Tracey Black was appointed CEO and president of Payments Canada in 2020, but is long-steeped in payments transformation, including as president of GFH Group, where she led on the launch of smart cards in Canada. Payments Canada hired her to lead the modernisation of the Canadian core clearing and settlement payment infrastructure in 2018, before promoting her to CEO.
In an opening session at Sibos 2023, Ms Black discussed large-scale transformation, leading through change and the future of modern payments, in Canada and around the globe. The Canadian payment systems modernisation journey is seven years in the making and most of the major pieces are in place, including a revamp of the retail batch payment system, with a new risk model and a third settlement window; upgrading the high-value payment system called Lynx; and the introduction of MX/ISO 20022 messaging standards. Payments Canada is also on the cusp of launching an instant payment system, called the Real-Time Rail.
Q: Where is Payments Canada on its journey to modernise the country’s payments infrastructure?
A: The payments modernisation journey for Canada, which refers to the upgrades of our infrastructure and legal frameworks that support our clearing and settlement systems, started in 2016. We started in 2016 with a name change, from the Canadian Payments Association to Payments Canada. We changed the governance of our board of directors, so we now have a majority independent board. And we published our vision for the Canadian payments ecosystem, which followed more than 100 interviews with stakeholders to understand what Canadians and Canadian businesses wanted from a payment system in Canada.
And we’ve made significant progress as of 2023. As Payments Canada, we own and operate the country’s core payments infrastructure that today consists of two payment systems: a batch payment system and a high-value payment system. In 2022, Payments Canada processed over C$400bn ($297bn) in payments every business day. Therefore, it’s important that these systems are up and running, and that no one ever hears about any issues that we’re having.
Our modernisation initiative has touched both systems. From a batch payments perspective, the first step in that modernisation journey was to add an additional exchange, which allowed for later exchange of payments and was very beneficial to our participants who are on the Canadian west coast. We also made some changes to our rules, which allows for broader participation, meaning that smaller members can now be direct participants in the batch system.
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As to the high-value payment system, which was launched decades ago, we not only changed the infrastructure for the system, but we had to update the supporting framework, such as the rules and bylaws underpinning it. We also introduced a new operating model, so we outsourced a significant component of our operations to a third party. Importantly we had to figure out how to make that work. We also changed the risk model.
The high-value system, called Lynx, went live in August of 2021. We were poised to go live with an MX implementation and upgrade our message standards to support ISO 20022 in November of last year, but we delayed that, along with Swift timelines. Instead, we introduced the message standard in March of this year, and now over 50% of the messages that travel on that system are using the MX standard. I believe that Canada is getting ready for an ISO world.
Lastly, we’re introducing a new payment system — a real-time payment system — for the first time in decades. We’ve made excellent progress on the bylaw for that system and the rule framework.
Q: What were the biggest learnings so far in the modernisation programme?
A: One of our biggest learnings is the importance of collaborating with the ecosystem. We have many stakeholders in Canada, and stakeholder engagement has been important for us all the way through our modernisation initiative. Our stakeholders would consist of our members, system participants, regulators, broader stakeholder groups, communicating frequently and being very transparent.
I would say another learning as it relates to stakeholder management is ensuring that the dialogue is two-way. So it’s not enough just to push information out to the ecosystem; there also has to be an opportunity and the willingness for the ecosystem to share back. That’s how you address challenges and identify opportunities.
A second learning is one that applies to all programmes of this magnitude and duration. In Payments Canada, we say that every day is like a week — payments years are like dog years, because so many things happen. As we find ourselves seven years into this programme, it’s worthwhile going back to take a look at the assumptions that we made at the beginning, and whether the needs of end users that were identified are still applicable.
When you throw a pandemic in there and the massive growth in digital transactions, I think it’s important to be a little bit flexible around your requirements and to be willing to make modifications to meet the needs of the market. That is what we continue to look at. Payments are evolving faster than ever before, so we need to look at how we make sure that what we are implementing will, and will continue to, meet the needs of Canadians and businesses.
Q: What are your top tips for leading such a large-scale transformation?
A: So from a transformation and a leadership perspective, these are big, long-lasting projects, and they come with bumps in the road and surprises. I would like to stress the importance of being flexible, but also of being resilient. There are often long days, long weeks, long months, and it takes a large team to deliver such programmes.
how you move in the middle has impacts on [advances in technology or changes in rules], like a ripple effect
Another component important to think about is that we stand in the centre of the payment ecosystem. One of the things that we realised early is that we have to do things so that our members can do things, so that their customers can benefit from advances in technology or changes in rules. But it's important to remember that how you move in the middle has impacts on all of those, like a ripple effect.
It’s also important to realise that not everyone’s moving at the same pace as you might be moving at in the centre. So you have to build that into your timeline and expectations. Which comes back to that stakeholder dialogue that we talked about earlier — making sure that there isn’t too much happening too quickly so that things get forgotten or people get overwhelmed.
Joy Macknight is editor of The Banker. Follow her on X (formerly known as Twitter) @joymacknight
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