetration
 Value of mobile payments unclear
 Numerous alternate forms of payment exist (e.g.,
Zoompass)
User Adoption
Merchant Adoption




Contactless-enabled POS deployment
Contactless POS standardization does not exist
Merchant contactless adoption is still limited
Why mobile contactless over card contactless?
Infrastructure




Lack of advanced application development
Cooperation between all stakeholders
Cost to implement
Potential cannibalization of revenue
Technology Standards




Lack of contactless-enabled phones
Top-of-phone is currently underdeveloped
Limited standardization of contactless readers
Deployment approach is unclear
 Early adoption of new phone applications
 Downloading / using applications can be
cumbersome
Device Capability
 Chip-EMV rollout is not yet complete
 Security of mobile payments is unclear
 No established rules and regulations
Security
Maturity Spectrum
Level of Maturity - Canada
Gap
Japan
- 177 -
S. Korea
UK
France
US
India
Prepared by Deloitte
Appendix B: Review of Payments-Related Activities: A. Mobile Payments
Despite the maturity gaps compared to select countries, there is an expectation that
mobile payments will gain traction in the Canadian market
Group
People
Trends




The Canadian payments market continues to trend towards increased usage of credit and debit cards
Consumers are cost conscious, and increasingly focused on security and fund management product features
Consumers are becoming more comfortable with mobile banking, facilitating adoption of mobile payments
Many believe that youth will drive mobile payments adoption given high mobile penetration and feature downloads
 Mobile payments in Canada currently take place via two main processes:
Processes
― Contactless payments use near-field communication (NFC, short-range wireless technology) to allow customers to pay for
goods at POS by placing chip-enabled cards/phones against an NFC reader; cards/phone may be linked to bank accounts,
allowing for direct debits from the user, or pre-loaded with credit
― SMS messaging allows payments to be initiated by sending text messages and an authentication code
Technology
 According to Advanced Card Technologies (ACT) Canada, chip and PIN payment cards will be deployed in significant
numbers over the next five years as credit and debit cards are converted to EMV standards, facilitating contactless
payment opportunities in a variety of previously cash-dominated markets
Regulations
 Regulatory bodies have faced challenges adapting their regulatory regimes to mobile payments trends (e.g., CPA
adoption of pinless contactless debit standards)
 The diversity in mobile payment stakeholders will require future participation of non-traditional regulators (e.g., CRTC)
 Regulators have begun to focus more on disclosure requirements for rates and fees associated with contracts
Competition
 Mobile payment stakeholders are beginning to expand their capabilities horizontally along the value chain globally
(e.g., handset manufacturer Nokia is entering the eWallet space, MNOs are taking on the role of acquirers)
 Other types of payments initiatives are being explored internationally, such as biometric authentication for payments
using fingerprints or voice recognition
- 178 -
Prepared by Deloitte
Appendix B: Review of Payments-Related Activities: A. Mobile Payments
Each mobile payments method serves different market needs, which will drive the
speed of adoption in Canada
Core
Characteristics
Country
Characteristic &
Leaders with
Technologies
P2P
Mobile Commerce
Mobile Contactless
 Developing countries, with a large
unbanked population (e.g., 41%)
 Developed countries
 Developed countries
 Strong P2P adoption (e.g., 16%),
with over 2MM transfers per day
 High mobile adoption (e.g., 84%)
 High mobile adoption (e.g., 100%)
 Minimal number of payment
substitutes
 Large number of payment
substitutes consolidated on one
platform
 A minimum level of adoption is
required to reach critical mass (e.g.,
4-22% adoption)
 Contactless-enabled transit riders
expedite time to adoption
 Typically introduced by independent
operators (e.g., mChek)
 Typically introduced by independent
operators (e.g., PayPal)
 Open chip standards developed, with
contactless chip embedded in phone
 Minimal involvement of banks and
MNOs
 Minimal involvement of banks and
MNOs
 Collaboration between card
networks, FIs, MNOs, and acquirers
for wide spread adoption
 Transactions take place via SMS
 Transactions take place via SMS,
mobile Web, applet, or IVR
 Mass POS deployment (e.g., 600K),
leveraging existing card readers
where possible (e.g., card network
contactless readers)
Funds Flow
 Funds transferred from bank
