Behind the Brand®

Neo S04E30_Donna_v2
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Jeff Adamson: [00:00:00] Welcome to Behind the Brand, the podcast that explores how technology, innovation and other forces of change are reshaping age old industries and giving rise to new opportunities. Join me, Jeff Adamson, one of Neo Financial's co founders and an awesome lineup of guests to discuss how the world is evolving to meet the needs of customers.

In the next few episodes we're focusing on the financial industry. In Canada, This is a space that has been dominated for decades by the big five banks who hold 93 percent market share. There's an incredible number of opportunities for innovation in this space. On this episode, I'll be speaking with Donna Kinoshita, Chief Payments Officer at Payments Canada.

Payments Canada underpins the Canadian financial system and economy. By owning and operating Canada's payment clearing and settlement infrastructure. As chief payments officer, Donna is responsible for managing Payments Canada's relationships with its members, stakeholders, and regulators, and Payments Canada's [00:01:00] communication policy and research functions.

As Payments Canada continues to evolve, Donna and her team work closely with industry stakeholders to ensure the Canadian payments ecosystem is inclusive, enables fair competition. And supports a thriving Canadian economy. Prior to Payments Canada, Donna led SimCorp's integrated sales, product, and marketing strategy to support market expansion and revenue growth in the role of senior vice president and chief strategy officer.

Previous to SimCorp. Donna held the role of senior vice president and group head of global products and solutions at MasterCard Canada. In our conversation, we cover a wide variety of topics, including the Retail Payments Activities Act, what that is, how it will affect the financial industry and the progress on real time rails.

So Donna, super excited to have you on the podcast.

Donna Kinoshita: Thanks, Jeff. Thanks for inviting me. I'm really looking forward to this and it's great to meet you.

Jeff Adamson: So I want to go back. I want to learn more about Donna. And as I was doing a little bit of research about you, I saw that you, you went to the U of T and you've got a BA in economics and psychology.

But then the first thing on [00:02:00] your resume on LinkedIn is basically being a vice president at one of the largest banks in Canada. Talk to me about the journey from, you know, getting a, you know, degree in economics and psychology to then going and being a borderline executive At one of the biggest banks in Canada.

Did it start out like that or are we missing a few steps?

Donna Kinoshita: I'd love to say that I graduated from school and, you know, was well connected and knew exactly what I wanted to do and landed a great executive role at one of the major big five institution. Alas, that is not true. There is a couple of stops along the way before then, but let's just say they were all in the financial sector and they gave me excellent grounding, if you will, for what ended up being where I am today.

Ironically enough, who knew?

Jeff Adamson: And so what was the journey like to Payments Canada? Because like you've, you've really have such deep banking experience across multiple different companies, but inside operating at a bank, then at one of the card networks, MasterCard and then at SimCore. And [00:03:00] so I guess, talk to me about the journey getting to being the chief payments officer at Payments Canada.

Donna Kinoshita: I wish I could say it was all, all foreseen, but, uh, I'm, I'm not going to propose that. What I will say though, is every move was very purposeful and although it seems like it was all in banking or in payments, I would say more how I thought about it was from a functional perspective. So I always knew I wanted to lead, uh, whether it be a business unit or a organization or a small fintech.

Which was great fun, but you know, too, so if you think about that, then you think about what kind of functional skills do I need to have? What kind of capabilities? What do I have to learn along the way? And so now you asked me how I started out my career. It was in branch administration. It was like the roots of banking, branch banking, nothing.

Tests you for that kind of experience. You get the full retail experience, you learn a banking at its core. And then I thought, you know, I, I [00:04:00] didn't think I wanted to stay in branch administration for my whole career and thought, you know, I'll go into financial operations. And so that's, uh, when I moved to American express, it got some great groundings in terms of, I think one of the things you folks are contemplating strategically is, you know, do we get a banking license or don't we?

And I'm happy to say, I mean, it's been some time ago again, this is going to date me, but back when it was American Express Canada, Inc, we went through a strategic review and decided to get a banking license and having that banking background. And at that time, 1 of the few who had it at American Express.

Kind of was part of the very small SWAT team that led it to Amex Bank of Canada, set up that first branch, the very tiny branch in Markham, but then really leverage that banking license. And again, kind of set me up well from a FinOps perspective, but then if you kind of think about that need to keep broadening out that role, that's where you get that CIBC role of product management.[00:05:00]

Sales relationship management, uh, and then moving into the networks and kind of trying to broaden out that relationship management role into an ecosystem relationship role going from the IBC to a small boutique consulting firm. It was in the day of the dot com boom, really exciting, kind of, you know, almost heady environment, if you will.

