Episode 8: The way we pay with Sue Britton, Alvin Chan and Rubina Ahmed-Haq

Transcript of the recording

Justin:
The way we pay is changing dramatically, but what's driving this payments transformation? Our third annual Payments Pulse survey consumer edition finds younger Canadians aren't settling for traditional payment methods, as 70% say they are willing to move away from cash in favor of other forms of payment compared to 62% of all Canadians. From automatic, and invisible payments to apps for tracking spending, our study shows that millennials, and Gen Z want easier, more convenient options to meet their needs.

According to the Payments Pulse survey, 73% of 18 to 34 year olds are more likely to choose a retailer online based on how easy it is to check out. They are more likely to make a spontaneous purchase, because their payment data is stored within an app or online, and they prefer to use ride hailing apps rather than a taxi, because the payment process is simpler. Overall, our survey shows that the younger generation is driving the movement for innovative payment technologies, and a modern payment system.

Hi, I'm Justin Ferebee, chief operating officer at Payments Canada, and your guide on the Pay Pod podcast, which examines all aspects of Canada's ambitious payments modernization mission. We're joined today by Sue Britton, the chief executive officer of Fintech Growths Syndicate, by Alvin Chan, payments innovation lead, digital and innovation at Ravel by CF, and personal finance journalist Rubina Ahmed Haq.

Welcome everybody.

Rubina:
Thanks for having us.

Alvin:
Thanks Justin.

Sue:
Nice to be here.

Justin:
The Payments Pulse survey highlights a generational shift to move modern payment methods, and a shift away from carrying cash. This certainly isn't surprising to any of us. Younger generations who have grown up with the convenience of technology are going to want to see that flow through every aspect of their lives, and may feel frustrated when convenience isn't available. Let's start our conversation with the pain. What do you find frustrating? What are the things that are your pet peeves around payments?

Rubina:
Personally, I find it frustrating when I have to reenter data. So if I've already purchased something at a retail establishment, and I've put the credit card information there, and then if I go there again and they want me to re enter it. So if I'm doing it from home, I know it's safe. I know my credit card information is safe, and so I want to do it quick. I know that from a personal finance perspective that quick shopping is probably not something I should promote. But just from a personal, being a mom of two and having a busy life, I put stuff in the basket. I just want to check out and I don't want you to make me go back, and enter data again. So I know some of that has to do with me saving it on my computer. But sometimes, re-logging in or asking for more information, I find that quite frustrating.

Justin:
And whatever, you always have to put something more in. You have to put in a postal code or your card number or something. It just never seems to be all there.

Rubina:
Yeah, and I mean we can now pay for purchases like a point of sale purchases just by tapping. I feel like there should be easy way to pay in the comfort of our home in the same way. I know that that technology may not exist yet, but when I go to the mall, I can just tap, tap, tap and pay. But when I'm at home, I've got to put in like my address, and my name, and my, all this kind of information that I feel like they should have it stored already as a credit card holder. That kind of frustrates.

Sue:
That actually brings up my biggest pet peeve, which has I think been solved by somebody, which dare I say PayPal. I have my own feelings about PayPal from a business perspective, but as a consumer, you'd actually, if you enable PayPal One Touch, you don't have to do all that. In fact, you can shop online at wherever you want and when you go to PayPal One Touch, it already knows who you are, where you live, your address and all that kind of stuff.

Sue:
It's definitely becoming my go-to just because to your point, right, it's a pain in the ass to put all your information in there, and not to mention remembering your password and stuff like that. Like if you don't remember it then you got to reset your password, and then you've got to wait for that email and all that kind of stuff is so much friction. So I don't know what you guys think, but it's definitely for me, convenience is huge.

Alvin:
Yeah, I mean for me, just the example where we need [inaudible 00:04:11], shopping in the mall and not having those merchants have contact lists. I'm a serial Apple pay user, and I love that convenience, and I love just one hand being able to make those purchases, and checking the other phone on the other hand. But yeah, it just, even from my observing people who haven't bought into that, I mean that's a pet peeve of mine. It's not my own activity. It's around [crosstalk 00:04:39] other people who are still paying with cash at Tim Horton's for example, or they're actually inserting their card at the point of sale when clearly they could have tapped the card. Yes, I do notice all-

Justin:
I'm one of those guys.