account or credit card into a virtual
account
 Funds transferred from bank
account, credit card, or virtual
account
 Funds transferred from bank account,
credit card
Revenue Model
 Revenues are generated by a user
fee for each transaction
 Revenues are generated via
interchange, and/or transaction fees
 MNOs are incorporated into the
revenue model (e.g., % interchange)
Mobile Adoption
Payment
Substitutes/Level of
Adoption
Initial Introduction
Business Model
Transactions Flow
- 179 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
3. Review of Payment Methods
4. Review of Participants in the Payments Ecosystem
5. Appendices
a. Participant Profiles
A. Mobile Payments
b. Review of Payment-Related Activities
B. Loyalty & Rewards
c. Glossary of Terms
d. Further Reading
- 180 -
Prepared by Deloitte
Appendix B: Review of Payments-Related Activities: B. Loyalty & Rewards
All Canadian FIs offer some form of loyalty program
Institution
Strength
Bank of
Montreal
Established
integrated
debit/credit
rewards
Royal Bank
of Canada
Payments
innovator with
leverage over
largest Acquirer
Canadian
Imperial
Bank of
Commerce
Strong Aeroplan
franchise
Bank of
Nova Scotia
Entertainment
focused
rewards
program
TD Bank
Financial
Group
President’s
Choice
Financial
Market leader in
core deposits
Simple,
integrated
program across
many products
Rewards




Highly Payments focused, Maestro/MasterCard debit supporter
Air Miles relationship: one Mile for every $40 debit spend and for every $15-$20 on credit
Earn Air Miles on BMO term investments
Air Miles redeemable for 800 products and services from travel to gift cards
 RBC Rewards are awarded for switching to RBC, referring friends as well as for opening certain chequing,
eSaving accounts and getting select credit cards
 $1 spent using select credit cards earns 1-2 RBC Rewards; no rewards on debit transactions
 RBC Rewards redeemable for travel, merchandise, RRSP contributions or charity donations
 Using Aeroplan Miles for Chequing portfolio (points awarded for opening a new account and for
maintaining an account with recurring deposits and withdrawals) and for eSaving accounts acquisition
 Aeroplan Miles for getting a new credit card and one Mile for $1-$2 spent on select cards; no Miles for
debit transactions
 Miles redeemable through Aeroplan
 SCENE program launched in 2007 now has 2 million participants
 Partnership with Cineplex:1 SCENE Point is awarded for $1 credit or $5 debit spent anywhere; additional
SCENE Points for setting up a payroll deposit or preauthorized credits/debits
 SCENE Points redeemable for movies, DVDs and concerts
 TD Travel rewards credit cards earn Points that can be redeemed for any travel related expenses (3x
bonus points for booking through TD travel website)
 $1 spent using select credit cards earns 2-3 TD Points; TD Points for opening a new credit card
 TD Points redeemable for travel (1,000 points = $5)
 TD Elite and Rebate cards offer 0.5%-1% cash back
 No points for Chequing accounts, other banking products or debit transactions
 Earn PC Points for opening a new chequing account, maintaining monthly balance, getting a new credit
card or a mortgage, paying for PC Insurance
 Earn 10 PC Points for every $1 on credit spend, 5 points for every $1 of debit spend
 PC Points redeemable at POS at retailers where PC products are sold 10,000 points=$10 or can be
donated to Children’s Charity
- 181 -
Prepared by Deloitte
Appendix B: Review of Payments-Related Activities: B. Loyalty & Rewards
Consumers are looking for loyalty programs that offer relevant, immediate and
personalized rewards/benefits
Cross Product Rewards
Customer
benefits
Early adopters
Financial
Institution
benefit
Instant Rewards
In-house Rewards
Redemption
 Customers earn points quickly
based on the number of bank
product and services they use
 Immediate redemptions at the
retail point of sale (POS)
 Redeem rewards for
merchandise services, gifts
and other exclusive privileges
 Pioneered by Banco Popular in
early 2000s, the program
allowed customers to earn
points from financing loans,
paying bills online and
maintaining average monthly
balances
 American Express allowed
customers to redeem points at
select retails and receive an
immediate 5% discount
 Pioneered by airlines and
hotels
 Increased revenue from cross
sell opportunities leads to
increased profit per customer
 Balance Sheet exposure is
reduced as rewards redeemed
by customers are not recorded
as a liability
 Reduce points liability
 Decreased customer attrition
 Citibank allows students to
redeem points for rebates of
up to $1,000 on outstanding
student loans
 Drive greater adoption of new
products and services by
current customers
 Decrease customer attrition