And I really wanted to try my skills in a more nimble, agile, all of those FinTech type of, you know, things. And it, you know, it again teaches you things you will never. Ever experience in a large organization or in a global organization, not just the, and you're probably living this right now true as well, right?

Is that not only are you managing a business, developing the strategy, executing on that strategy and at the same time, trying to raise capital, like the amount [00:06:00] of energy, right? That one needs to do that. I have. Full respect, but I loved it. I loved the nimble environment. I love that really results oriented, eat what you kill kind of mentality.

And so Margaret Atwood asked me to join her technology company. So being the creative writer, she is, she also developed some creative technology, which was remote. Book signing technology at the time.

Jeff Adamson: Margaret Atwood had a tech company?

Donna Kinoshita: Yeah.

Jeff Adamson: That is an interesting fact. I did not know that. What was that like?

Donna Kinoshita: It was, um, it was one of the most fabulous experiences, uh, in my career. Uh, a little bit about me. I, I really proud of myself being on, you know, the very logical, it's the whole banking thing, logical, right side of the brain, whichever is it. I wanted to expand the creative side.

Jeff Adamson: Huh.

Donna Kinoshita: So imagine working for this.

Amazing creative woman, the things that she would think about and not just writing, but in terms are environment, the ecosystem, the [00:07:00] world and what we're doing to it and the impact we have on it. And really the kind of future thinking and at the same time develop some technology that was remote signing, but it wasn't a digital signature.

It was a wet signature. That you could drop to paper remotely. So her original thinking obviously was doing remote book signings. She asked me to join to help commercialize it and broaden the use cases, which sounds a lot familiar in terms of now I think about what I'm doing today as well. We took it to market.

It is now in the Ontario cabinet as remote signing of bills. Uh, and orders in council.

Jeff Adamson: Wow. It's still being used today. I

Donna Kinoshita: believe it's still used today. It was a number of years ago, but I believe it's still in use. Anytime there's a wet signature required at the time, mortgage documents couldn't be signed digitally.

So in the States, particularly as citizens bank, we rolled it out for remote mortgage signings. It was fabulous, but working for Margaret, you get to meet some fabulous people, as you can imagine. [00:08:00] And a funny story on the side, we were raising some, we were raising capital and, uh, Jack Dorsey pings Margaret and says, Hey, I'm going to be in Toronto.

Why don't I come and visit? And we're like, he must have heard of the long pen. He must be wanting to invest in us. It's that, you know, what signature to go with Twitter. And at the time he only had Twitter.

Jeff Adamson: Okay. Presquare. Okay.

Donna Kinoshita: Presquare. So he just has Twitter and we're getting ready and we've got all of our presentations ready to talk to him about the long pen, which was this, uh, and it was biometrically correct.

So it would be, it's an authentic legally binding, what signature we could do remotely. So we were so excited Jack was coming to visit. And while He's waiting for Margaret in the boardroom. I'm just chatting with him and he pulls out of his pocket. He says, I want to show you something Donna. I've been toying with this in my literally his garage, you know, the proverbial garage.

My buddy, he's an artisan. He says, [00:09:00] I think you came from the payments world. Maybe you can relate to this scene. My buddy's an artist and blah blah blah and he's really confused by all these merchant payments and merchant chargers and fees and he doesn't understand them and I'm really trying to simplify it for him and tell me what you think of this.

He pulls out the first prototype. Of the square dongle.

Jeff Adamson: No way.

Donna Kinoshita: So you can imagine my background and I'm still again. I really don't want to date myself, but you know, we call them knuckle busters. Oh, yeah,

Jeff Adamson: yeah, of course.

Donna Kinoshita: Or, you know, okay, now we finally got cards, we're swiping them. The chip had just kind of started and he pulls out of his pocket this dongle and he sticks in the phone jack.

The earphone jack of his phone. I'm watching him do this and he says, give me your credit card. Okay. And he swipes it.

Jeff Adamson: He's like, I just took 1,

Donna Kinoshita: 000 at the time. I probably [00:10:00] didn't have 1, 000, but for me, it was a revolutionary moment. And I think it was partially one, obviously it was revolutionary, the first square, but I think it was just by chance, because of my background in payments, I was just flabbergasted at how he was going to, I knew, I knew at that moment, he was going to revolutionize.