Alvin:
I don't want to be in line behind you.

Sue:
We were talking about cash yesterday actually, and there was a few bankers in the room, and the conversation came up about, and they were talking about notes. And I said, "Can you just like tell me what the definition of a note is?" And they're like, "Oh, a note is actually cash, but it's a banker term." So it's even like, and I'm old, so I can't even claim to be in the target market we're talking about, but I don't think that cash... I think cash is, definitely becoming one of those things. It's rarely in anybody's wallet.

Alvin:
Yeah. And I mean, I take your point about the frustration, but you each are saying, "Oh well I use this, I use that." But it's very fragmented. So I use tap, but sometimes tap isn't working or stuff. It's like I'll carry my card and I got to carry whatever. And PayPal is great, but sometimes it doesn't take PayPal, or some say, you always have to have resiliency, and like I still get cash when I travel just because I never know where I'm going to be or what I'm going to have to have. And it's almost a backup for me. But it just feels like there are so many different things, to your point that the retailer is trying to be convenient for cash, for tap, for everything, and it just slows everything down almost.

Justin:
Right. And, with the advent of all these new technologies, and other experiences that other industries provide, the customer, and I think there's the common theme of consumer behavior, consumer expectations just keep evolving that tap is not good enough. Why can't I just walk out of the store with the stuff that I wish to purchase? Why do I have to talk to anybody? Why do I have to stand in a kiosk to be able to self checkout? [crosstalk 00:06:25]. That's worked for me. I mean...

Sue:
Yeah, I know it's a great point, because you go walk by Zara or Uniclo or any of those stores and the lineups are so long that you almost wonder-

Alvin:
Is it worth it?

Sue:
Is it worth even going in there?

I don't want to stand in line, and wish I could just go somewhere and do my, I don't know, mobile checkout, or something like that.

Justin:
So would you say, so what we're hearing here is that people are making buying decisions based on the payments, how they pay. Is that true for you?

Rubina:
Oh, 100%.

Sue:
Yeah.

Rubina:
If I see a big lineup like you just mentioned, I'm not going to buy anything. Or if I like something, I'll go home and order it online. Very rarely will I subject myself to a 20 minute line to buy a clearance dress that I just happened to pick up. That used to be the motivator. Right? You would go and everything would be really cheap, and so you'd be motivated to stand in line, because you want to save money but that no longer is the case, because you can easily get those items online. Why waste 20 minutes?

Sue:
And if I can just add one more thing, when you take it beyond just shopping to paying for let's say renovations, right? And it's over your e-transfer limit, that's frustrating.

Rubina:
[crosstalk]... Do a mobile deposit over a certain amount. We got into this problem when we, because we're in the process of buying a house, so you have to transfer large sums of money, and it's clear that the money is in the bank account. It's just transferring it from one account to the next, and you've got to do it in through transfers, because they just won't allow it to happen. That's super frustrating.

Sue:
I think the point is that, it's almost like the friction. So we know friction creates innovation, right? Because there's a pain, and so you want to solve for that. But I think the issue is that the bar is being set pretty high now by companies that are bringing technology to the market that is more convenient, and no friction promotes adoption and usage. And so you can't rely on people just sticking with you, because they like your brand or they want your product or they frankly feel trust in your financial institution, because we're all busy people, and we're just going to go find the path of least resistance.

Justin:
Yeah, yeah. And I think to your point, we're seeing examples where it's not only about the discount, or the sale or how much money you will save, but rather, am I going to save 20% off my purchase or actually save 20 minutes not standing in line. And I think more and more customers are choosing that, "Hey, I'd rather save that time, because that's more valuable than the 20%..." For example, "... of my purchase." So, it's frustrating for us. It must be difficult for retailers. Can you tell us what their experience is with all the different changes and how they serve customers or what they care about or...?

