Or What makes Canadian Banking different?

Transcription

1 CANADIAN BANKING Sharing a Border Or What makes Canadian Banking different? Ray Kohler Senior Relationship Manager, US Markets RBC Royal Bank 1

2 Agenda Understand the basic differences between Canadian and US banking landscape and recognise opportunities Need to know information about disbursements, collections and payment processing Business and Industry trends Canadian Payments Systems Task force and impact 2

3 To share a border Canada and USA are each others largest trade partners 2013 USA s trade with Canada was over $740 billion California-Canada exports $18.8 billion USA is Canada s leading agricultural market Canada is a larger market for all US goods than Europe s 25 countries combined Largest energy trade relationship Canada is the 6 th largest foreign investor in US The number of companies have operations both sides of the border continues to grow 3

4 Canada the financial institutions 22 domestic banks, 26 foreign bank subsidiaries and 22 foreign bank branches operating in Canada and many credit unions, trust companies etc total 130 FI s 93% of the total $3 trillion assets are held by 6 major banks RBC (Royal Bank of Canada), TD Canada Trust, CIBC (Canadian Imperial Bank of Commerce), Scotiabank (Bank of Nova Scotia), BMO (Bank of Montreal), National Bank of Canada Over 6,200 full service branches - the 6 majors each have a network across the country 4

5 Canada rules and regulations Extensive national federal legislation and regulation, minimal provincial (state) involvement Similar federal oversight bodies: Bank of Canada, Department of Finance, Office of the Superintendent of Financial Institutions (OSFI). Financial Intelligence Unit (FIU) and Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) Canadian Deposit Insurance Corporation (CDIC), Canadian Payments Association (CPA) covers both cheques and ACH 5

6 Canada - clearing and settlement Bank of Canada has no clearing function 11 direct clearers they clear for all other FI s through 6 clearing/settlement centers across the country No national image exchange until 2014 but considerable proprietary image exchange 2 processing companies owned by the 11 direct clearers Electronic payments cleared through same clearing centers and processing companies 6

7 Canada card processing Four major card processors, each processor handles merchants who deal with any FI, but faster use of funds comes when matching deposit accounts: Moneris Royal Bank and Bank of Montreal Global Payment Systems of Canada CIBC and National Bank Paymentech Bank of Nova Scotia First Data Merchant Services TD Canada Trust 7

8 Canada debit cards Interac Association is the organization responsible for the development of the national network of two shared electronic financial services: Shared Cash Dispensing (SCD): cash withdrawals from any ABM not belonging to a cardholder's financial institution Interac Direct Payment (IDP): Canada's national debit service Virtually every financial institution throughout Canada is a member debit cards accepted practically everywhere 8

9 So, what does this all mean? For the banking system For accepting debit and credit cards For lock box processing For ACH payments 9

10 for a corporation Each of the 6 majors has national presence, thus its easy and usual for a company to deal with just one bank for all locations Thus one bank, one system for reporting, data, transfers Overnight national clearing of all cheques - no float Accounts in Canadian and US dollars common for both business (and personal banking customers) from most FI s 10

11 for the banks Two processing companies Symcor and Intria owned by the banks Same day value for cheques across all 5 time zones coupled with quicker/electronic returns One centralized clearing system for cheques and electronic items 11

12 for card processing Processors must provide terminals able to handle both credit and debit cards Canadian Debit and credit cards now all chip and PIN to EMV standards Higher volumes of card usage debit cards Considerably reduced consumer cheque usage 12

13 for card processing A number of minor card processors, each of which may handle only certain merchants who may bank with any Canadian FI Depending who the processor banks with, there can be a delay in the merchant receiving value for transactions This issue more important in Canada because of the extensive use of debit cards 13

14 for credit card merchants Visa highest cardholder numbers, MasterCard gaining American Express smaller, Discover rarely accepted To ensure speedy (usually next day) access to funds, ensure your bank accounts and card processor are aligned If not, funds may not be available to you for 48 hours 14

15 for retailers, debit cards National debit card service means: Real time processing Instant authorization Funds taken from cardholder account instantly Same day credit to merchant/retailer Over 90% of Canadians have and use debits cards frequently 15

16 for retailer, bank deposits and stores National presence means national deposits Same day credit Deposit options One account per store, both debit/credits cards and cash deposits in same account match to register polling One account per store for cash only, debit/credit into one account for all locations, split by location code One account for all stores-location codes, another account for all card transaction. 16

