Market Insights

Since its launch in 2003, Canadians have readily adopted the Interac e-Transfer® service, using it to split dinner tabs, pay rent, settle up with the babysitter, or send a monetary gift to family or friends.  According to Interac, Canadians made some 763 million transactions in 2020, which equates to more than 2 million transactions per day.

Until now rolling out an Interac e-Transfer service specifically geared to businesses’ needs has been slow, primarily due to technology limitations affecting a variety of capabilities, says Dougal Middleton, Vice-President of Enterprise Payments at Scotiabank.

This past December, as part of a pilot project Scotiabank was the first financial institution in Canada to offer its business banking customers the Interac e-Transfer for Business enhancement, allowing for real-time, data-rich payments and additional flexible routing options such as using an account number. A primary benefit of the service is that funds deposited are immediately made available to the recipient, allowing businesses to more accurately predict cash flows. Other benefits include saving time and resources used reconciling accounts, removing some of the potential for fraud normally associated with cheques, and the ability to take advantage of early payment discounts from suppliers.

Traditional payment processing methods — cheques, paper invoices, cash, and electronic funds transfer — are costing Canadian businesses an estimated $3 billion to $6.5 billion a year as a result of delays in payments processing and a lack of data and transparency that requires companies to undergo labour-intensive reconciliation of payments, according to Payments Canada.

Interac e-Transfer for Business is a game changer for Scotiabank’s business clients when compared with traditional payment products, says Adam Gabriel, Vice-President of Global Business Payment Products. “What it’s done for our business customers is enable them to reduce operational complexity and costs, improve cash flow and gain transparency throughout that process,” he says.

The pandemic put the spotlight on treasury operations, speeding up the move to digital, Middleton says. “Businesses have realized manual processes are inefficient and not cost effective. When you can’t get somebody into the office to pick up a cheque and run it over to the bank to make a deposit, you realize just how hard it is to get paid,” he says.

A big bonus for companies is not having to match and reconcile the money coming in line by line with outstanding invoices. “With the advent of data-rich payments, the payload carries far more context, which allows corporate and commercial entities, and small businesses for that matter, to automate a lot of the activity that surrounds reconciliation and invoice matching,” Middleton emphasizes.

Monique Girardin, Postmedia’s Senior Treasury Analyst, says she’s all for getting the national media conglomerate on to whatever digital platform she can, both from a standpoint of business efficiency and to lower the company’s carbon footprint.

“Going into the pandemic, Postmedia was already in a very good spot,” she says. When Scotiabank approached her with the opportunity to test the Interac e-Transfer for Business service she was quick to do so. “It’s definitely made our lives, and especially mine, easier when it comes to taking in payments and with what’s going on in the world right now,” Girardin says.

Postmedia, which publishes National Post and several major Canadian daily newspapers, currently uses Interac e-Transfer to receive payment for retail and classified advertising and in some human resources functions, such as facilitating benefit payments from employees who are on maternity leave, or short- or long-term disability but plans to expand it to other payment functions.

Before last March, Girardin says employees on leave sent in post-dated cheques for their entire leave. Currently, she is only in the office twice a month to check the mail and cheques may not be cashed at the first of the month, she says, and when they aren’t, she has to contact everyone to let them know. “Finances are hard right now and you don’t want to surprise people when they might think that the cheque has already come out, but it hasn’t,” Girardin says. Now, when the first of the month rolls around Girardin says her email is flooded with Interac e-transfer transactions for the payroll department. “It’s easy to track, easy to record in our system — five minutes from start to finish.”

While Girardin notes the system needs tweaking before it can meet all of Postmedia’s needs, she is confident Scotiabank is taking customers’ feedback into consideration as it continues to improve on it.

Scotiabank has more refinements in the works, Middleton says. Last month, business-to-business payment limits increased to $25,000, from a current $10,000. Global trends indicate these limits could continue to rise as the industry continues to modernize the Canadian payment system. There are many opportunities to continue to innovate in partnership with Interac on the service to deliver new digital payment experiences for businesses and their clients, some of which will require tailoring to make it viable for different use cases.

“We’re not done yet. As we continue to improve on and invest in modernized payments, we’ll be able to unlock a lot more value for our client base,” Middleton acknowledges.

Another key investment Scotiabank is making is in bulk disbursements — simultaneous multiple payments via the Interac e-Transfer Bulk service to streamline payroll and supplier payment systems — and adding the rich payment data with each payment in the file. “That’s a substantial win for business customers, particularly ones that process larger transaction volumes,” Gabriel says.

Being first out of the gate also has allowed Scotiabank to start awareness of the service earlier, while continuing to learn from customers’ experiences and test internally with different capabilities, Middleton says.  

“Every bank is consumed by this payment modernization journey. To be able to get out there first and showcase our ability to move it forward and keep pushing the dial is important,” Middleton says. “We’ve got a road map of investment unfolding that will enable more and more capabilities to serve our clients in a better, more seamless way.”

This article was first published on Perspectives.

Learn more about Global Business Payments.