Alvin:
Yeah, so I think we get a mix within the Toronto Eaton Center in terms of methods of payment. There's tons of different terminals out there within each of the stores. There's not one centralized method of payment. I think for the most part I think, especially here in downtown Toronto, the ability to be able to tap your car, tap your phone is mostly there within major urban shopping center.

So I think, that from that perspective, they've certainly, I'll say caught up, but also want to say that it's more table stakes in this day and age. And we do see some retailers who are evolving beyond that to catered to certain customer demographics. I'll use Alipay and WeChat pay as an example of retailers, and the more, I guess forward thinking retailers accepting those directly at their sort of stores to capture the Chinese tourist market, which can be quite lucrative to them.

But otherwise, we haven't seen the advent of say, cryptocurrency payments yet at the store level, but hey, who knows how quickly that might come on. But otherwise, yeah. We've seen a lot of new technologies being showcased in the US about, just go, I don't have to explain the Amazon Go example, by other retailers like 7-Eleven, Sam's Club, Walmart in the US really trialing a lot of the frictionless payments, and not having to interact with associate or tap a card or insert a card or anything. It's just scan it yourself and just walk out of the store.

Justin:
So, we were talking about our own experience with friction, and the frustration with that, and the fragmentation of the payments. And we hear that it's also difficult for retailers to try and navigate all of that and we're driving out friction. The goal is to drive out friction, but there is another side and you raise this just briefly, that maybe if you take out friction, people spend too much.

And often online payments are forced to be credit card payments. So convenience ends up being a credit card payment. And if it's too easy, maybe you're not keeping track of it, maybe you're not managing it. So we've often heard people say, "Well, I need the friction to manage my finances here. It gives me that moment of pause. It says, what is this, or I take out $300 cash when I'm done, I'm done. And then I can do that." But do you have any views on that? If there's a role that friction has and financial management.?

Rubina:
So yeah, the easier you make it to buy anything, the more likely people are to buy.

Justin:
And, forget they bought something [crosstalk 00:11:39].

Rubina:
Exactly. And credit cards have two problems. One is that they're super easy to use. And secondly, the rewards. So often people are chasing whether it's airline rewards, or grocery rewards, or what cashback people are often shopping, there's a rewards day or you get that sort of, they say they get that dopamine. Like all of a sudden you feel good, because I got 20 times the points today.

And so, I really caution people to use your credit card as a tool, not as a resource. So we are in a world now where we don't want to carry wads of cash around for obvious reasons. And most places, I mean I know especially in downtown Toronto, there's places that just simply don't even take cash. So you probably couldn't operate in the world, if you just wanted to pay with cash, that'd be actually a nice experiment to go to city like New York and try to see how far you get with just cash.

So we have to use that tool. But to make sure that when we are spending money on the credit card, that you have the money in the bank, that you know that you can pay it at the end of the month and in full. Because credit cards are great for convenience, but they're very expensive. I mean, I talk a lot about compound interest being in the favor of young people who save. But what about compound interest on the other side of debt? It's exactly the same thing. All of a sudden your $100 purchases costing you $175, $200 even more so if you continue to hold onto it.

So I guess my answer is is that, know the power of the credit card and understand that there's countless studies out there that show that we spend more when we spend with plastic and even more so Apple Pay and every... The more distance you make between the pain of taking the money out of your wallet, the more easier it is to overspend.

Sue:
I think this is actually a good segue to talk about challenger banks. Because, I think Fintechs in general, because I think that's where Fintechs are really starting to take hold in terms of, take someone like Stack or Coho or really well I mean there's dozens of them in Canada where built into your banking experience are those financial management tools. Whereas with our traditional banks, we still have to opt in to use a budgeting tool or use something. I mean, I think I did connect mint or something like that to my personal account, and I get the emails every once in a while that say, "Is it true you've spent $0 this week?" Because somehow it's gotten disconnected-

Alvin:
No, no, that's not true.