Merchant acquiring and merchant acceptance payments. And see, you know, to segue a little bit in terms of where I am today, I feel like we're on that cusp again today with technology, the technology that's available,

Jeff Adamson: AI

Donna Kinoshita: on our doorstep, opening up access to PSPs, to fintechs, I feel like we're going to get another wave of innovation revolution and it's pretty exciting.

Jeff Adamson: It does feel like we're, we're at, we're having a bit of a moment right now. and banking and payments. And I feel like banking, you don't want banking to be exciting, but I do feel, but yeah, there's a, but it does feel like with open banking, with payments [00:11:00] modernization that there is, it's, it's coming up more and more.

And even you can see that it's starting to become more of a mainstream topic, which I think is very relevant, especially in the context of looking at Canada's falling productivity, which has been kind of more and more in the news. Carolyn Rogers just announced that. We need to break the emergency glass on our productivity issues and payments really is that infrastructure that enables commerce and maybe this is a good segue into Payments Canada but maybe for people who aren't as familiar with Payments Canada, what role does Payments Canada play in the payment space in Canada?

Donna Kinoshita: Yeah, I think the word backbone I think resonates very loudly for me in terms of I would describe us as the backbone Of Canadian payments. We support all of our member base, which are largely financial institutions, banks, soon to be PSPs. We are a not for profit organization. We are member funded, but [00:12:00] we take our direction, not from one, but two regulators.

Lucky for us, uh, the Bank of Canada, as well as the Minister of Finance. But more importantly, I would say for those in the know, uh, payment geeks, we clear and settle and settle. All of the payments in Canada on behalf of our members.

Jeff Adamson: Which payments fall under your jurisdiction? Because like people will think of payments, like a lot of the average consumer will think of payments as a credit card, but that's not what you're talking about.

You're talking about the movement of money in different ways. So, so what are all the different ways that Fall under payments. Canada.

Donna Kinoshita: Yeah. So the two main infrastructure systems that we own and operate. One is, uh, links and what links for, uh, layman terms would be wire payments.

Jeff Adamson: Okay.

Donna Kinoshita: Uh, and then the other main infrastructure system is the automated clearing, uh, system.

And that's kind of, again, for the average consumer would be like, um, uh, AFTs, EFTs, direct deposit, those kinds of settlements.

Jeff Adamson: It was really the bulk movement of money in Canada. That's really what you're, [00:13:00] you're in charge of.

Donna Kinoshita: That's correct. And we're very proud to say we will be, we are in development of, uh, the third main, uh, infrastructure system, which is the, um, real time payments rail.

Jeff Adamson: Okay. Well, that's great. I think we're going to talk about that. That to me is, is really what modernization is about. And so when you think about the future of payments in Canada, what role does innovation play in that?

Donna Kinoshita: Yeah, uh, huge. Obviously you think about any kind of innovation or commerce or trade, it's always going to end in a payment.

Now the end user might not think about it. They're not, you know, the wonderful thing of nobody wakes up every day thinking about how they're going to make a payment, but at the end of the day, everybody ends up making payments every day, and they need to clear and settle and they need to do that safely and soundly.

So, in terms of innovation, I had the privilege of listening to some of your other podcasts, so I know there's many use cases out there in terms of. Innovation once a real time rail is available and [00:14:00] available broadly and open access to many to innovate on what I look forward to, though, is the use cases.

We haven't even thought of and so what is that? Art of the possible? I often say to my kids who are a little lower than yours. If you had asked me not that long ago, do you want? A camera in your phone. I'd be like, why I've got a camera and I've got a phone and they work quite well. Thank you very much. I didn't know I had an instant need.

Jeff Adamson: I

Donna Kinoshita: didn't know how convenient it was until it happened. And now all of a sudden it's like the, how could you ever separate the two?

Jeff Adamson: Yeah, it's the, if you ask people what they wanted. Back in the early 1900s, they'd say faster horses, not, not cars. Exactly.

Donna Kinoshita: And you know what, the use cases that come out of that, of the, uh, just the other day, I was thinking, oh, you know, you, you're doing your, your expenses or whatever.

And I'm going back and forth with my, uh, wonderful assistant who I can't live without. But she's like, we'll just take a picture of that and send it to me and we'll figure [00:15:00] it out. Okay, perfect. Couldn't do that. Not that long ago and you wouldn't have ever said if somebody asked you what what would make you more efficient I don't know that that's the first thing that would enter my head But it sure does help now But

Jeff Adamson: at the same time if you if you kind of look at the way the payment system works today with EFTs If you said to your assistant send me a picture or she said to send me a picture and I'll take care of it But it took three to five days for that picture to arrive Wouldn't have as much utility would it?

