Total Finance Magazine Winter 2021 by Lloydmedia Inc

TotalFinance WINTER 2021

C A N A D A’ S M A G A Z I N E F O R F I N A N C I A L E X E C U T I V E S

NOW WHAT? ALSO IN THIS ISSUE:

❱ ❱ ❱ ❱

Banking Industry Insights The Impact on Payments Equipment Finance Trends Debt, Capital & Lending PM40050803

TALKING POINTS

Deloitte’s recently-released North America Technology Fast 500 is an annual ranking of the fastest-growing North American companies in the technology, media, telecommunications, life sciences, FinTech, and energy tech sectors. Now in its 27th year, awardees are selected based on percentage fiscal year revenue growth from 2017 to 2020. This year, 66 Canadian companies made it to North America’s Fast 500 with one in the top 10. They are: 1) Snapcommerce. Toronto-based Snapcommerce (formerly Snaptravel) made its Deloitte list debut, crashing in at number five after successfully securing US$85M in growth funding in March 2021, in a bid to expand beyond its original travel offer into other verticals. 2) Maple. Toronto-based telemedicine startup Maple also made its first appearance on Deloitte’s list, jumping straight to second for Canada and 12th overall having seen 15,315 percent revenue growth over three years. 3) Mistplay Inc. In at number three for Canada, up from fourth last year, and 16th North Americawide, Montreal-based software startup Mistplay grew 13,171 percent in a three-year period. 4) AbCellera Biologics. Vancouver-based biotech firm AbCellera ranked fourth in Canada (30th overall) having seen 6,562 percent growth from 2017-2020, driven largely by its discovery of a treatment for COVID-19 patients early in the pandemic. The treatment, which got to market within months, has since been administered to hundreds of thousands of patients and led to a huge IPO for the startup in December 2020 securing a valuation of US$5.3B, a record for the Canadian biotech scene. 5) Bolt Logistics. A leading Canadian technology-enabled logistics and last-mile delivery provider for businesses of all sizes, Bolt has experienced extraordinary 4,990 percent growth since its launch in 2017 on the back of its customer-centric and sustainable approach to fulfillment. 6) ApplyBoard. 7) Dialogue. 8) Bitbuy. 9) Flexiti Financial. 10) mCloud Technologies.

$ $ $ Melania Trump announced the Melania Trump non-fungible token (NFT) platform, which will release NFTs in regular intervals exclusively on MelaniaTrump.com. The first NFT, entitled “Melania’s Vision” was available to purchase for a limited period between December 16 and December 31, 2021. Melania Trump stated, “I am proud to announce my new NFT endeavor, which embodies my passion for the arts, and will support my ongoing commitment to children through my Be Best initiative. Through this new technology-based platform, we will provide children computer science skills, including programming and software development, to thrive after they age out of the foster community.” A limited-edition piece of digital artwork will be 1 SOL (approximately $150) and includes an audio recording from Mrs. Trump with a message of hope.

$ $ $ Toronto-Dominion Bank closed a three-year US$500 million green bond offering through a syndicate of underwriters that includes minority-, women- and veteran-owned business enterprises (MWVBEs). This is the first time that a Canadian bank bond offering has been led by a syndicate group that included MWVBEs as Active Joint Bookrunners, reflecting TD’s strong commitment to diversity and inclusion. This bringing its total ESG-bond issuance to approximately C$3.0 billion. The proceeds from this issuance will be used to finance and/or refinance, in part or in whole, loans, investments and projects that meet the Framework’s criteria, which may include green buildings, clean transportation, renewable energy or other loans, investments or projects that promote the green eligible categories described in the Bank’s Framework.

WINTER 2021

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Table of Contents 3

Talking Points

CFO CV

ECONOMIC RECOVERY 8

Canadian Corporate Debt: Navigating the Risks Amidst the Economic Recovery

PAYMENTS 10 Banking the Unbanked Markets 12 Unattended Payments With the User in Mind

INSIGHTS 14 How the Pandemic is Reshaping the Future of Financial Services

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Winter 2021 Volume 2 Number 1 Publisher / Corporate Sales Steve Lloyd steve@totalfinance.ca

Contributors Peter Alcock, Head of Product Marketing, NM Kathryn Atkins, principal of Writing World and an award-winning freelance business writer Andrew Eppich, Managing Director, Equinix Canada