Sue:
No, no definitely not true. But like, I think the Fintechs are solving a problem around financial inclusion, and I think financial literacy and financial management, it's not the be-all and end-all, but that I think is where we could, I mean, that the problem I think is that consumers don't know, they don't know about Fintechs or challenger banks.

And so they have to find them. That's the other issue. I'm a big fan of Milo. I don't know if you've heard of-

Rubina:
Of course, yeah [crosstalk 00:14:42].

Sue:
Yeah, yeah. And-

Rubina:
So, you save a small percentage or the change off your purchase or, that's not how it works?

Sue:
I mean, there's all sorts of things we can poke holes through around data privacy and things like that. But, not with respect to Milo, but just in general. With open banking, things like this'll be easier. But you log in and you provide your banking credentials and you can choose which accounts you want to round up your purchases. And round them up or set a specific amount.

My Dad fell ill last year and he had a complication, and surgery and I was visiting him and he actually was saying, "I really want to go visit family back home." But they live on a very like they're living on a very small income. And I thought of my Milo account that I'm actually, and I went and I opened it and it was like $5,000 in that thing. I hadn't even looked at it cause it doesn't even-

Alvin:
Register for-

Sue:
Doesn't even register. It just keeps rounding it up. So, not that that's the answer to spending too much.

Justin:
But, it seems like the world is creating convenience, but you almost have to, you were relying on the friction in the system to manage your money. And now you have to create your own friction, almost. Like you don't have your credit card with you, or you have to [crosstalk 00:15:57]. Everyone should manage their finances on their own. Like we can't blame the payment system, because it's too convenient. You've got to give people as the tools, whether it's a a Fintech or pay check or whatever that says, "If you want to manage it, we'll have you do that."

Rubina:
I think that's a good point. And it's the same with Robo advisors. I know those companies hate being called Robo advisors, but sort of using that kind of way to save for your retirement or whatever it is that you're saving for. That's fine to use that, but understand what you're invested in. Understand how the system works. Don't just go to them and say, "Save for me. Invest for me."

So it's the same thing with budgeting tools. So you can use a budgeting tool like added onto your own or already sort of financial understanding of how much money you're spending. But now I'm going to use this just to make my life easier. No, I'm not going to use this to actually solve my problems.

Justin:
Right. Now, if we transition a bit here. So we talk about the fragmentation, the friction and the innovation that's coming in and all of this is on the consumer, or on the retailer to try and figure it out. What about open banking? What about the future? What's coming next and what do we have to look forward to?

Sue:
Well, I mean I think open banking isn't inevitable, right? It's inevitable because banks in different parts of the world are already I guess complying with regulations to open up to allow their customers to share their data with other financial institutions or what have you. But I think the point of open banking is really to put the choice in the customer's hands around what to do with their data. Right.

Sue:
And it becomes their data to own, and when they want to go and open an account with another bank, they can do that more easily, or they can see both their bank accounts, if they have multiple bank accounts, they see them in one place. I think that's just the tip of the iceberg though. Because, as a customer now that we're becoming so digital, I think being able to actually manage all of our apps, and different ways we transact and everything in one place, which open banking in theory should allow, because there's this for hopefully the people that are listening APIs it's not a foreign term, but this ability to integrate different apps into sort of this one place where I see everything would be nirvana, right?

You'd see your budgeting tool. It doesn't have to be from your bank, your multiple bank accounts, your wealth account, maybe your accounting app, if you have a small business or... So I think open banking is the opportunity to create a platform. Platformification. It's just this idea that we all are gonna eventually see our phones as platforms. Platforms and gateways to other stuff.

Justin:
What are you guys thinking?

Alvin:
I'm going to echo Sue's comments. Yeah. It's just about putting that control back into the consumers hands, I think. In this day and age, there's so much data that one generates, if I think about the social sphere and all of that data, it's your own. Like you control it, you do what you want with it, you share it, you choose who to share it with or not. So why shouldn't that be for all my financial transaction data too. At the end of the day create more utility for it and value to myself as a consumer.