- 182 -
Prepared by Deloitte
Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
3. Review of Payment Methods
4. Review of Participants in the Payments Ecosystem
5. Appendices
a. Participant Profiles
b. Review of Payment-Related Activities
c. Glossary of Terms
d. Further Reading
- 183 -
Prepared by Deloitte
Appendix C: Glossary
Glossary of terms
Name
Type
Definition
Acquirer
Intermediary
Service provider for merchants etc. that accept cards for payment and accept payment
transactions from those merchants (e.g., provide terminals and network access)
Automated Banking /
Teller Machine (ABM /
ATM)
Intermediary
A computerized telecommunications device that provides the clients of a financial
institution with access to funds in their accounts in a public space without the need for a
cashier, human clerk or bank teller
Business-to-Business
Transaction Flow Type
A transaction in which funds flow from one business to another (i.e. purchase of input
materials)
Business-to-Consumer
Transaction Flow Type
A transaction in which funds flow from a business to a consumer (i.e. a return)
Business-to-Employee
Transaction Flow Type
A transaction in which funds flow from a business to an employee (i.e. pay cheque)
Business-to-Government Transaction Flow Type
A transaction in which funds flow from a business to the government (i.e. corporate taxes)
Cash
Method of Payment
Physical bank notes (bills & coins) as a means of exchange
Cheque
Method of Payment
A demand draft drawn on or payable through or at a depository institution or a federal,
state, or local government entity, including cashiers and certified cheques, travelers'
cheques, money orders and rebate cheques
Consumer-to-Business
Transaction Flow Type
A transaction in which funds flow from a consumer to a business (i.e. purchase)
Contactless Payment
Method of Payment
Credit cards and debit cards, key fobs, smartcards or other devices which use RFID
(radio-frequency identification) for making secure payments. The embedded chip and
antenna enable consumers to wave their card or fob over a reader at the point of sale.
Also known as NFC (near-field communications)
Credit Card
Method of Payment
A widely accepted electronic payment mechanism that enables a person to purchase
goods and services through the use of predominantly unsecured revolving credit
Debit Card
Method of Payment
An electronic payment mechanism which enables the cardholder to debit (withdraw or
spend) a bank account in order to obtain cash or to make a purchase, using the ABM,
online or POS terminal
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Appendix C: Glossary
Glossary of terms
Name
Type
Definition
Electronic Funds
Transfer
Method of Payment
An electronic payments vehicle that enables the processing of credit and debit payments
between depository institutions for transactions like prearranged bill payments, payroll,
person to person exchange, etc.
EMV
Method of Payment
A standard for interoperation of integrated circuit cards (IC cards or "chip cards") and IC
card capable point of sale (POS) terminals and automated banking machines (ABMs), for
authenticating credit and debit card transactions
Government-to-Business Transaction Flow Type
A transaction in which funds flow from the Government to a business (i.e. tax
reimbursement)
Government-to-Citizen
Transaction Flow Type
A transaction in which funds flow from the Government to a citizen (i.e. tax
reimbursement)
Government-toGovernment
Transaction Flow Type
A transaction in which funds flow between governments and/or government agencies (i.e.
provincial-municipal transfers)
Interchange
Fee
A portion of each transaction retained by the card issuer when it pays the payment
processor for the services it provides to the merchant; it includes the cost of the payment
processor’s switch fee. In practice, this is a fee paid by the merchant directly to the issuer
Issuer
Intermediary
Issue cards to individuals and businesses, extend credit to them, and collect payments
from them
ISO
Intermediary
Independent System Operator. Non-financial institution that operates private-label ABMs
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Appendix C: Glossary
Glossary of terms
Name
Type
Definition
Loyalty
Method of Payment
Accumulation of loyalty points (i.e. Air Miles) that can be redeemed for goods/services.
Usually funded by interchange fees
Merchant Discount
Fee
A per-transaction fee paid by the merchant to the payment processor of the services it
provides to the merchant; it includes the cost of the payment processor’s switch fee
Mobile Payments
Method of Payment
Mobile payments allow individuals the ability to make payments with a PDA or cell phone.