Donna Kinoshita: That's right. So we all know the real time role will be instantaneous Payment so, you know, immediately you go off. I can make my bill payment immediately. How convenient would that be? I wouldn't get late charges. You think about the gig economy now and, uh, you know, an uber worker. Oh, how convenient if I could get paid for those 3 hours.

I just worked like at the end of the shift. How convenient that be and that would be final some of the things and as we talk to our members and stakeholders in the ecosystem, the art of the possible starts to come out. So recently, I had a conversation with Dan kelly [00:16:00] if I be and, you know, one of their biggest business problems for small businesses is chargeback.

Particularly for online, uh, but chargebacks are a real thing for small businesses. Well, top of mind, you might not think about it, but a irrevocable payment doesn't necessarily contemplate the chargeback. So if you gave merchants and consumers the choice of You can pay using still all the same payment options, but should you choose, you can make this final payment so that the merchant knows it's good and it's irrevocable.

Maybe there's some extra reward points or something in it for the consumer if they do it that way. How much does that save that small business? And how much more effective and cost efficient is that merchant? Well,

Jeff Adamson: you see this actually in the U. S. actually with Target and the red card. I don't know if you're familiar with, it's essentially a, I believe it's a bank to bank payment card [00:17:00] that bypasses a lot of the, the card networks.

So they give a, an added incentive to Target customers who use it so that people don't use a credit card. Basically what they're doing is they're taking the savings that they would normally be paying to a card network And then passing it to the customer in the form of rewards. And now I think they have close to like 20 or 30 percent of their payments volume going through it.

Even when you think about like with real time rails and instant payments, I don't know if Canadians have an understanding of just how much the costs trickle down into the economy of the delay of money moving. And for example, like even when you think of the float that a lot of Businesses or banks that will carry.

So if you do an EFT and if you want that money to kind of appear instantly on the other side, the banks will often just move money right pocket to left pocket to kind of show the customer the money, but then wait for the money to actually arrive. But then there's a carrying cost to having all that, that, that float money.

We're talking billions and billions and billions of dollars [00:18:00] and just additional complexity that could go away. And. And I think to your point around real time payments of your wages, I know there's a great company here in Calgary called Zezune, who recently just raised a small extension round, and they give people access to their wages in real time, like kind of as they're earning it, but there's a cost to doing that because They're likely or someone is likely floating that payment that's going out before they get paid versus just if everything could kind of go instantly to the end customer.

Like in countries that have this, I know, I think that's the pick system in Brazil. Have you seen a lot of these use cases getting picked up in a lot of these other ecosystems?

Donna Kinoshita: So I will say there's many use cases and other ecosystem in other jurisdictions and we've done obviously the global scan of, uh, I'm picked for sure as a great success story.

Don't take this the wrong way. And I'm going to be a little controversial and probably my team that will listen to this after will cringe. But we always try and take lessons learned [00:19:00] from the other jurisdictions and what works and what doesn't work. What I'm also very cognizant of, though, is Canada is a very unique market.

And so I try to understand, uh, why PICS got such great adoption and what works and what doesn't work and what might be similar here and what might not be. When we look at, uh, in India, Singapore, Brazil, uh, any of the other jurisdictions, Australia, the UK, Australia and UK are probably more similar to us, but, you know, Canada specifically very high banked.

We have a very low unbanked rate, very high mobile penetration, but very high mobile carrying costs. Very high concentration of banks with an existing P2P transfer service already in market. Some of these things don't exist in the other markets, right? So in some cases, it's easier to leapfrog and, and gain [00:20:00] a lot of traction on low hanging fruit or some of the use cases that are out there today that make it a little bit more difficult here because there are, you know, as Canadians, we've figured out ways.

How to kind of do the same thing, maybe not just as fast or just as efficiently, but to your point about load and, uh, you know, cost effectiveness, I don't know if you saw, uh, there was a study, um, a paper, uh, CD how put out, we actually commissioned, um, we helped in, in some of it, uh, certainly there were other folks who contributed, but, you know, in their, in their estimations, to your point, They guessed about, on average, three billion dollars of GDP could be realized in the first five years of a real time payment rail in Canada, given all of those factors that I've talked about.

On a very, uh, optimistic perspective, they thought even upwards of over seven billion dollars of two key driving [00:21:00] forces, one was float and the other was if you look to take out less efficient, means of payment mechanisms being cash and check.

Jeff Adamson: I think that's a gross underestimation. I think there'll be billion dollar companies created as a result of this.