James Orlando, CFA, Senior Economist, TD Bank Michael Penner, Chief Executive Officer, Lynx Global Finance Brett Saldarelli, Economic Analyst, TD Bank

Creative Direction / Production Jennifer O’Neill jennifer@totalfinance.ca Photographer Gary Tannyan President Steve Lloyd steve@totalfinance.ca

18 INTERVIEW 18 Legacy Banking Needs to Change Its Tune An Interview with Sudipta Kumar Ghosh

27 EQUIPMENT FINANCE 25

Four Key Technologies Address Supply Chain Disruptions Impact on Work Truck Finance

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27 Equipment Finance Roundup

MARKET RESEARCH 30 Workplace Changes from COVID-19 Won’t Be Permanent, Most Believe

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Ontario Interactive Digital Media Tax Credit

Made possible with the support of the Ontario Media Development Corporation

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CFO CV

William Moore

Real Luck Group Ltd. (TSXV: LUCK) and its subsidiary companies doing business as “Luckbox”, an award-winning provider of licensed, real-money eSports and sports betting, is pleased to announce the appointment of William Moore as its new Chief Financial Officer. Moore is tasked with leading Luckbox though its anticipated player growth phase. An ACCA-qualified accountant with buy and sell-side M&A experience, Moore joins Luckbox, leaving his position as CFO at Markor Technology, a B2B gaming company. He has held senior finance positions at eGaming B2C operators since 2002, including with Gamesys (now Bally Technologies [NYSE: BALY]), Gala Coral Group and bwin / Party (now Entain [LSE: ENT]). During seven years on the operating Board of Gamesys, he oversaw the successful launches of Virgin Bet, Rainbow Riches Casino and Monopoly Casino. Luckbox CEO Thomas Rosander said: “We are delighted to welcome William to the Luckbox team at an exciting time for the Company as we target strong growth in 2022. We intend to launch our casino during this quarter, paving the way to ramp up our player acquisition efforts early in the new year. William, with his vast and relevant experience at established iGaming companies, is the perfect fit to strengthen the team as we embark on this next phase of the Company’s story.” Moore said: “I strongly believe that Real Luck Group is at an inflection point where it can significantly scale player acquisition and revenues.” The Company is an awardwinning betting company that offers legal, real-money betting, live streams, and statistics on all major esports on desktop and mobile devices.

Portable Electric Ltd., a Vancouver-based cleantech company and global leader in clean energy power stations, revealed

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Darren Ready

the appointment of Darren Ready as the company’s new Chief Financial Officer and Corporate Secretary, effective December 1, 2021. The news comes just a week after Portable Electric announced the appointment of Scott Hardy as the new CEO. Ready joins Portable Electric from Loop Energy (TSX: LPEN), where he served as Chief Financial Officer, driving the company’s financial strategy and performance since 2016. Ready played a key part in identifying and developing Loop Energy’s joint venture in China. He was also integral to Loop Energy’s Series A and B rounds of funding with Cummins and its $100M IPO on the TSX in February 2021. In his role at Portable Electric, Darren will help shape a growthrelated finance strategy together with the Portable Electric’s engineering and sales teams, to help transition the company from a hardware specific company into a data-driven, integrated hardware and software mobile power platform. “I am very excited to welcome Darren to our talented and dynamic executive leadership team,” said Scott Hardy, CEO and Board Director of Portable Electric. “His financial expertise and his exceptional leadership qualities will be an invaluable asset to our Portable Electric team as we accelerate our growth, and transition the business toward a multidimensional mobile power solution provider, therein supporting the operating needs of our growing list of customers such as PG&E and Netflix.” Portable Electric manufactures a clean energy alternative to traditional gas and diesel generators.

The BC Bud Corporation (CSE: BCBC), a house of high-quality cannabis brands

based out of British Columbia, is pleased to announce the appointment of Ms. Emily Graham as Chief Financial Officer. With more than 20 years of experience, Graham brings a breadth of experience to The BC Bud Co. having worked for numerous large cap public companies covering industries such as construction, manufacturing, and more. Emily is a CPA, CMA, and holds an MBA from the UBC Sauder School of Business. Graham replaces Samantha Shorter who will stay on in a supporting consultancy role. Graham commented “I am excited to join the very knowledgeable team at The BC Bud Corporation. I look forward to helping the company grow into its full potential.” “We are excited to add Emily to the team at the BC Bud Co.” said Brayden Sutton, CEO of The BC Bud Co. “Emily will lead our financial division while providing strategic support in other areas as our business continues to grow. I’d also thank Samantha for her valued contributions while we were a private company and through our go-public transaction.” In addition to the appointment, the company also announced a concurrent grant of 1,140,000 stock options exercisable for a period of 5 years at $0.20 to directors, officers and consultants.