“Top-of-the-phone” payments refer to M-Commerce, where customers use the traditional
user interface of the phone to transact (e.g., SMS, applications), while “Bottom-of-thephone” refers to contactless transactions
Network
Intermediary
Create and develop card brands, act as intermediary entities between acquirers and
issuers
Near-Field
Communications (NFC)
Method of Payment
Payments made via contactless transmitters embedded in cards and mobile devices
(e.g., PayPass, Interac Flash). See contactless
Person-to-Person
Transaction Flow Type
A transaction in which funds are exchanged between two individuals (i.e. money transfer)
Prepaid Cards
Method of Payment
Allow consumers to load money onto a card; when the card is used for payment, the cost
of each transaction is deducted from the amount pre-loaded onto the card; cards can run
on an open or closed network
Processor
Intermediary
Provide processing services to issuers and acquirers (card manufacturing, authorization,
clearing, settlement, back office)
Remittance
Method of Payment
Generally refers to an overseas P2P funds transfer, but can also include domestic
transactions
RFID
Payment Type
Radio-frequency identification. Technology used to send and receive data wirelessly over
short distances. See contactless
Switch Fee
Fee
A per-transaction network access fee paid by the payment processor and by the card
issuer to the network provider
White Label / Private
Label ABM
Intermediary
ABM that is owned and operated by an independent party rather than a financial
institution. Customers usually pay a convenience fee to withdraw funds
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Table of Contents
1. Executive Summary
2. Payments Overview
a. What is a Payment?
b. The Canadian Payments Ecosystem
c. Canadian Payments System Regulatory Framework
3. Review of Payment Methods
4. Review of Participants in the Payments Ecosystem
5. Appendices
a. Participant Profiles
b. Review of Payment-Related Activities
c. Glossary of Terms
d. Further Reading
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Prepared by Deloitte
Appendix D: Further Reading
Further Reading
Reference
Description
Link
Bank for International
Settlements [2003] Payment
Systems in Canada
Provides an overview of the Canadian payments
system. The report addresses the institutional
aspects of the system, payment media used by
non-banks, interbank exchange and settlement
systems, and the securities settlement systems.
http://www.bis.org/cpss/paysys/CanadaC
omp.pdf
Bergevin, Philippe [February
2010] Change is in the Cards:
Competition in the Canadian
Debit Card Market, C.D. Howe
Institute
Provides a brief background of debit payments in
Canada and examines the implications of the
rapidly changing debit payment landscape. The
report also provides three recommendations for
government action to ensure that consumers and
merchants are protected and that the system can
evolve to serve them better.
http://www.cdhowe.org/pdf/backgrounder
_125.pdf
Bulmer, John [24 September
2009] Payment Systems: The
Debit Card Market in Canada,
Library of Parliament
Describes the structure of the debit card payment
system in Canada, outlines the history of the
Interac Association and explains the cost to
merchants of debit card transactions.
http://www2.parl.gc.ca/content/lop/researc
hpublications/prb0909-e.pdf
Canadian Bankers
Association, [28 May 2009]
Canada’s Credit and Debit
Card Marketplace
Presents the banking industry’s perspective on the
card payments system.
http://www.cba.ca/contents/files/submissi
ons/sub_20090528_creditcards_en.pdf
Canadian Payments
Association, [February 2008]
Issues Paper: Review of Bill
Payments in Canada
Discusses the current bill payment processes
available in Canada, outlines four general key
areas of concern and the issues that underlie each.
The paper also provides a brief review of other
international developments in the bill payment
arena.
N/A
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Prepared by Deloitte
Appendix D: Further Reading
Further Reading
Reference
Description
Link
Canadian Payments
Association, [2010] CPA
Payments Strategy: Vision
2020
Sets out the long term strategy for the development
of the CPA clearing and settlement systems,
ensuring that the clearing and settlement
framework continues to serve the needs of all
participants and the Canadian public.
http://www.cdnpay.ca/imis15/pdf/pdfs_ne
ws/payments_strategy_vision_2020.pdf
Chakravorti, Sujit and Lubasi,
Victor [2006] Payment
Instrument Choice: The Case
of Prepaid Cards, Federal
Reserve Bank of Chicago
Explores the costs and benefits of prepaid card
applications over existing payment instruments for
certain payment segments.