On the topic of RTR, I know that there's a number of people in the industry that are frustrated by the timeline that it's taking to come to market. And to me, it's always around like the transparency around that. And I think that oftentimes it's actually good for things to take longer because if you rush things to market and it's a disaster, then You'll have wished that you took more time.

Help me understand a little bit about, you know, it was supposed to be out in 2022 or now into 2024. Can you help some of our listeners understand why, what are some of the good reasons why it's being delayed, uh, rather than kind of sticking to a strict launch timeline?

Donna Kinoshita: So, it's a great question and I wish I could give you full disclosure and be fully transparent.

I will say that is our, [00:22:00] our definite. Desire full disclosure, I can't share everything due to confidentiality, but what I will, I am happy to share is it is our full intent to bring a safe, sound, sustainable and resilient. RTR to Canada. I will also say we're feeling very positive and optimistic in terms of the very, very near future and getting back, uh, to full speed ahead.

And, uh, you're right. It's so important to get the infrastructure. Like, if you think about it, these are our fundamental rails. That are being built for the ecosystem to innovate on for the next 10 plus years, you want to make sure you're getting it right. You want to make sure you're building it in a way that is sustainable and [00:23:00] resilient and while you'll, you won't be able to think of everything.

You try to anticipate what might be the need in 1, 3, 5, 7 years from now, not just from a, you know, in terms of capacity and resiliency perspective, but what are the new technologies in the future that we need to be ready for that, that we have, we don't inadvertently close any doors.

Jeff Adamson: And so it's your assessment then Donna, that it's being delayed for safety and resilience, not because of governance and bureaucracy.

Donna Kinoshita: No, it's absolutely for the right reasons. You know, sometimes it doesn't feel that way. Okay. I'll give that to you, but I think as the journey unfolds, the ecosystem is going to appreciate the time that was taken to do real due diligence, a real, real deep dives on the path forward. I also think the time we talk was well spent in terms of gartering ecosystem [00:24:00] alignment.

I will say, you know, our mantra now in the last couple of months has been team Canada. I've never, you know, I've taught, I bored you a little at the beginning of this, of my journey of how to have, of getting here. I've never seen overall alignment across the ecosystem, Uh, industry stakeholders and regulators in terms of, yeah, I think we've got the right path now.

Let's all hammer down and full steam ahead.

Jeff Adamson: So it seems like it's coming up more and more real time rails and you even saw an announcement in the fall economic statement from the feds. Do you feel confident that this remains a significant priority for the government?

Donna Kinoshita: Absolutely. I think innovation and competition are always top of mind for them.

I do believe that there is significant pressure being the last G7 country not to have a real time rail. I do think we're seeing visible support with the announcement at FES of the CP Act amendment to open up access and membership, coupled [00:25:00] with the RPAA finalization of the rules.

Jeff Adamson: Mm hmm.

Donna Kinoshita: I mean, that's significant movements.

Jeff Adamson: How do you think the upcoming election may affect how the government's prioritize it?

Donna Kinoshita: You know, I'd like to believe we're far along enough on the journey. It's not an election item platform, right? It's like kind of an execution. It's good for Canada. No matter. Which side of the fence you sit on. I don't want to, you know, you don't want to count your chickens before they hatch, but in some regard, the train has left the station.

Jeff Adamson: Well, that's good to hear. I mean, I think there's just so many people that are excited for this to come and just as someone, you know, I've been on team Canada for a long time and I want Canada to win. And I think that you need to have the right tools to compete. I think if we really care about increasing productivity, like right now Canadians are earning like roughly 70 cents to the dollar to our American counterparts, like we've got to make some, some changes and, and obviously not through, not through caution to the wind, but at [00:26:00] some, at some point I think we need to start looking at the risk reward ratio and saying, Hey, maybe we're, maybe we're, We need to be okay with a little bit of discomfort around risk, and maybe you're not going to get it entirely perfect, but maybe take a bit more of an iterative approach.

You mentioned something earlier, Donna, on the RPAA, so that's the Retail Payments Activity Act. There are so many acronyms in this industry that I can barely keep up with them, so help our listeners understand what that is.

Donna Kinoshita: Yeah, I think the easiest way to think about the uh, RPAA, the Retail Payments Activities Act.

Okay. I, I think about them as the rules of engagement.

Jeff Adamson: Okay.

Donna Kinoshita: If you want to play in the sandbox, what's the rules? Ah, here are the rules that you need to follow. And those are kind of, in my mind, the guardrails. We, I just took my team bowling the other day. I'm like, where are the bumper rails? I need some guardrails up so my ball doesn't fall in the gutter all the time.