H&R Real Estate Investment Trust (“H&R” or “the REIT”) announced the incoming Board of Trustees and senior management of Primaris REIT. This includes the appointment of Rags Davloor as Chief Financial Officer of Primaris REIT, subject to completion of the arrangement. Davloor brings extensive experience to the role, including previous CFO roles with Canadian REITs and real estate companies, as well as having worked as a strategic advisor, as President & Chief Operating Officer of a large Canadian retail REIT, as a senior investment banker at a Canadian bank, and accounting roles with a specialty in tax accounting. “We are thrilled to round out the senior management team of Primaris REIT with an executive of Rags Davloor’s calibre. He brings deep experience spanning public company reporting and accounting, M&A, operations and strategic planning,” said

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CFO CV Alex Avery, incoming Chief Executive Officer of Primaris REIT. “Over the course of his career, Rags has cultivated broad and deep relationships in Canadian capital markets, and we expect those relationships to enhance investor confidence in Primaris REIT.”

EllisDon is pleased to announce that John Bernhardt, Executive Vice-President and Chief Financial Officer, has been named a Fellow of the Chartered Professional Accountants of Ontario. The Chartered Professional Accountants (CPA) are known for high ethical standards, strategic insights and their capacity to identify solutions to complex issues in today’s business world. “I feel humbled to be recognized as a Fellow of the Chartered Professional Accountants of Ontario and to be in the company of so many other fine colleagues and individuals. My career as a CPA has always been a fulfilling one, and to achieve one of the highest distinctions in the profession is truly an incredible honour,” says John Bernhardt, Executive Vice-President & CFO, EllisDon. Each year, CPA Ontario seeks to honour select members who exemplify these attributes. The Fellows (FCPA) distinction formally recognizes those members whose achievements and contributions, in their careers and in the community, have rendered exceptional service to the profession. Becoming a Fellow is the highest honour that can be bestowed on a CPA. When John first joined EllisDon in the early 1990’s, the company faced major challenges in the wake of the recession. John was instrumental in reshaping the company’s finance function and creating and implementing new controls that turned EllisDon around and ultimately led to 316 percent growth revenue by 2006. John also played a key leadership role in transforming EllisDon from a family-owned business to a 100 percent employee-owned company in what leadership considers the most impactful event in the business’ 70-year history. Marshalling the business through this process every step of the way, John’s foresight, expertise and strategic thinking were essential to the success of the transformation.

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The Empire Life Insurance Company announced the appointments of J. Edward Gibson, FCIA, FSA as Senior Vice-President, Capital Management and Chief Actuary and Rebecca Rycroft, FCIA, FSA as Senior Vice-President and Chief Financial Officer. Rycroft joined the company earlier this year and assumes the CFO role from Gibson, who has been serving as both Chief Financial Officer and Chief Actuary since 2018. “Capital management is an increasingly vital part of our J. Edward Gibson business. This appointment recognizes Edward’s exceptional leadership and knowledge in the actuarial, capital preservation and capital growth portfolios,” said Mark Sylvia, President and Rebecca Rycroft Chief Executive Officer. “We brought Rebecca to Empire Life with a plan for her to become Chief Financial Officer after a short transition period. Since then, she has demonstrated strong leadership and the depth of knowledge and experience needed to address today’s complex financial reporting and planning challenges.” Established in 1923, and a subsidiary of E-L Financial Corporation Limited, Empire Life provides individual and group life and health insurance, investment and retirement products.