http://www.phoenixhecht.com/treasuryres
ources/PDF/FRBChicagoprepaidcards.pd
f
Ching, Andrew and Hayashi,
Fumiko [13 May 2008]
Payment Card Rewards
Programs and Consumer
Payment Choice, Federal
Reserve Bank of Kansas City
Examine the effects of rewards on consumer
payment choice using consumer survey data to
estimate a series of models that explain how
specific consumer characteristics are related to
certain payment choices across retail types.
http://www.rotman.utoronto.ca/newthinkin
g/creditcards.pdf
Committee on Payment and
Settlement Systems of the
Group of Ten Countries
[2009] Statistics on Payment
and Settlement Systems in
Selected Countries, Bank for
International Settlements
Prepared by Committee on Payment and
Settlement Systems of the Group of Ten Countries.
This report includes statistics on payment and
settlement systems in selected countries, including
Canada.
http://www.bis.org/publ/cpss87.pdf
Deloitte [2010] Charting a
New Course for the Credit
Card Industry
Examines the current credit card industry, including
innovation, challenges, response strategies and
opportunities.
http://www.deloitte.com/assets/DcomCanada/Local%20Content/Articles/Servic
es/Consulting/ca_en_fsi_credit_card_pov
_030810.pdf
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Prepared by Deloitte
Appendix D: Further Reading
Further Reading
Reference
Description
Link
Deloitte Center for Banking
Solutions [2008] Evolving
Models of Retail Banking
Distribution
Examines how reformatted branches and
alternative retail distribution channels for banking
services are likely to become increasingly important
in the near future.
http://www.deloitte.com/assets/DcomUnitedStates/Local%20Assets/Document
s/us_fsi_CBS_Evolving_Models_may08.p
df
Deloitte Center for Banking
Solutions [October 2009]
Crisis in the Credit Card
Industry
Provides an overview of the current trends with the
credit card industry. The report also addresses the
issues and concerns surrounding interchange fees,
as well as increased regulatory scrutiny, and
examines the directional shift within the payments
industry.
http://www.deloitte.com/assets/DcomGreece/Local%20Assets/Documents/Atta
chments/Crisis_inthe_creditcard_industry.
pdf
Dove Consulting [March
2008] The Electronic
Payments Study: A Survey of
Electronic Payments for the
2007 Federal Reserve
Payments Study, Federal
Reserve System
Details the methodology and findings of the 2007
Electronic Payments Study (2007 EP study) which
determined the number and value of electronic
payment transactions originating in the United
States for the year 2006. The 2007 EP study looked
at “core” electronic payment instruments and at
prepaid cards. It also looked at emerging
payments.
http://www.frbservices.org/files/communic
ations/pdf/research/2007_electronic_pay
ments_study.pdf
Edgar, Dunn & Company
[March 2009] Realizing the
Full Potential of Mobile
Commerce
Outlines view of the mobile commerce
landscape while outlining the factors that will be
necessary for growth.
http://www.paytriot.net/files/ampDRIVE/1/
mCommerce9050301.pdf
Electronic Funds Transfer
Working Group [2004]
Consumers and Debit Card:
Canadian Code of Practice
for Consumer Debit Card
Services
Sets out the details of the Canadian Code of
Practice for Consumer Debit Card Services.
http://www.cba.ca/contents/files/misc/vol_
20090000_cdncodepracticeconsumerdebi
tcardservices_en.pdf
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Prepared by Deloitte
Appendix D: Further Reading
Further Reading
Reference
Description
Link
First Data Corporation [2010]
Worldwide Opportunities for
Debit
Discusses the impact of the growth of debit and the
implications for payments strategies based on
research for which First Data commissioned
TowerGroup to conduct through interviews with 34
banks across 10 countries.
https://www.firstdata.com/downloads/thou
ghtleadership/debitresearchexecsmry_uk.pdf
Fitzgerald, Kate [June 2008]
Rethinking Rewards, Cards &
Payments
Discusses the consumer trends emerging in loyalty
and rewards and the changes in the way issuers
are treating rewards.