That RPA is those guardrails,

Jeff Adamson: right?

Donna Kinoshita: You gotta, you gotta play in the swim lane [00:27:00] so that everybody knows. It's safe and secure that there isn't going to be one player that drags the whole ecosystem down or puts the ecosystem at risk. And so those RPA are kind of the regulations for payment service providers, not to use another acronym.

If you want to join the system, these are kind of the rules you need to follow.

Jeff Adamson: What do you think the impact of the RPA is going to be for the existing ecosystem? Like, for example, to what extent do you think this will impact fintechs, for example? You know, Neo is a fintech, we've got Wellsimple, Coho, uh, Mogo, a ton of emerging technology companies.

That are payment service providers that want to play a larger role in Canadians lives and increase the level of competition in Canada. How do you think the RPA will, will impact them?

Donna Kinoshita: Listen, I'd be lying if I didn't say, I think it obviously has a level of reporting and regulatory oversight that [00:28:00] maybe some FinTechs aren't used to.

I'd like to believe, you know, the FinTechs that you've rhymed off, you're all mature enough. And stabilized enough that you know how to play in the regulatory environment. I would say for maybe some smaller Fintechs or startups, it will feel, I'm going to guess, cumbersome, perhaps put some undue pressure in terms of resources.

And some folks just don't know how to, uh, to, to play in the regulatory. Environment having said that, you know, when we talk about innovation, it occurs to me, folks will come up with innovative solutions for not just technology, but for maybe the smaller fintechs who don't have the hands, the bodies to be able to do all of the regulatory oversight and reporting.

And provide that service, maybe it's RPA as a service, you know, for some of smaller FinTechs that don't want to invest in, uh, in direct.

Jeff Adamson: And so for [00:29:00] the, for the FinTechs that are going to be now regulated, what are some of the benefits that they're getting out of this additional oversight?

Donna Kinoshita: I think the benefit is then they get access to direct access to, uh, to the rails.

They can go in directly and it's equal playing field. So part of our mandate is to live by the public policy objectives, which is a fair and open and access. All of our payment systems and particularly when you think about the real time rail the fair and open access means it's a same cost to everybody on a per transaction so.

Fair and open access in terms of cost and usage at the same time maybe the downside for some is fair and open access and rules and oversight and regulations but it would be the same for all.

Jeff Adamson: So there's the. The Retail Payments Activities Act. And then we've also got the [00:30:00] amendment to the Canada Payments Act that's coming.

Help me understand the differences between the two.

Donna Kinoshita: Yeah. So, uh, we call it actually the three legged stool. So you've got two of them. The, uh, uh, RPAA is the rules. The Canadian Payments Act is the who can be members and participants, uh, with Payments Canada. And have direct access to the infrastructure.

And so one is the rules, the other is the membership. And then the third leg of the stool is the infrastructure. And so we like to refer the, to the RTR, the real time payment rail at that third leg.

Jeff Adamson: And how close in these kind of legs of the stool will they follow? If you're now getting governed and regulated and you have that overhead, how quickly will the actual Access to the rails follow like, is that something that's already kind of the trains coming down the track that access is kind of a fast follow or is it a first let's regulate.

And we'll figure out the [00:31:00] access when we get around to it.

Donna Kinoshita: Ah, the ambition is the stars align and all three happen concurrently. That's the ambition. Okay. I will say RPAA and, uh, uh, the CP Act amendment is probably as you described it. One might get a, a month or two, uh, differential. Um, only cause I, I haven't got a complete crystal ball in terms of how It's going to move through the setting of that, but we are hopeful as well as the Department of Finance that the two would actually collide quite closely.

Jeff Adamson: And I think that the average listener, like the average Canadian, I don't think has any concept of the level of risk that comes with access to payment infrastructure and like the level of like just how many bad guys are out there that. Are looking for ways to take advantage of loopholes, even just for, for, uh, with all the new technologies coming out with deep fakes.

And AI, like it is, it's startling. People are [00:32:00] now using deep fakes to change their facial identity for when they're doing, uh, you know, applications for ID verification now. And so like, even for example, you've got someone using a VPN, they're sitting in Russia, but their VPN says that they're in Kitchener and they will do a thousand applications for different types of financial products with a thousand different faces and with a, with a hundred different companies.

Just seeing, you know, with a bunch of stolen IDs to figure out, like, how can they just get into the system so I can appreciate the need to make sure that there's protections because once you kind of open it up, then sometimes you won't find out if you've let the wrong people have access. Until it's, it's too late.

