Episode 27: Leading through modern payments

Transcript of the recording

Elizabeth Dempsey:
Hi everyone. My name's Liz Dempsey, and I'm the lead of event content and communications at Payments Canada and your host on this episode of the PayPod. Today's topic is all about leading through great change, specifically change in our great field of payments, and who better to talk about leadership and payments than our very own President and CEO, Tracey Black, who is joined today by our special guest, John Ambrose, a financial services executive, and Tracey's former colleague and mentor. Welcome John.

John Ambrose:
Thank you for having me. It's a pleasure to be here today, Liz.

Elizabeth Dempsey:
And welcome Tracey.

Tracey Black:
Thanks, Liz, and thank you, John. I'm looking forward to our chat, as I always do.

Elizabeth Dempsey:
I understand you have a long professional history together. Can you tell us about how you know each other, how did you develop your mentorship, friendship, relationship, where did it all begin?

John Ambrose:
We've known each other going on 20 years. We both have been involved in the payment industry for a period of time. I have been involved in the payment industry much longer than Tracey. She's too young to remember some of the things that I was involved in way back when. But we met as a result of the EMV chip implementation in Canada. Both Tracey and I were working in the payment industry, and we were very involved in different ways with the chip implementation and, as everyone knows, it was a great success. So that's where Tracey and I actually connected for a conversation that carried on looking at the challenges and opportunities that we'd face at the time, and also what was most interesting was looking to the future, what Tracey's views were, and how I saw the future of payments in Canada. And so we connected on that occasion and we stayed connected through various business events and conferences and whatever, and always had an opportunity to continue our conversation and enhance our views of where things were going.

In 2009, I formed my own consulting firm and as it turned out in 2011, I had an engagement with Interac to develop their strategy for contactless payments and mobile payments. And I knew that Tracey was working independently, and so I invited her to join me, and we formed a team to do the work at Interac. That led to a whole litany of opportunities and challenges and different types of tasks from strategy to organizational management to a lot of different levels of consulting services in the payment industry, and we worked together very closely. We had a strong relationship. It was based on, in my opinion, Tracey may correct me, but it was based on open communication, a clear understanding and respect for each other's strengths and what we brought to the team, and common values and worldview that we aligned very quickly on that. So from there, the relationship building, you know we're a few years later and we still know each other. We haven't worked together closely for the last few years, but we've stayed in touch, and continue to share our ideas. Okay. How many lies did I tell there, Tracey?

Tracey Black:
None, none, no lies at all. I think Liz, I remember when I first met John, and I think everybody in their career has a few moments where somebody says something to you and you go, wow, you know, very insightful. And so I asked, I didn't even ask, John became my mentor without even me having to ask him to. And it came at a very helpful time in my career. It's always, you know, in any industry and payments is no exception, it's always beneficial to work closely with people who have experience that precedes and exceeds your own. And John has been incredibly generous with his knowledge and with his time over the years. As he indicated, he did call me in to do some really interesting work with him at Interac, and we met through Chip and PIN, which I'm sure we'll cover off in more detail. But I am really excited to have John here today, not only because he's a good visionary for payments, he's predicted a lot of the things that we're seeing today. You know, this was 10, 15 years ago. You know, he was the first guy who told me that payments were going to be invisible, who knew that he's right. And I also wanted to talk about mentorship because I think we're just coming out of a period where it's been challenging to maintain relationships that are based on knowledge, and I think it's probably more important than ever now that we work in remote circumstances much of the time. I think mentorship is increasingly important, and probably even more so for payments, where the pace of change is so rapid. I think it’s very helpful to have people who have decades of experience who have seen some of these things that we're trying to do. Now they've seen similar things from previous eras in the industry. John, how many lies did I tell about you, from a mentorship perspective?

John Ambrose:
Well, I mean, mentorship is a two-way street. And yes, I don't think we formally said well, let's have within our relationship a mentoring approach and concept. But it turned out that way, and it was a two-way street. And what I mean by that is it, the mentor and the mentee need to both get value out of the relationship. If you're going to be looking for the use of a person's time, expertise, knowledge, you have to offer them the value of your capabilities, knowledge and perspective. And, as I mentioned, when we first met, that's where we started exchanging, and I think that's where our relationship and the mentorship that came out of that evolved was we were looking at it as how each of us were going to benefit and get value out of the relationship. And it's gone beyond just talking about whether there's a proper payment structure and a policy to identify certain limitations, it's gone to a relationship where we talk about our values and things that are important to us.

Elizabeth Dempsey:
It's an incredible relationship. And, building on that, and you mentioned your work together already on contactless payments, what are some of the most significant innovations in payments in Canada that have brought us to where we are today and which ones in particular are you most proud of?

