When one thinks of the government payments, it doesn’t necessarily conjure up thoughts of innovation or change. Government is typically slow to change, which is not always a bad thing. When it comes to public policy and what’s best for Canadian’s a bit of reflection and thought can go a long way.
At the same time, the pace of innovation and change in the private sector has increased substantially over the past few years. There is the emergence of digital wallets, crypto-currencies, artificial intelligence and a whole host of new Fintech service providers that are helping everyday Canadians manage their money and increase their payment utility. As a result, a significant gap now exists between what consumers expect and what governments offer in terms of payments.
Going Digital
More than anything, governments at all levels are looking for ways to reduce the amount of cash or volume of cheques that get processed for everything from a tax payments to parking tickets to pet licenses. Processing these payments is expensive and time consuming. According to an RBC study, the average cost of processing a cheque is $9.75. Accepting cash payments is even worse, as organizations need to add physical locations and staff and then have costs associated with transporting and securing physical currency.
Digitization of payments is a great way to reduce these costs, but getting to a low cost, digitized payment has a number of hurdles unique to the government sector.
Barriers to Innovation
In my opinion, there are three main barriers to payment innovation in the government:
- Financial Inclusion - Governments don’t have the same luxury as the private sector to be selective around what payment methods they will offer. 15% of Canadians are underbanked and 20% are strongly concerned with sharing financial data online. Everyone must pay taxes, and so the government is obligated to be as financially inclusive as possible, allowing individuals to pay in the form that they want.
- Cost - Offering credit cards is a challenge because the interchange fees can have a significant impact on overall tax or revenue. Many government organizations aren’t structured to take on these costs. These costs also extend to the effort required to build or implement a new payment method.
- Remittance Data - One great aspect of cheques is that little memo field in the bottom left. This can be used to carry remittance data that governments use to properly post and allocate that payment. Other electronic options, such as EFT don’t have the ability to provide this data and so are difficult to implement.
Bridging the Innovation Gap
So given these barriers, how do government organization’s tackle these challenges? One approach is for them to partner with external providers who can help accelerate their digital strategy.
We recently launched PaySimply, a government payment website that allows consumers to pay their taxes using alternative methods. For those who want to defer the cash flow impact or collect loyalty points, we offer credit card payments. For those who prefer an inclusive and secure in-person experience, we offer cash or debit payments using a QR code at Canada Post. Finally, for others who are comfortable with Interac e-Transfer, we offer this solution. Regardless of the method chosen by the consumer, the CRA receives a single digital file complete with all remittance data using their existing bank settlement process - and the best part is that it costs them nothing.
Learn more about PaySimply