And when you're dealing with people's livelihoods, and this is something we talk a lot about Neo or at Neo is, is like, these are people's life savings. These are people who are trusting you with their life's work. Like the, the rewards of their life's work financially are, are sitting, you know, in, in the digital walls [00:33:00] of life.

Of our company and that's a huge responsibility and in your role at Payments Canada making sure that the system, the infrastructure, the oversight is done in a way that's not only fair but is also safe for Canadians because there may be companies that might get started up and. Throw caution to the wind and not care about a lot of those things and then all of a sudden you've got potentially hundreds of thousands of Canadians kind of left holding the bag.

Donna Kinoshita: Yeah, I couldn't agree with you more. Uh, and you know what pops into my absolutely and so the fraud is on the rise. I'm sure you see it in your own business already. So many things that you mentioned, you know. Spark something for me. Uh, this area is where we do look to learn to try and get ahead of it, um, in from other jurisdictions.

And so more closely, we look at what's happening in Australia, in the UK. It wasn't that long ago, like a few years ago, you know, you'd focus on breaches, account takeover, uh, some of the things you've mentioned, [00:34:00] you'd focus on stolen identities. Things like that. And now what we're finding is, so that would be classified as unauthorized fraud and we've got rules around that many of you, I'm sure you do many of the institutions have their fraud monitoring systems scoring set up to try and identify unauthorized fraud.

There's confirmation of pay now in the UK and Australia that at least says, you know, Here's a Jeff's account number that I think I'm sending it to. And can you also check that it is Jeff's name, had account number. Okay, good. That's another step, but now it's so prevalent and so scary is this authorized.

So it's, you know, acronym APP authorized push payment. You couple that with real time payments. Now it's authorized. Real time fraud payments being made, you know, where I know I'm sending the money to Jeff and I know this is Jeff's account [00:35:00] number and yep, that's who I want to send it to because Jeff told me he's going to send me a beautiful shiny new Porsche tomorrow if I just send him this 10, 000 right now and like any kind of scam.

So it's, you know, how do you tackle that? It's a completely different way. Uh, to think about tackling that. The other thing that comes to mind that we've learned from FedNow in the US, again, is that real diligence, a lot of the fraud is happening in wallets, and so how do you incent the wallets to care as much?

About KYC as everyone else in the ecosystem so that there's no weak links along the way, a lot, a lot of things to think about to make sure everybody stays, the whole system stays safe and secure.

Jeff Adamson: You mentioned earlier about kind of level playing field when you talk about the. the Canada Payments Act, uh, and the amendment for payment service providers to [00:36:00] now be regulated.

Is it the intention for it to be the same for everyone or will there be multiple tiers where, you know, potentially FIs, you know, large banks will be treated differently than Newer entrances.

Donna Kinoshita: I can't comment from an RPAA perspective. I don't know the answer to that from the CPAC from access. It'll, it would be if you're, um, approved on the RPAA, you would gain access to the systems like everybody else.

Jeff Adamson: Got it. It's going to be exciting. It's a, I think there's a lot of people who are looking forward to whether that's open banking in your world, it's payments, um, just the competition bureau starting to get funded and, you know, You know, hopefully get the mandate to actually have a bit more teeth and even just the recent news was Coho announced that they're working their way towards becoming a schedule one bank.

If you were talking to FinTechs today in Canada, would you be recommending to them that they work towards a banking license or are there other opportunities in the payment space that you think can provide just as much value?

Donna Kinoshita: [00:37:00] It's a great question. I think it's unique to each fintech, and I think it is dependent on that fintech's, uh, differentiating value prop.

How is that fintech going to distinguish themselves, uh, separate themselves from the pack? I would say the obvious advantage to get a, getting a banking license is you can hold deposits and, and, uh, make the, the NIM spread, right, between, uh, deposit taking and lending. If that is that fintechs part of their core strategy, business strategy going forward, because it's not an easy lift,

Jeff Adamson: getting

Donna Kinoshita: a banking license, and it's not an easy one time lift, and it's not an easy ongoing commitment, and so it better be part of your core strategy, intrinsic to how you differentiate yourself.

I would say a lot of fintechs, Differentiate themselves in other ways, right? Whether it's by choice, by being able to match very unique one to one needs for [00:38:00] their customers, uh, whether it be a great consumer, customer experience, the front end, a great, um, uh, user interface, you know, you don't always need to have the banking license to compete effectively.

It depends on what your core strategy is.