John Ambrose:
That's a challenge, Liz, because payment innovation in Canada has been built off of a number of base offerings. And I'll go back a little bit, I'm going to go back quite a ways, back to shared ATMs, when Canada developed the whole concept of interactive shared ATMs. That established a platform that was very valuable to Canadians and Canadian users. But what it was, was a platform to build debit at the point of sale, something that Canada had a reputation around the world as a leader and a successful program that others wanted to emulate. And I'll tell you a little later why I know that in no uncertain terms. That platform though, that offering was built on the confidence that the consumers, the banks, the institutions had, and it developed through the ATM shared network, and it was transferred through to the debit at the point of sale. Consumers knew about PIN, they knew about the security and the security of the systems and the security that was protecting their bank accounts because they'd been accustomed to using those tools. So that platform became very important. Now, what built off of that? Contactless payments, we wouldn't have had contactless payments if we hadn't had a good solid point of sale infrastructure. And what came off of contactless payments? Mobile payments, we wouldn't have mobile payments if we didn't have contactless payments because they built the infrastructure in the platform. So which one was most important? Which one am I most proud of, because I had the benefit of participating in all of those that I just mentioned, plus others. It's hard to say which one was the most significant. It's the fact that, in the Canadian context, we were able to build off of the platforms using the tools that were available to us. I'm going to touch on another part of this. Innovation is often considered as a technology solution. Technology is only one piece of innovation, and quite often it's not even new technology, it's using existing technologies in new ways, but innovation goes beyond that. It goes to the old infrastructure that supports the initiative — policies, procedure, rules, regulations, documentation, administration.

All those things have to be brought together in a unique way to offer new value to the marketplace. They're typically already established processes that need to be enhanced and modified maybe, but they come together and they're brought together in a new way. So again, is there one that does that particularly well? Maybe, but from my perspective, it was a building off of all the things that we had been doing and continued to do as a marketplace. My opinion is they all have been very significant in contributing to Canada's advancement in payments. I should also point out that Payments Canada played a big role when we established the ATM network and even a bigger role when we did the debit point of sale by providing a settlement system. When I traveled around the world a few years later and people would ask me, how come Canada was successful and moved this through so quickly, and this option was so readily available? It was because we had infrastructure like Payments Canada and others that we could depend on.

Tracey Black:
That's great. John, I'm going to jump on John's approach to talk not necessarily about the actual innovation itself. You know, I think the message is that payments innovation is often evolution, not revolution, and all of the topics that John referred to, we've all lived the benefits of those as Canadian consumers. And the thing I'd like to raise, Liz, is I think Canada's move to EMV chip and PIN was really smooth. So the innovation was the chip on the card and the upgrading of all the infrastructure at all of the issuing banks and all the point of sale terminals, like it was a big, big program. The innovation occurred elsewhere in the development of the chip. There were obviously rules, policies, processes, but I think one of the other really significant components for innovation or evolution in payments to be successful is end-user confidence and trust in the system. And so the thing we did so well in Canada, in our implementation of EMV is we took a customer first view. So we thought about the impacts to end-users. Most Canadians have payment cards from multiple issuers in their wallets. An example of putting that end-user first was in how we communicated about this new technology. So we used common messaging, we had common language that went into every letter sent to every Canadian with a new card. All the terminology was the same. We inserted cards in Canada, it said the same thing in every letter, which I think made it much easier for Canadians to understand what we were changing in terms of the payment process. But we also moved as an industry, so all the networks got together, Visa, Amex, MasterCard, Interac, everybody was around the table. And that collaboration ensured that Canadians were never left exposed for any payment that they made with a payment card in their wallet because everybody moved together. So I think that ability to put Canadians and Canadian businesses first, and to think about the impacts of this evolution on end-users was a really important contributor to our successful implementation of EMV here in Canada.

Elizabeth Dempsey:
So let's build on payment innovation, and as you said, the incremental change needed to revolutionize an entire ecosystem. What's worked in the past to affect this scale of change?

