All Hands on Deck: Navigating Forward in Canada’s Fast-Changing Financial Services Sector

Speech

Keynote Address by Lucie Tedesco, Commissioner, Financial Consumer Agency of Canada at the Payments Canada Summit, 2017

Check against delivery. 

Thank you, Amanda.

Well, good morning, everyone.

It’s a pleasure to be at this year’s Summit, and to have an opportunity to speak to delegates from our country’s payment sector.

Over the last 25 years, innovations in payment technologies have transformed the way we conduct financial transactions.

That Canadians have been so receptive to this, reflects a widespread desire for better products and services, as well as an expectation of the industry’s ability to deliver.

The Financial Consumer Agency of Canada plays a lead role in consumer protection. On the basis of this alone, I am sure you will recognize important commonalities among us.

After all, the interests of consumers and merchants are at the heart of what drives our work—whether we are regulators, industry or others comprising the sector.

Of course, the modernization of the payments sector is not exclusive to this country.

While speaking at an event very similar to this one last fall, my US counterpart, Richard Cordray at the Consumer Financial Protection Bureau, said this:

The possibilities opened up by powerful technologies and novel approaches are enabling new services and transforming how payments and lending are conducted. So we want to understand how we can influence and channel this wave in positive directions. And I believe our goals are the same: to put consumers first and improve their lives.

The FCAC Act sets out our two distinct yet complementary programs to protect financial consumers.

The first is supervision.

We are responsible for the administration and application of this country’s federal financial consumer protection framework.

We do this by ensuring institutions comply with consumer provisions under various financial statutes.

These provisions focus on the obligations of regulated entities to disclose key information to consumers, and to provide them access to basic banking services and complaint-handling systems.

FCAC also supervises compliance with a number of industry codes and public commitments.

Payment card network operators are, of course, familiar with one in particular—which is the Code of Conduct for the Credit and Debit Card Industry.

The Crebit Code, as we call it, requires payment card network operators and other network participants to provide merchants with information, as well as with flexibility and choice for accepting card payments from their customers.

Financial education is the other very important component of our mandate.

And I thought rather than describe our program at length, I would encourage you to take a look at the materials and tools on our Agency’s website—including our budget calculator and credit card and account selector tools.

Try them out.

It is a good way to acquaint yourself with our approach to helping Canadians build their financial knowledge and navigate their way through the world of financial services and products.

So… I thought it might be interesting for you to get a glimpse of one of the many ways we reach out to consumers with information and guidance.

This is a short video we produced on some of the issues related to using credit cards at ATMs.

At the core of financial education is the National Strategy for Financial Literacy.

This strategy sets out goals and priorities to help Canadians better manage their finances and make decisions as their needs and circumstances change over time.

It calls on stakeholders to join efforts to make financial literacy a life-long journey for us all.

Being discerning about financial options.

Seeking information and acting on the basis of facts.

Preventing fraud and financial abuse.

Now these are the outcomes our financial education program seeks to achieve.

So, to summarize: Consumer protection and financial education.

They are the broad components of what we do at FCAC, day in and day out.

Earlier, I referred to the ongoing transformation of our payments system.

Statistics illustrate just how significant it is.

According to numbers released by the Canadian Bankers Association in February of this year, nearly three-quarters of Canadians do most of their banking using online and mobile banking.

As I said to a gathering of consumer advocacy groups in March, “the financial marketplace is constantly evolving. And as such, we must evolve with it.”

FCAC’s challenge is to achieve a balance between carrying out its supervisory role and not standing in the way of innovation.

Though these realities are replete with newness and change, there are nonetheless some things we can predict.

For instance, I think it is safe to say that those of you involved in the business of technology development will continue to expand the range of consumer products and services, and, hopefully, continue to drive down costs and increase competition along the way. 

Because there is no denying that online and mobile technologies offer one particular feature that I know we all value—and that is… convenience.

But, as appealing as convenience can be to consumers and merchants, it is important to remind ourselves that innovation often gives rise to new risks.

Consider the scenario of a consumer using a smartphone to make a payment, and then something goes wrong.

Where does that consumer turn to resolve the issue?

The payment card network?

The bank?

The company that designed the payment app?

The consumer must know where to go to have the issue resolved and, if that doesn’t work, how to file a complaint.

This is fundamental. 