And I think the power of open banking as we've seen in other jurisdictions is to be able to provide that increased consumer choice and to be able to allow those, whether it's a platform or an organization that I might sort of provide consent to share that with, to be able to help me make more informed choices, whether that's from financial management investing or maybe even buying stuff. And to be able to customize what it is that you know I'd like to buy and what might fit me and might suit my budget. And that kind of all comes together.

Rubina:
I think young people especially are a little bit tired of having to be loyal to one financial institution. And that of course creates those problems where like if you're applying for a mortgage, and you've got an investment account here and a checking account there and some other stuff going on. So to bring that all together and make it one big profile is difficult. And so that's one problem I think open banking will solve, is that of course it will all be on one platform.

And the other thing is nothing is more frustrating when you think you're taking money out of one place and you realize you took it out of the wrong place and you pay a fee here, and it's because you couldn't see it altogether. And so if you know, if you had just known that this is where the money is supposed to come out of, because it's all on one page, you wouldn't have made that mistake. You wouldn't have had... I mean I have a whole huge problem with bank fees as it is, and I'm more overcharged in so many ways for very simple things that, in Europe especially for example, you can go to any bank machine and get money out without any fees. Why has that not happened here?

I lived there 20 years ago, 19 years ago, and I remember the first thing I realized is that, you can go to any bank and you don't have to pay a fee to get money out. So things like this, we haven't caught up, so we try to organize our finances so that we pay the least amount of fees and get the most return our investment. But if we can't see it all in one place, it's very hard to do. And I don't want to be just a customer of TD bank or just a customer of RBC in order to benefit from that one page view.

Sue:
Yeah. And it's interesting, because I think the 18 to 34 year olds, maybe the higher end of that who will have already, you know, gotten used to the fact that they have to go to one of five or 10 banks in Canada, and possibly go into a branch and possibly talk to somebody. But those younger ones like I don't actually, I don't see them doing that. Because they're digital natives, right? They truly grown up with like digital everything. I think they will be the ones to start to try and find a way to get a solution that doesn't require them to have to go to those banks.

But the problem is like, would you... I don't know what you guys think, but I'd be interested in your views about, Rubina about this whole issue of financial management, because like what is the actual solution if the end consumer user has to actually even have the realization that they should manage their money in a different way, right?

Like what is the thing that is really going to help us improve our financial lives? Instead of it being something that we have to stumble upon or realize when we're 50 not that I'm... Well yeah I'm 50 but you know what I mean? You know what I mean? Like sometimes it's-

Justin:
We do confessions here [crosstalk 00:22:48].

Sue:
Well, it's just too late when you do realize that, "Osh, I was supposed to be saving money. I was supposed to be, I don't have enough for retirement." Whatever, whatever. Right? Like, and so how do you... I mean, there's a couple of problems there. One is, I think we're a very close banking society in Canada, so there's very little openness to be able to actually go and easily find other solutions. But also, is that kind of almost like made worse by the fact that we're not managing our money properly. I don't know if you can my question in there, but, whatever.

Rubina:
Like in last 20 years, a few things have happened. One, it's so complicated to invest money. There are so many products and so many different ways that you can invest your money. There's so many registered accounts, there's TFSA, RSP, RESP, and there's so many different places where you can put your money. Taxes are getting more and more complicated. So people are trying to do so many things at once.

I think getting back to basics, simplifying the process is probably number one. I mean 1980s our savings rate in Canada was about 20%, so if I made a dollar, I save 20 cents and now it's less than 2% and I know a lot of that has to do with low interest rates, because people have no incentive to actually go and save money. But, whenever you go back in time, no one was using their savings account to invest for retirement.

People were always using something a little bit more sophisticated. Now we just have too much choice. So simplifying, I think that the message of what you should be investing in, like going back to like that 1980s example, we kind of have to get back to basics and teaching people, pay yourself first, choose simple products that you understand. Don't go to a financial advisor and say, "Ted, tell me what to do." Go to financial advisors and say, "This is the research I've done. I'd like to get your opinion on that as well." That I think would be step number one.