ATAC Resources Ltd. (TSXV: ATC) said Jasmine Lau has joined ATAC as Chief Financial Officer. Lau, CPA, BCom., is a member of the Chartered Professional Accountants of British Columbia and has an extensive background in the resource sector. Jasmine has served as CFO and

controller of several public exploration companies with projects throughout the world. In addition to her experience working with junior resource companies, Jasmine worked at Teck Resources Ltd. as a SOX Auditor. Prior to Teck Resources Ltd., Jasmine worked for Deloitte & Touche LLP’s Vancouver Assurance & Advisory group where she focused on audits of public mining and resource companies. Jasmine earned a Bachelor of Commerce from the University of British Columbia. Lau is replacing Mr. Andrew Carne who has been serving as Interim Chief Financial Officer. Carne will continue in his role as ATAC’s VP Corporate and Project Development. ATAC is a Vancouver-based exploration company focused on exploring for gold and copper in Yukon and Nevada. Work on its ~1,700 km2 Rackla Gold Property in Yukon.

Pineapple Financial Inc., Canada’s mortgage destination for the modern home buyer, is pleased to announce that it has appointed Rupen Shah to the position of Chief Financial Officer effective immediately. As CFO, Shah will focus on accelerating and expanding the business, leading the creation of a worldclass finance function within the company to enable its strategic growth plan. “We are excited for Rupen to be joining our team, with Pineapple rapidly growing and gearing up for bigger changes,” said Shubha Dasgupta, Founder and CEO of Pineapple. “Rupen is a seasoned executive; he has demonstrated his leadership and proven success in creating profitable corporate strategies and integrated business planning. As we enter a new era for the business, his wealth of knowledge in the financial sphere will be key to strategically position Pineapple within the market and propel our brand with home buyers.” Rupen joins Pineapple with over 30 years of experience in finance and accounting, working with global public and private companies. Pineapple is a leader in the Canadian mortgage industry, breaking the mold by focusing on both the long-term success of agents and brokerages, as well as the overall experience of homeowners.

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ECONOMIC RECOVERY

Canadian Corporate Debt:

Navigating the Risks Amidst the Economic Recovery By James Orlando and Brett Saldarelli

anadian nonfinancial corporate debt has reached new highs, spurred by low interest rates and the desire for firms to hold higher levels of cash. Debt is highly concentrated in specific industries, including real estate and construction. The high level of indebtedness in these industries makes them vulnerable to a moderation in housing market activity. The oil and gas sector is another highly leveraged sector following years of energy price volatility, but the recent improvement in pricing has bolstered their financial position. Small businesses that operate in the food and accommodation sector, though not as highly leveraged, are vulnerable to the uncertainly surrounding service spending and the withdrawal of government support programs.

now accounts for 81.5 percent of nominal GDP, well above the 77.2 percent established in the final quarter of 2019. In this paper, we look at the change in debt in the Canadian economy and highlight specific sectors which have been impacted the most.

Cash Remains King Many corporations have taken on debt only to maintain elevated cash levels. Indeed, the amount of cash holdings of nonfinancial corporations increased by 37.9 percent since the final quarter of 2019. A similar pattern, although not as pronounced, occurred during the Global Financial Crisis, when cash balances increased by 16 percent (2008Q1 to 2009Q4). When we adjust debt-to-GDP for cash holdings, we can see this metric has fallen below its pre-pandemic level and is now in line with its long-run average (Chart 2). Given the pandemic uncertainty, firms had the incentive to hold cash to meet refinancing needs. With borrowing rates at historical lows, firms across the risk spectrum were able to tap into the corporate debt market. The investment-grade sector provides evidence of this as the share of

Chart 1 compares debt in the Canadian economy for nonfinancial corporations, households, and government. Nonfinancial corporate debt has increased by $196.9 billion over the pandemic and accounts for 81.5 percent of nominal GDP. The corporate debt landscape in Canada has shifted dramatically. Over the last two years, we have seen businesses take on debt for various reasons. Some have done so to weather the economic volatility, where others have levered up to take advantage of new economic opportunities. With interest rates hitting rock bottom, the ability for firms to carry more debt has been a strong incentive. This has caused nonfinancial corporate debt to reach record highs, having increased by $196.9 billion over the pandemic (Chart 1). The total debt load

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ECONOMIC RECOVERY corporate issuance at the bottom of the risk spectrum currently sits at historic highs. Chart 2 adjusts nonfinancial corporate debt to account for cash holdings amongst corporations. Net debt as a share of nominal GDP has fallen below pre-pandemic levels and is in line with its long run average. Chart 3 compares gross and net debt across specific industries. Five industries account for 56.0 percent of gross debt and 69.3 percent of net debt. Real estate, manufacturing, oil and gas, construction, and utilities are some of the most indebted industries.