N/A
Flavelle, Dana [27 October
2009] Credit Card Giants
Create Debit Havoc, The Star
Presents recent developments within the Canadian
debit card market, including retailers’ concerns over
higher fees with the entry of Visa and MasterCard
into the debit card market.
http://www.thestar.com/business/article/7
16492--credit-card-giants-create-debithavoc
Fraser Milner Casgrain [2002]
Banking Legislation in
Canada: Early Changes in the
New Millennium
Comments on some of the significant changes
under amendments to federal financial institution
legislation in the form of Bill C-8 which was brought
into effect in 2001. The paper also provides context
through discussions on legislative provisions
outside of those changes.
http://www.fmclaw.com/upload/en/publications/archive/2
835129_BLIC_web_.pdf
Horcher, Karen [2003] The
Business of Payments: Part
1, Certified General
Accountants Professional
Development Network
Discusses the changes occurring in the payments
industry, the reasons for these changes and the
implications for businesses.
http://www.cgapdnet.org/Non_VerifiableProducts/Article
Publication/BusinessPayments/Business
Payments_p1.pdf
Houle, Rene & Schellenberg,
Grant [July 2008] Remittance
Behaviours Among Recent
Immigrants in Canada,
Statistics Canada
Provides a broad cross-national perspective on
remittance behaviours among recent immigrants in
Canada by using the Longitudinal Survey of
Immigrants to Canada to document the incidence of
remitting and the amounts remitted by immigrants
from a wide range of countries.
http://dsppsd.pwgsc.gc.ca/collection_2008/statcan/
11F0019M/11F0019MIE2008312.pdf
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Prepared by Deloitte
Appendix D: Further Reading
Further Reading
Reference
Description
Link
Kitching, A. and Starky, S. [26
January 2006] Payday Loan
Companies in Canada:
Determining the Public
Interest, Canadian Library of
Parliament
Provides an overview of payday loans within
Canada, including key industry players, issues,
regulations and the development of a Canadian
regulatory regime.
http://www2.parl.gc.ca/content/lop/researc
hpublications/prb0581-e.html
Kjos, Ann [October 2007] The
Merchant-Acquiring Side of
the Payment Card Industry:
Structure, Operations, and
Challenges, Federal Reserve
Bank of Philadelphia
Provides a description of the merchant acquiring
function, the industry structure, and how the
business has evolved within the US context.
http://www.philadelphiafed.org/paymentcards-center/publications/discussionpapers/2007/D2007OctoberMerchantAcq
uiring.pdf
Loyalty One [11 April 2009 ]
Over 114 Million Active
Canadian Loyalty Program
Memberships in First-Ever
Measurement of Canadian
Loyalty Participation,
According to COLLOQUY
Research
Based on the 2009 Colloquy Loyalty Marketing
Census, discusses statistics on loyalty programme
membership in Canada.
http://www.loyaltyone.com/whoWeAre/Ne
wsReleasesItem.aspx?id=0c8362ed851c-4d7c-a688-84e9dafc86ca
Monetary and Economic
Department [September 2007]
Triennial Central Bank Survey
of Foreign Exchange and
Derivatives Market Activity in
April 2007, Bank of
International Settlements
The BIS coordinates a triennial global central bank
survey of foreign exchange and derivatives market
activity. The survey provides comprehensive and
internationally consistent information on turnover
and amounts of contracts outstanding in these
markets.
http://www.bis.org/publ/rpfx07.pdf?nofram
es=1
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Prepared by Deloitte
Appendix D: Further Reading
Further Reading
Reference
Description
Link
Mulpuru, Sucharita [12
February 2009] The Emerging
Opportunity in Mobile
Commerce, Forrester
Provides the trends in mobile commerce and the
opportunities presented therein.
http://www.forrester.com/rb/Research/em
erging_opportunity_in_mobile_commerce
/q/id/47881/t/2
Nilson Reports – April 2007 to
March 2010
Nilson Reports is a newsletter, published 23 times
a year. These newsletters provide statistics, news
and proprietary research on the consumer payment
systems.
http://www.nilsonreport.com/
O’Connor, Sean [Autumn
2003] Developments, Issues
and Initiatives in Retail
Payments, Bank of Canada
Review
Provides an overview of retail payment systems in
Canada, highlights recent developments within
retail payments and explains the issues and
initiatives taking place in the retail payment
systems.