Jeff Adamson: I think some of the things you're doing around the payment side and opening up access, I think will actually make it a lot easier for non banks to compete. Because currently right now, all the fintechs have to kind of take these indirect routes to get access to the movement of money.

And then you're just adding layers to that process. So I think that's, that's one way where you're just allowing that direct relationship with payments Canada. So, so that less complexity for the, for the fintechs. And so even if there is some, some regulatory overhead, if they're able to get direct access, hopefully the costs can come down and I don't think a lot of Canadians understand that every time they move money, whoever's moving that money for you incurs a cost.

And if it's [00:39:00] through Interac, for example, those costs are extremely high. Um, and for smaller regional banks and credit unions, it makes it a lot harder for them to be profitable, um, when they're carrying smaller balances on the topic of, of banking licenses. How do you, what do you think about, cause you have Ausfie who's kind of in charge of regulating the banks.

And taking people through the process. Do you think Ausfee has the mandate, like, because I've often heard there's kind of competing interest between kind of the Minister of Finance and Ausfee, where the Minister of Finance wants to show that they're encouraging competition and, you know, perhaps lowering bank fees by bringing new competitors into the market.

Um, because that's, that's obviously beneficial for getting votes from Canadians. With an OSFI, it seems like it'd be more work for them to have to regulate more banks. Do you feel like there's the real mandate with an OSFI for them to enable them to be more banks or to make that process easier for new entrances to the, to the market?

Donna Kinoshita: That's a great question. I have to admit, I don't know that I am probably the most in the know [00:40:00] person to answer. I will say from a layman's perspective. Uh, or bystander's perspective. I don't know that that's OSPI's mandate to expand banking license. I honestly don't know if it is or it isn't. Unlike part of the minister's platform, as opposed to mandate, would be to increase competition, increase innovation, uh, and one of the mechanisms to do that is to expand membership.

Give direct access to the payment rails and you know you said it yourself direct access to the payment rails gives you a lot that you don't need a banking license you can accomplish that by adhering to the rpa and applying to be a member with access to the payment mechanisms i don't know that everybody and i said everybody doesn't doesn't need to be a bank so that's why i kind of got i.

And we do have relationships with OSPI and they are the oversight body. I, I don't know that I've ever [00:41:00] heard from them. Oh, and how are we going to get all of these fintechs to be banks? I

Jeff Adamson: don't think that's, I definitely don't think that's happening. Last question for you, Donna. And that is if, and I'm just thinking in the context of your whole career, like you've had so many amazing roles across so many hugely impactful companies.

And I think the role you're in now has the potential to have more impact than all of them combined. What advice would you give to someone, even if, even you go back in time, 18 year old Donna, what career advice would you give 18 year old version of yourself?

Donna Kinoshita: One of them, you mentioned earlier, probably not in the context of a career, but in terms of the ecosystem, you got to take risks, you got to take thoughtful risks.

Because I'm just naturally not a, not a natural full risk taker, but thoughtful risks, you have to take to continue to grow to expand sitting in a steady state really isn't, uh, isn't gonna, isn't gonna help anybody. Um, and then again, I would say, take ownership, take [00:42:00] accountability for your own, for your own destiny.

It's funny, I just had lunch today with a colleague. And we talked about manifesting. We laughed because, uh, uh, my daughter's talked about manifesting. I said, you know, we just call it envisioning, but call it what you will, but you really got to have an idea and a vision of where am I trying to get to? I'm a big believer.

Setting three and five year goals and, uh, and driving towards those goals and be purposeful in your career path, be purposeful in your day to day life, be confident and certain of your value system and you'll get there.

Jeff Adamson: Well, thank you so much, Donna, for this. I appreciate you. I'm very grateful for you coming on.

Very grateful for all the work that you've done, uh, in banking and payments in Canada. Really looking forward to, uh, what's coming and, uh, maybe just for our listeners, where can they follow you? Where can they hear or read a little bit more about you?

Donna Kinoshita: Well, thanks for that. And thanks for the chat today, Jeff.

Really enjoyed it. Um, you can find me on LinkedIn and find any updates at, uh, payments. ca.[00:43:00]

Jeff Adamson: Thank you for tuning into behind the brand. If you enjoyed today's show, please subscribe and leave a review on your preferred podcast platform. If you're interested in learning more about neo financial, visit us at neo financial. com behind the brand is production of neo financial and media lab. YYC hosted by me, Jeff Adamson, strategy, research, and production by Philippe Burns.

Dario Boettcher and Kyle Marshall.