Breaking barriers for vulnerable Canadians by advancing access to payments

Financial inclusion is essential to the success of the Canadian economy and inclusive payments and payment systems play a pivotal role. Elizabeth Mulholland, Chief Executive Officer of Prosper Canada, a national charity dedicated to expanding economic opportunity for Canadians living in poverty. She shares her perspective on the need for modern payment regulation, including changes to the Canadian Payments Act, to offer Canadians more choice in innovative, safe and affordable payment products and services that meet their needs.

Tell us about Prosper Canada and the important work you do towards ensuring all financially vulnerable Canadians have access to the financial policies, programs and products they need to build their financial wellbeing. What is the significance of payments in that work?
In a nutshell, Prosper Canada works with government, business, research and community partners to develop, test and sustainably scale financial tools, resources and services that measurably improve the financial well-being of people with low incomes across Canada. We also work directly with governments to ensure their policies and regulations remove financial barriers for vulnerable groups and help to build their financial well-being.

Payments are a critical part of the financial ecosystem, particularly digital payments, which open up enormous opportunities for people to access an ever-growing range of products, services, employment and business opportunities and AI-enabled tools to help them make the most of their money.

At Prosper Canada, we’re interested in ensuring that people with low incomes and other vulnerable groups are fully included in the payment system and that effective rules and regulatory frameworks are in place to protect consumers from fraud and abuse and provide them with innovative and competitive products and services that meet their needs and offer optimal consumer experiences. 

Unfortunately, many people living in rural, remote and Indigenous communities and people with low incomes are still not fully included in our digital payment system and consequently miss out on the economic opportunities it offers at a huge cost to themselves and to society. We’re interested in working with payment system stakeholders to change this.

What are the biggest payment barriers for financially vulnerable Canadians?
The two biggest barriers to participating in the digital payments system are digital exclusion and financial exclusion.

Many people living in rural, remote and Indigenous communities and people with low incomes may have poor or non-existent internet and/or cellular access in their communities, be unable to afford the high cost of internet and cellular plans and/or have low digital literacy. All of these barriers can make it challenging or even impossible to access our digital payment system.

These same groups — particularly people with low incomes and those living in many Indigenous communities — may also be financially excluded. This means they do not have ready access to a mainstream financial institution offering safe and affordable financial products and services. This is particularly true in northern communities, some First Nation communities, and low-income neighbourhoods in some cities where local banks and credit unions have given way to high-cost, high-risk, fringe financial services. As a result, these individuals often lack a deposit account digitally linked into the payment system, shutting them out of a host of financial products, services and opportunities.

Canada deserves credit for being one of the most highly banked nations in the world, with 96% of Canadians having a formal bank account. Those who are not banked, though, are concentrated in our low-income and Indigenous populations and even those who have bank accounts sometimes avoid using them if they have bad debts and are afraid their accounts may be garnished.

Prosper Canada was a signatory of a joint industry letter to the Minister of Finance on the need for changes to the Canadian Payments Act to broaden access to Canada’s payment infrastructure. What potential opportunities or benefits do you see broader access delivering to Canadian consumers?
The most important benefits we can offer Canadian consumers are greater choice and competition within the context of a safe and well-regulated payment system.

To date, access to our payments infrastructure has been limited to the large financial sector players. While these do an excellent job meeting many consumer needs, they are not always the key drivers of innovation, nor are they likely to focus on niche consumer segments with more specialized product and service needs — like people with low incomes. The relatively small number of players also limits competition, potentially keeping consumer costs higher than they might be if more companies were in the mix.

Responsibly expanding payment access to credit unions and emerging fintech players means consumers will have more choice, earlier access to innovative new payment products and services, and potentially lower costs as greater competition drives down product and service prices.

A measured approach to broadening access, which includes effective rules and robust consumer protection, can help to create a more innovative and competitive marketplace that is good for everyone.

Which emerging payment trends and technologies do you foresee having the biggest impact on financial inclusion and accessibility in the coming years?
Some of the most critical trends lie outside the payment system but will ripple through the payment system as well. Trends like the formal adoption by financial firms of ESG goals and public reporting focused on financial inclusion. Also the broader shift to customer-centric product and service design, combined with new regulatory standards with respect to accessibility for people with disabilities and appropriateness of financial products and services for diverse consumers, particularly those who are vulnerable. All of these trends can help remove barriers for low-income and other vulnerable groups and improve their consumer experiences and outcomes.

Other developments, such as the use of AI-enabled products and services, open banking and the forthcoming introduction of the Real-Time Rail payment system in Canada are effectively double-edged swords that present both risks and opportunities with respect to payment inclusion and improving the financial products, services and experiences available to low-income and vulnerable consumers.

This makes it critically important that we make inclusion, accessibility and consumer protection central to the process as we introduce new infrastructure, products and services, and rules and regulations to govern them.

If we get this right, we can make our payment system significantly more inclusive and beneficial for people with low incomes. If we’re not prepared to put in the effort at the front end though, then the payment system may arguably become even less accessible and a riskier place for vulnerable Canadians.

You are an integral member of the Payments Canada Stakeholder Advisory Council (SAC). Can you tell us more about your role on the council and what drew you to it?
As someone who has never worked directly in the financial sector, I admit that the payment system and how it operates was pretty much a black box to me before joining Payments Canada’s SAC.

I knew enough, however, to understand that how the system and its members operate has a huge impact on the everyday financial experiences of Canadians and, consequently, that even small changes could have a major positive impact if done right.

This is what convinced me to join the SAC and I haven’t been disappointed. There is a strong interest in understanding the issues with respect to payments inclusion and to finding practical solutions to address these.  The system is large and complex though — really a system of many interconnected systems — and identifying the challenges is always much easier than the painstaking work of developing workable solutions that can be effectively implemented systemwide.

For these reasons, SAC has set up an Inclusion Working Group, which I am a member of. We have been working iteratively with Payments Canada staff, SAC and the Member Advisory Council (MAC), to define what we mean by an inclusive payment system, establish guiding principles, identify key challenges and opportunities to realize those principles, and develop concrete recommendations. We are midway in this process but encouraged by the strong engagement of all the stakeholders and looking forward to engaging SAC and MAC members in November and hearing their feedback.