CLHIA comments on Payments Canada's consultation paperRelease Date: 06/27/2016 Staff Reference: Stephen Frank
June 27, 2016
Mr. Jeff van Duynhoven
Executive Director, Modernization Program
Constitution Square, Tower II
350 Albert, Suite 800
Ottawa, ON K1R 1A4
Re: Consultation Paper – Developing a Vision for The Canadian Payments Ecosystem
Dear Mr. van Duynhoven:
The Canadian Life and Health Insurance Association Inc. (CLHIA) appreciates the opportunity to provide comments on Payments Canada’s consultation document entitled Developing a Vision for the Canadian Payment Ecosystem (Consultation Paper).
The CLHIA, established in 1894, is a voluntary trade association that represents the collective interests of its member life and health insurance companies. The Association's membership accounts for 99 per cent of the life and health insurance in force in Canada.
The industry provides a wide range of financial security products, such as life insurance, annuities, pensions and supplementary health insurance to 28 million Canadians. The industry pays out roughly $83.5 billion a year or more than $1.6 billion a week in benefits, making the life and health insurance industry one of the heaviest users of the payments system in Canada.
Comments on Consultation Paper
We would like to take the opportunity to commend Payments Canada for the level of consultation and engagement it has led in developing the Consultation Paper and a vision for the future of Canada’s payments system. The industry has been pleased to take part in this engagement process through its participation on the Stakeholder Advisory Council and through participation on Payments Canada working groups.
The industry supports Payments Canada’s vision that “a modern payments system is fast, flexible and secure, promotes innovation and strengthens Canada’s competitive position.” In fact, given the pace of innovation in the payments space that has occurred already and that is expected to take place in the near future, we would suggest that modernization of Canada’s payments ecosystem is not only welcome, but necessary in order for Canada and Canadian financial institutions to remain competitive on the global stage.
The industry is supportive of efforts to move to fully electronic payments that allow for the transmission of enhanced remittance data with the payment. This would set the foundation for the move away from cheques, which would be more efficient and cost effective. In this regard, we strongly support ISO 20022 as the electronic payments standard for a modernized payments system. In addition, ISO 20022 is being adopted by a number of countries around the world. As such, we are supportive of ISO 20022 in a modernized payments system as it would align domestic payment standards with international standards thereby improving interoperability.
The industry supports the sentiments expressed in section 3.3.2 (Improve Access to Clearing Systems) in the Consultation Paper that access to the payments system should be based on objective risk-based criteria that could remove unnecessary and/or subjective barriers, such as the volume requirement. We recognize that a balance must be struck between greater access to clearing systems and limiting risk to the system and its users. We believe that balance can be achieved and that greater access would support innovation and competition, which would benefit users of the payment system.
As noted in Section 3.4.5 (Global Observations – Access and Approach to Clearing Arrangements), national payments systems are increasingly accessible to non-bank entities. To this end, we note with interest developments in Mexico, Japan and Switzerland permitting insurance companies and other non-bank financial institutions to directly access core payment clearing infrastructure.
Finally, we would note that how the vision is implemented will be critical in achieving its objectives and the public policy objectives. This will include setting out clear timelines and ensuring that a framework is in place to move Canada’s payments system forward in a timely manner. We strongly believe that continued collaboration led by Payments Canada with payments system participants and stakeholders will allow for a successful transition to a modernized payments system. Education of payments system participants and users will also be critical to ensure an understanding of the coming changes.
On behalf of the Canadian life and health insurance industry, the CLHIA appreciates the opportunity to submit comments to Payments Canada on the Consultation Paper, which sets out a vision for Canada’s payments ecosystem. We would be pleased to provide further information or to discuss any issues with you, at your convenience, if you would find it helpful.
Original signed by
Vice President, Policy Development and Health