Justin:
Okay. So the research we did said that the younger generation is leading the way in Canada in many ways, starting with convenience as being the primary driver. And there was a secondary piece in the research about wanting better and more information. We talked about the frustration and the fragmentation of payment systems from a user perspective, consumer as well as the retail side. We talked about what's possible in the future. About some of this complexity coming together or maybe getting more complex with open banking. I'm not sure.

But, what I'm going to ask you now to give us a view of the future. Your level of optimism or what what it would be a perfect outcome. What do you, what's nirvana for? In a turbulent time, what comes out the other end on this? Your prediction perhaps is a better one. Your prediction for what's going to happen in five years. You have one minute, go.

Alvin:
Alright, well I'd say, if you think back to, seeing from like minority report, back, it's hard to believe that was like 2002. Is when that movie came out, right?

Rubina:
Wow.

Alvin:
17 years ago. And kind of feature they predicted, I mean, hey that's here now and I kind of just wanted to highlight the fact that Tom Cruise is walking through, and everything kind of recognizes him. So we're seeing that today already. Right. As I talked about things like Amazon Go, and sort of just Go payments. I'd say, yeah, my utopia is more use of my metrics to be able to create frictionless experiences, more use of, I'll say mobile POS, which everybody has in their hands as they walk around the mall, which is your own mobile phone. Making more utility out of that to be able to, whether it's scanning things on your own or being able to recognize and just to be able to walk up the store.

And I think just maybe not for me, but we've seen the great advent of social commerce, right? More people hanging around in the Instagrams, and the Twitters, and the Facebook environments and being able to really just shop from there. I think that's going to be the new area to watch in terms of where commerce is really going to be taking off.

Sue:
Okay. Well I'm going to not be realist, because you said nirvana. Right? So, in an ideal world, I think in five years we have a radical transformation, and the way we transact, and I think it will be a platform based solution, meaning like not, I won't necessarily... I should choose my words more carefully, but I won't necessarily care who the financial brand is that I'm using.

I will care more about being able to do everything I can digitally, which requires a whole host of things for us in Canada to fix. But I guess from a nirvana standpoint, I would prefer that not be from Amazon or somebody like that who means probably that domestically we have a challenge with some of our Canadian homegrown tech and stuff ever seeing the light of day.

Sue:
So, I know that sounds kind of a little bit negative, but I do think that that is what our future is. And then by then, I suspect we're going to need a whole lot of solutions to help us manage our digital decisions, because we're where this is... I do agree that like, because I'm a bit of an online shopper that it's so easy that how quickly we'll be able to get ourselves in trouble will be exponentially bigger five years from now than it is now. Yeah, that's what I think.

Rubina:
As a personal finance journalist, I think my nirvana would be is that we're using tech to save as much as we possibly can. I think technology has now allowed us to spend, and get things very quickly. But now I would like to see technology move towards where if I walk into a store, I know I'm getting the best deal in that area. If I invest in something, I know that this is the best product for me based on all the information they've gathered about me and that I'm making it with confidence, because the technology has sort of brought all that information together, and proven to me that that's the best decision.

The worst feeling is when you book an airline ticket and then you know the guy beside you paid $100 less, or the girl beside you. So I want to take that out. I think sort of democratize the whole system. And so we're all getting the best deal at the time we make that purchase. It's different of course, if you do things two or three months later, because the market's changed, but at that time you're getting the best deal, and I think technology can allow you to do that.

Justin:
Love it. Well, thank you for your optimism and your engagement and we will look forward to seeing this realized in our payment system. Thanks everybody. [crosstalk 00:29:35].

Sue:
Thank you.

Alvin:
Thank you.

Rubina:
It was fun.

Justin:
Thank you all for joining me today to discuss consumer payment preferences, and your insights into the future of payments. As always, the Pay Pod is available for download on your favorite podcast app or payments.ca. Join the conversation online using #modernpayments. That's all the time we have for this episode, but please join us next time for season two as we continue to delve into the world of payments.