If the consumer can’t access the necessary support, then the risk “risks” causing harm.

An important point to understand is that the scope of FCAC’s oversight and enforcement powers is defined in the legislation according to type of organization—not by the function an organization performs.

In other words, you are regulated because of who you are, as opposed to what you do.

To illustrate, while we don’t regulate gifts cards from, for example, Apple, we do regulate all of the prepaid cards issued by federal financial institutions. 

And while FCAC may not oversee all payment system participants, I would encourage those organizations that are outside the purview of our authority to insist on having standards as high as those FCAC oversees—to demonstrate commitment to consumers and merchants.

The bottom line is that being consumer centric is good for business.

In the cities, towns and communities where we live, there are those rare gems.

We know them.

Those independent community businesses with a long-standing, loyal client base.

Not necessarily because they have more or better selection than their competitors, but because they have their customers’ best interest at heart and insist on giving them the best possible experience.

So, if I had any advice to give you, it would be to keep this best interest top of mind when you are developing new products and services. 

Adopt a risk-based, proactive approach to consumer and merchant issues—and turn to FCAC for guidance.

Remember, trust influences every consumer and merchant decision and action.

You know what they say.

Trust. Difficult to earn, easy to destroy.

Now, there are plenty of competitors entering the financial services marketplace, and that is not likely to stop any time soon!

Just last month, PricewaterhouseCoopers released a report on how financial services around the world are innovating in response to the impact of fintech.

Based on the perspectives of 1,300 senior financial services and fintech executives from 71 countries, the report, titled Global FinTech, shows that 30 percent of consumers plan to increase use of non-traditional financial service providers in the not too distant future.

At the same time, 39 percent plan to continue to use only traditional financial service providers.

And what about the traditional players? 

Well, they are increasingly partnering with fintechs to keep up with market demands, which makes lots of sense given that they both bring different strengths to the table.

Banks have an established customer base, reputation, capital and regulatory knowledge.

Fintechs have a high tolerance for risk, are typically agile and some might argue are more in tune with what consumers want.

Like you, regulators are only as effective as we are prepared to adapt to these emerging challenges and opportunities.

Working with the International Financial Consumer Protection Organisation—or FinCoNet, which I chair—we are able to extend our research efforts.

Released last fall, FinCoNet’s report, Online and Mobile Payments, examines the challenges to mitigating risks associated with the innovative payments services market.

Fraud, deceptive practices and lack of reliability of devices and infrastructures are among the important threats to consumer protection that we identified.

Out of our shared findings and experiences, we proposed an approach and examples of multi-disciplinary, collaborative actions to strengthen our supervisory capacity in this evolving field.

Consultation also enables the Agency to keep up with changes affecting financial consumers.

Let me give you an example: To make sure the topics and content of our educational materials resonate with target audiences, we turn to stakeholders such as consumer groups for ideas and feedback.

The value of working with stakeholders to support our common objectives cannot be overstated.

Because, in addition to acquiring invaluable information and insights, we strengthen collaboration.

Research also enables us to stay current and positioned to adapt to developments in the sectors we oversee.

We use the information we uncover about emerging trends and issues to develop strategies and activities that empower consumers.

We also draw on our findings to inform policy discussions with our colleagues from the Department of Finance and with other regulatory authorities.

To keep current, the Agency has increased dialogue with organizations such as yours.

In fact, over recent months, some of the world’s major software- and technology-development companies have turned to us for advice and guidance on how to integrate elements of the Crebit Code into their plans.

It is incumbent upon each of us to work together if we want to lead in the payment space.

So, let’s be forthcoming, and assemble on common ground.

There is a quote from Henry Ford that I really like because it applies to all kinds of settings. 

It goes like this: "Coming together is a beginning. Keeping together is progress. Working together is success."

I consider it a privilege to represent FCAC—our country’s leader in financial consumer protection.

Every day, I am inspired and mobilized by the Agency’s mandate to protect Canadians.

I encourage all of you to be mindful of the people who may ultimately determine your destiny of whether you will succeed or fail in the marketplace.

It is the right thing to do in every way.

We are all consumers.

We know intimately the mix of experiences and beliefs behind our product and service choices.

There is a great deal to be gained from acknowledging this and pursuing our objectives accordingly.

Thank you for being here and for your attention.

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