John Ambrose:
You've touched on a number of things that particularly, you know, the impact of things outside our normal control, the pandemic being one of them, where there was a quick change to how things were being done. And again, from a Canadian context, we were well prepared to provide consumers and merchants with the tools that they needed, touchless, if you will, payments, through what we had done. And Tracey touched on the EMV chip initiative. Something that probably few Canadians realize is, if you would reflect on that, we implemented Chip and PIN and contactless using the same card in the same time. We were one of the few places in the world where that was done. And we were leaders from a usage point of view of contactless payments. Because what did we do? We combined the most important things to consider when you're looking at payments. Payments are all about convenience and risk: you add more convenience, and you mitigate the risk. What was an integrated chip card? Convenience of contactless with the ability to mitigate risk with PIN on chip, a perfect solution for a Canadian market. Now, how do we evolve and what is the next step? Well, obviously we're moving away from the dependency on the physical infrastructure for payments. E-transfer was, I'll say, the first significant introduction of non-physical infrastructure requirements for payments. And that's changed the whole view of what is going to happen next. Because we’ve taken out the barriers. The barriers of infrastructure were what kept us from being able to implement some of the innovation in the past.

I introduced contactless payments to Canada in 2002, February of 2002. I announced it at an event that was here in Toronto, and we went around trying to get vendors and merchants to accept contactless. 2002. When did it become commonplace in Canada? 2018? Because of the physical infrastructure that had to be replaced, the number of players you had to make changes. And if you are familiar with the payment industry, no one changes your terminals in less than seven years. That's the retailer's kind of rule of thumb. So it takes you seven years just to get them to change the terminal because they have a legacy system, they need to get a return on their investment. That's not any different with the banks, they have legacy systems that they have to get a return on. It takes a long time. That's not what we're facing today. We don't have the limitations and barriers of physical infrastructure. For implementation, or for new entrants. New entrants don't have to be accommodated within the existing infrastructure, which was often a barrier for people who wanted to participate in the payment industry because they saw bags of gold out there for some reason, that was available in banking and payments. And I won't get into all the people who took a shot at it and backed out. So we've got a different situation where we don't have barriers of implementation from existing players, and we don't have barriers of entry from disruptors, new entrants. So some interesting challenges. I'll leave it at that for a minute and let Tracey take a shot at it.

Tracey Black:
I think, as usual, it's very easy for me to pick this up and run with it. We are most of the way through a very significant payment modernization initiative here in Canada, a significant spend to enhance our capabilities from an infrastructure perspective, but I just want to pick up on your recent comments, John, and also something that you said earlier in our conversation, about innovation is not just about technology. So, you need some core base level of capability in an ecosystem to support payments, and you know, let us learn from our past mistakes, and ensure that we continue to evolve. That's how technology is looked at now. It's not a significant investment every 10 years, it's sort of continual ongoing enhancements to ensure that that systems maintain their currency. But a lot of our innovation in Canada, it's not going to be reliant on our infrastructure. At this point in time, it's really who; who can use that infrastructure and how. And so a lot of our innovation in Canada is going to come from changes in rules and policies. And we started to see much more flexibility around that in the pandemic, where we had the technology capability to introduce new payment experiences for Canadians, we just hadn't had the real drivers. And change is hard, right? Change is difficult. Nothing like a crisis, right? How many times do we use that good old quote during the pandemic, but we really moved the dial on end-user experience during the pandemic, first of all, because we had to, and then because we could. And I think we knocked down a lot of perceived barriers around why a policy had to remain or why the process had to be that way. And I think we learned that actually we were more comfortable to move forward than we had thought, and I hope that we continue to push the boundary. You know, obviously we need safe, secure payments in Canada as we see more participants onto the systems, it's absolutely essential that we maintain the resilience and the security of our systems. Because if we don't have consumer trust and user trust, we won't see innovation in the same way. So, yes, it's innovation, I think it's also a clear understanding of the impact of policies and rules and where changes can be made to evolve those policies and rules to allow for new payment experiences or the enhancement of existing payment experiences in the market.

John Ambrose:
Yes, I agree that new policies and rules or enhanced policies and rules, because there's often a lot of value still in the things that were established before, because those requirements and needs and expectations are still there, but there's a whole new set of requirements and needs and expectations, as well as tools I mentioned earlier. Well, you know, payments is convenient. Risk mitigation tools have continued to be enhanced. So your whole view of what risk constitutes, what constitutes risk changes. So your policies, procedures, guidelines, processes, need to be modified to take advantage of the tools that are available, and take processes out that are no longer performing a meaningful purpose in conducting business or executing your role in the payment industry. And those are challenging things to take on, but doable. And the unfortunate part is new entrants don't have any of those barriers. Legacy is a challenge for those of us that have been in this particular business segment for years. I used to do presentations talking about the challenges of legacy and the fact that there are people who don't need to concern themselves with that because they’re new entrants and they have no legacy, no need to, and they make investments and, and countries do that. And Canada did that for many years where we invested because we didn't have legacy systems that were going to hold us back. Our friends south of the border had legacy systems, and they weren't going to embrace any new technology until they got the return on their investment. We went leapfrogs ahead of them in many innovations, some of which we've talked about today.

