Modernization of payment systems long overdue amid rapid changes: BoC official

“I don’t want to be alarmist here, the systems are still functioning — but it could be improved,” Leduc said after the speech as he took questions from the audience at the event for Payment Canada, a not-for-profit group funded by financial institutions that helps oversee business and consumer transactions.

“We have look at the future to do this because at one point it’s going to be very costly to operate those (older) systems.”

He said that down the road the retail payments system must also be designed to allow enough openness to allow for consumers’ expectations of fast, efficient payment options, like PayPal.

If the system fails to stay up to date with these innovations, consumers may choose to adopt alternative, potentially unregulated forms of payment, that could eventually pose risks to the broader economy, he added.

“Modernizing systems when technological advances and other changes in the payments environment are occurring at such a fast pace is not only challenging, it is potentially paralyzing,” Leduc said.

“However, we all know that inaction is not without costs.”

He credited Payments Canada with undertaking a plan to modernize them.

The Bank of Canada, Payments Canada, a tech consortium called R3 and several financial institutions have also spent the last year working on an experiment called Project Jasper that tested an inter-bank payment system using a digital-ledger platform.

The experiment looked at whether digital-ledger technology could underpin an entire wholesale payment system. Digital ledgers, which are the underlying technology behind cryptocurrencies like Bitcoin, are sometimes to referred to as “blockchain.”

The study found it may possible one day, but that it’s not quite ready because concerns over issues such as privacy must still be addressed, Bank of Canada senior deputy governor Carolyn Wilkins and Payments Canada president Gerry Gaetz wrote in an op-ed published Thursday in the Globe and Mail newspaper.

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Andy Blatchford, The Canadian Press

by Canadian Press

Modernization of payment systems long overdue amid rapid changes: BoC official

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