http://www.bankofcanada.ca/en/review/au
tumn03/oconnore.pdf
Park, Yoon S. [2006] The
Inefficiencies of Cross-Border
Payments: How Current
Forces are Shaping the
Future, Visa Commercial
Discusses the challenges of the current crossborder payments process and the forces influencing
its future.
http://www.financialtechmag.com/_docum/105_Documento.pdf
Robertson, David C. [10 July
2006] Measuring and
Communicating the Value of
a Bank’s Payments Business,
Journal of Payments Strategy
and Systems Vol. 1 No. 1
Discusses the paradox that, whilst the payments
business offers tremendous opportunities, most
bank payments executives struggle to obtain
strategic levels of funding.
http://www.treasurystrat.com/resources/ar
ticles/StreetView06.pdf
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Prepared by Deloitte
Appendix D: Further Reading
Further Reading
Reference
Description
Link
Skiba, P. and Tobacman, J.
[10 December 2007] The
Profitability of Payday Loans
Studies the profitability of payday lending using
standard .financial data from CRSP and SEC filings
and loan-level data from a payday lender.
http://www.cplaacps.ca/english/reports/Vanderbilt%20Ox
ford%20profitability%20study%2012%201
0%202007.pdf
Smart Card Alliance
[September 2007] Proximity
Mobile Payments: Leveraging
NFC and the Contactless
Financial Payments
Infrastructure
Provides overview of mobile payments, including
the needs of stakeholders, the financial industry,
mobile operator, consumer, acquirers, processors,
ISOs and POS vendors, and merchants.
http://www.sunildewan.com/uploads/Proxi
mity_Mobile_Payments_Leveraging_NFC
_and_Contactless_Financial.pdf
Smart Card Alliance [May
2009] Security of Proximity
Mobile Payments
Provides an overview of the proximity mobile
payments ecosystem. This paper also describes
both the end-to-end security requirements and an
implementation model for using proximity mobile
payments in North America.
http://www.nrfarts.org/Mobile_in_Retail/Mobile_WhiteP
apers/Security_of_Proximity_Mobile_Pay
ments.pdf
Statistics Canada [17
November 2008] ECommerce: Shopping on the
Internet
Discusses statistics on Canadians use of the
internet to purchase goods and services in 2007.
http://www.statcan.gc.ca/dailyquotidien/061101/dq061101a-eng.htm
Strategic Information
Technology Limited [March
2006] Canadian Debit and
Prepaid Technology: A
Management Perspective
Provides overview of debit and prepaid technology,
including trends, historic perspective on Canadian
retail banking, Interac, terminology, typical debit
POS transactions, and stored value cards, amongst
other topics within the debit and prepaid
technological space.
http://www.stratinfotech.com/debit_cards_
canada.pdf
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Prepared by Deloitte
Appendix D: Further Reading
Further Reading
Reference
Description
Link
Sullivan, Richard J. [21 May
2010] The Changing Nature of
US Card Payment Fraud:
Issues for Industry and Public
Policy, Federal Reserve Bank
of Kansas City
Provides an overview of retail payment systems in
Canada, highlights recent developments within
retail payments and explains the issues and
initiatives taking place in the retail payment
systems.
http://www.kc.frb.org/PUBLICAT/ECONR
EV/PDF/10q2Sullivan.pdf
Taylor, Varya [2006] Trends in
Retail Payments and Insights
from Public Survey Results,
Bank of Canada Review
Presents an overview of bank notes in circulation
and the advances made by electronic means
of payment, specifically debit and credit cards. This
article also highlights the key survey (public survey
commissioned by the Bank of Canada) findings on
cash holdings, cash usage versus electronic
payments, and public confidence in bank notes,
and describes how the confidence index was
constructed.
http://www.bankofcanada.ca/en/review/sp
ring06/taylor.pdf
Technology Strategies
International [2009] Canadian
Payments Forecast
Discusses the trends emerging in the payments
industry and the likely future of the industry.
http://www.paymentsnews.com/2009/01/c
anadian-paymen.html
Widger, Zia Daniell [18 March
2010] Understanding Online
Payment Preferences in
International Markets,
Forrester
Examines consumer payment preferences in
international markets, specifically in relation to
online payments.
http://www.forrester.com/rb/Research/und
erstanding_online_payment_preferences
_in_international_markets/q/id/56585/t/2
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