17 for retailer, bank deposits and stores Not all banks have branches everywhere however For deposit arrangements when your bank does not have a convenient branch, try and limit to branches of just two other FI s purely for ease of administration Either local location manager makes transfer, or ACH sweep from company via POS data 17

18 for retailer, bank deposits and stores With debit/credit card usage so high: Very few stores accept cheques, no national chain does No cheque conversion ARC/ACH/POP not necessary, debit cards better Less cash on deposit, greater security However, proportion of cash sales depends on customer demographics 18

19 for receivables, lock box Question # 1 - Do we need one? Do we have staff accessing A/R in Canada? If yes, then maybe not, as mail time to our office probably the same as to lock box. If no staff, then yes we do need one in Canada rather than mail time to USA which can be 10 business days or more National presence means national deposits Can our Canada office post A/R into our system, then take cheques to bank? RDI coming 2014 Mail time only for float, same day value for cheques Sales office only, do we want sales people bothering with cheques/deposits/faxing details to A/R 19

20 for receivables, lock box National presence means you can use one bank, the majors have several lock box locations, CAD and USD, again one bank = one system. Primary locations: Vancouver, Calgary, Winnipeg, Toronto, Montreal, Halifax Most banks have US lock box locations for the US receivables processed at nearest Canadian location. e.g.. Boston processed in Montreal Processing options: Daily advice via web platform Images, faxes, back up via snail-mail BAI files, EDI 823 files, flat files 20

21 for corporate disbursements Cheques Losing favor as no float, cheque fraud The best way of getting rid of cheque fraud is to get rid of the cheque Positive Pay offered by most major banks Wires Used for international transfers usually-not within Canada Expensive for bank to bank within Canada Consider selling CAD$ in Canada to your Canadian bank and wiring USD to your US bank likely better rate 21

22 for corporate disbursements ACH - common for vendor/supplier/payroll payments All your vendors have bank accounts and File in Day 1, payments value Day 2 Limited to Canadian version of NACHA CCD i.e. $ plus 15 characters, company sends advice 2 days ahead 22

23 for corporate disbursements Financial EDI 820 payment order/remittance advice Similar to NACHA CTX i.e. $ and 4999x80 character records Same day value, guaranteed funds, no recourse All banks can receive Remittance same day via , fax edi 820 Money and remittance data travel together Payment confirmed by bank quicker acceptance by vendors/suppliers 23

24 for corporate disbursements Procurement/purchasing card programs common Payroll cards some banks do issue, but very few Canadians are unbanked. No rules regarding imposing payroll via ACH Positive pay services clarify with bank as rules different regarding liability 24

25 for fraudulent cheques, returning In Canada, timeframes are set by CPA for reimbursing customers for cheque fraud depending upon the type of fraud Altered item (i.e. changing the name of the payee) Counterfeit item 90 days 24 hours Forged drawer 24 hours Forged endorsement No time limit 25

26 for information reporting Internet based portals common covering: Balance & transactions, transaction images Lock-Box reporting and images Transfers between accounts Wires both outgoing and intra-day incoming reporting Positive pay, payee match ACH input and reporting Tax payments on-line Make sure you have latest version 26

27 for information reporting BAI, SWIFT, proprietary data transmission and EDI formats commonly available Beware of time zones banks process end of day, batch totals. While some banks process on-line, reality is no national/consistent real time processing at any bank, despite what they say! Ensure any treasury management software can deal with CAD currency and convert BAI input etc. 27

28 for deposit balances Interest on daily balances, as no float - this is cash No sweep accounts developed or required Wide range of investment options Various combinations available, depending upon minimum balances 28

29 payment trends for the future Remote Deposit Capture Acknowledge substantial need in Canada given geography Rules agreed 2013, adoption/implementation 2014 Launch linked to national image clearing/exchange Payroll cards limited usually to welfare Mobile payments-several pilot projects 29

30 CPA Payments Task Force Creating national mobile payments standards Digital identification and authentication Framework for rapid elimination of cheques governments and insurance payments Framework for electronic invoice presentment and payments under ISO standards 30

31 useful links Bank of Canada general information Canadian Payments Association cheques & ACH, probably the most useful Canadian Bankers Association general information FINTRAC all you need to know 31

32 questions thoughts issues clarification concerns 32