Elizabeth Dempsey:
And what has to happen going forward to support the continued evolution of payments in Canada? How do we keep innovating?

John Ambrose:
Well, we've touched a couple times in this discussion about collaboration, and also Tracey brought up, in very important, is a holistic view of what innovation is. It's not just about go out and find the new technology, or embrace a new technology or whatever. There's much more to implementing an innovative solution than just the technology. We, in the past, had a reputation as a country who worked well, collaborating to provide new solutions. That collaboration is more necessary now than it ever has because of what we just talked about, that the barriers are different. The ability to get together and come up with a solid reason why we need to deliver this innovation to Canada, collectively. Collaboration amongst Canadian banks was our stronghold. We need to find a way to bring that forward to today's situation. Yes, the risks are different, the business models are different, they have a lot of challenges to them. But we had business model challenges and risks in the past, where we introduced new players. We've got mobile handset operators involved in payments, we've got merchants much more involved in payments, we've got commercial entities involved in payments and all participating in common interest. We need to look at it again and say, okay, what are the risks of embracing new partners? What are the risks of not embracing new partners and doing it on our own? But you don't do that as an individual institution in Canada. None of them are big enough, as much as there are large organizations with tens of thousands of employees from a global scale and from a market penetration and ubiquitous acceptance, and none of them can do it on their own. We knew that back in the eighties when I was involved in the shared ATM discussions. Everyone sat at the table and said, none of us can put an ATM on every corner ourselves, we have to do it collectively. It's the same discussion. None of us can reach all of the people even though there's no physical infrastructure required in the same way, because each consumer has their own tool and their own acceptance and delivery vehicle. So we need to come out with new ways of collaborating to our common interests.

Tracey Black:
I would add to that, that we have a habit in the payment industry of holding onto everything forever. And so I think we have to get a little bit better at letting go. So John referred to legacy infrastructure. You know, I think we're seeing very significant investment in legacy infrastructure replacement across our industry, which I think is helpful to support the continued evolution of payments in Canada. And I think we also have to take a good look at all the payment instruments that are out there,  and determine which ones aren't really serving us now. And are there some that we should sunset? You know, there's always a long tail on these things. We talk about cheques a lot. We're seeing a pretty significant decline in cheque writing, personal cheque writing. There's still a significant number of cheques that are written by businesses, large businesses and small businesses. We have the ISO 20022 data standard now. I think we have to educate Canadians and Canadian businesses about the value of that standard. And we have to demonstrate how that data standard used to move money from one account to another electronically is better than a cheque. You know, I think we need to invest in sunsetting some of our payment vehicles that aren't so useful anymore. I mean, Liz, I don't know what you think that last cheque that somebody writes is going to cost, but it's sure going to be expensive. And I think we're starting to get into the territory now where the cost per cheque is significant, and the value that a cheque payment provides, there are payment instruments available that are much superior to that. So I think as an industry, we'd have to do it as an industry, you couldn't do it without the cooperation of all of the players in the industry that John mentioned, including government. Government, big cheque writers, but that's one of the things that we need to do, is we have to demonstrate that we know when to move off things that aren't serving the best interests of Canada and Canadians any longer, and to always be looking for how to enhance what's working, how do we make it better.

Elizabeth Dempsey:
We've talked about payments in Canada, but let's talk about Canada in relation to the rest of the world. You touched on this a little bit when talking about collaboration. How can Canada regain its status as a global leader in payments or catch up to other G-20 countries' payment evolution? John, I'll start with you.

John Ambrose:
Our strength in the past was the fact that we had been very effective in implementing innovative programs domestically. We would do those programs using international standards, and I spent a fair amount of my career aligning standards in various countries to international standards, ISO-type standards. And when you do that, what you get is the halo effect from what you've done domestically. It now is not as difficult a process to enter into an international activity relative to that. And you get recognized as an organization that can do that effectively. It's also important to do the things that Tracey was talking about as far as getting focused on what is needed in the world today. So, money transfer on an international level, on a cost effective basis, is very important. And you've got a lot of new entrants that are trying to get into that space and push out the banks and others who have been in the international money transfer business on a consumer level and business level for some time. So doing things collaboratively, domestically gives us the base of understanding your capabilities in order to be viewed as a valued participant on global and international missions.

Tracey Black:
I think the observation that is clear coming out of Covid is that payments is increasingly a global business. We're not only now looking to address friction in our domestic payment systems, but also how our citizens in Canada can do business in other countries. And I, I think when you're at the front of the pack, which Canada was for so long, you know, our domestic scheme, John talked about shared ATM dispensing, e-transfer was early, like we had a lot of really early wins. We have to remember to lift our heads up and look around, and see what's happening in other parts of the globe. Canada was, we were a leapfrogger, in part because we didn't have legacy technology or legacy payment experiences that maybe clouded the business case for new types of payment experiences. But we have to lift our heads and look around, because it's absolutely essential that Canadians and Canadian businesses have access to the same payment capabilities as their peers in other jurisdictions, and that they can transact globally. It's a fast moving industry and we can't do everything all the time. We can't do everything that everybody else is doing, but I do really believe that we can learn from areas like Europe where they have a whole bunch of countries that are really close together, and they have a need for fast cross-border payment capability because they all trade amongst themselves. We have one large trading partner in Canada, the US, and we should be obviously focusing on that, but I think we should really be making a concerted effort to learn from other jurisdictions, how they're approaching payments, what works, what doesn't. I'd just like to give a big thank you to the UK, referring back to our chip and pin initiative. We did a lot of learning from the UK and their chip rollout, and it was incredibly helpful to us. And I think we should be really focused on understanding where we want payments in Canada to be, what is our north star, what kind of capabilities do we want for Canadians and Canadian businesses? And then who's doing what we want to do and how do we learn from them? How do we take a page, and how do we share our knowledge as well?

John Ambrose:
I think those are important points. And I think it's also important for us to be looking at how globalization is changing. Recent world events have changed the perspective of a number of countries on how they will do transfer of funds and value, and that's bringing a different perspective. It’s going to be challenging, and we’re going to have to be very careful how we partner and who we partner with, in order to accomplish that. When we learned how to work remotely as a globe community, companies have reached out to other markets that they wouldn't have gone to before because of the physical infrastructure and number of things they needed to do, where now they can do business in those countries and had people work remotely at very low cost accommodating them. I lived in Paris, France and Brussels, as part of my international experience and am quite aware of how the efficiency of what they were able to do in Europe that Tracey talked about, benefited the community, because I was working in payments in Europe at the time. I was seconded to Europay, which ended up being merged with MasterCard some years later. And it was interesting to see how they took a different approach to satisfying the international and global payment activities.

Elizabeth Dempsey:
So we've kind of gone full circle, starting with mentoring at a leadership level, and then grew that into mentoring at a global level where we're looking at different jurisdictions and what we can learn and, and what we can share with other jurisdictions. And as the discussion comes to a close, I'm actually going to put you on the spot and ask John, what is the most important lesson or value you've learned from Tracey and Tracey, what is the most important value or lesson you've learned from John?

John Ambrose:
What, how do I learn from Tracey? How being clear and upfront with people on your expectations and needs can be a very effective way of accomplishing the goals of both yourself and the individual you deal with. Tracey was always very clear on what her expectations were and what she wanted to accomplish, and that made it much easier for me to be able to participate with her and for us to jointly succeed at the things we were trying to do.

Tracey Black:
And I think what I've learned from John, lots of things, but I've learned the value of experience, and I've been in the industry long enough now to realize that there are cycles, so we have cycles where we invest and build, and we have cycles where we extract all the value that we can from the investments in what we've built. And it's important to ask questions and to listen carefully when people answer you. I think that when you work in a fast moving industry, it's sometimes tempting to think that you know the answer already. I have learned so much about payments by listening carefully to John's answers to my questions. So I just want to thank him for all of the advice and all of the mentoring, you know, because sometimes when you're direct with people, they don’t always appreciate it. I think there are some fantastic people that work in payments and I feel very fortunate to have had the opportunity to work so closely with one of those, John.

John Ambrose:
And I feel the same way. We’ve had a wonderful ride, and I look forward to staying in touch as we go forward.

Elizabeth Dempsey:
And as you said, it started with a conversation and, and we've really appreciated the opportunity to listen to your continued conversation today. So John and Tracey, thank you both once again for joining us on The PayPod. It was such a pleasure hearing your perspectives.

John Ambrose:
Well, thank you Liz and Tracey, thank you for extending the invitation, and thank you to Payments Canada for the opportunity to share some of my background experience and hopefully some of the vision we have for the future.

Tracey Black:
And thanks to both of you. Thank you John, and also thank you Liz.

Elizabeth Dempsey:
So before we go, make sure to stay connected to the latest developments in payments by visiting payments.ca and signing up for the Exchange, our newsletter. And be sure to visit thesummit.ca to take advantage of our special ticket pricing offer, on now for The SUMMIT, our annual payment conference happening May 29, 30 and 31. I'm Liz Dempsey. Thanks for joining us for this episode of The PayPod.