The Changing Industry Debt Landscape The global pandemic has brought a number of economic themes to the forefront, including record home price gains, oil price volatility, global supply chain disruptions, and the willingness of Canadians to return to in-person service activities. Should these themes persist they could have a profound impact on highly indebted Canadian industries. When breaking down nonfinancial corporate debt at the industry level, five industries (real estate, manufacturing, oil and gas, construction, and utilities) account for a total of 56.0 percent of gross debt and 69.3 percent of net debt (Chart 3). Moreover, these five industries are significant contributors to economic activity, accounting for close to 37 percent of industry level real GDP.

What Does Housing Have in Store for Real Estate and Construction? Chart 4 illustrates how net debt and the interest coverage ratio has changed over the pandemic for specific industries. Oil and gas, and the manufacturing sector have seen declines in debt and improvements

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in the interest coverage ratio while real estate and construction have experienced increases in debt and declines in the interest coverage ratio. Real estate and construction are two industries that have popped up on our radar given their vulnerability to a moderation in housing market activity. The real estate sector is the most highly indebted sector in Canada, accounting for 23.3 percent of gross debt and 31.3 percent of net debt. Over the pandemic, the sector experienced one of the biggest increases in debt, with gross and net debt increasing by 5.3 and 6.0 percent, respectively. Given the high levels of debt, it’s important to gauge the industry’s ability to meet its interest obligations by looking at the interest coverage ratio. Worrisomely, the industry has one of the lowest interest coverage ratios (Chart 4). This is important because real estate has been an engine of economic growth over the past decade, accounting for an average of 11.9 percent of real GDP. Given the run-up in house prices, the real estate sector is obviously vulnerable to any future price volatility. Using history as a guide, from 1989 to early 1990, home prices declined by 12.7 percent peak-to-trough. Subsequently, bankruptcies in the real estate sector spiked by over 200 percent. A similar debt story has emerged in the construction sector. The sector has experienced an increase of 4.4 percent in gross debt and 4.9 percent in net debt since the first quarter of 2020 and currently accounts for 7.3 and 5.3 percent of gross and net debt, respectively. In addition to elevated levels of leverage, operating profits have plunged from their 2020Q3 peak, but are starting to rebound. Even still, the industry boasts a healthy interest coverage ratio (although it is still below pre-pandemic levels, Chart 4). Furthermore, the industry accounts for 10.3 percent of cash holdings, suggesting that it is well positioned to meet its interest obligations in the event of a future economic downturn. Similar to the real estate sector, construction has been a catalyst for economic growth, contributing an average of 7.5 percent to real GDP over the past decade, with residential building construction contributing 2.6 percent and non-residential construction contributing 1.2 percent. Both the real estate and construction

sectors could be vulnerable to a slowdown in housing market activity. The global pandemic brought a surge in Canadian residential home prices and sales as many individuals left larger less affordable cities for ones that offered more affordable living options. Residential home prices have increased by 33.0 percent since February 2020. With such strong price gains and the swelling levels of household indebtedness, the risks to the real estate and construction sectors are clear. Given the recent financial contagion risk emanating from the Chinese firm, Evergrande, amongst others, the highly indebted real estate and construction sectors should be watched.

Manufacturing Yields to Supply Chain Disruptions Chart 5 illustrates the declines in manufacturing over the pandemic. Manufacturing sales have regained their pre-pandemic levels; however, motor vehicle manufacturing remains well below pre-pandemic levels. With global demand for goods peaking during the pandemic, constrained supply chains have struggled to keep up. Inputs into the manufacturing process have been delayed, or in some cases, scrapped, resulting in a slowdown in manufacturing around the world. Canadian manufacturing is no exception with sales regaining their pre-pandemic levels at a tepid pace (Chart 5). The sluggish recovery in sales has increased our interest in the sector as manufacturing is one of the most highly indebted industries, accounting for 10.4 percent of gross debt and 8.9 percent of net debt. Despite elevated debt levels, the sector’s financial statements appear to be improving. Both gross and net debt Continued on page 23

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PAYMENTS BUSINESS

Banking the Unbanked Markets O

By Michael Penner

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ver the last decade the global payments industry has seen tremendous growth, providing increased convenience and opportunity to both businesses and consumers, but advancement does not always happen quickly or uniformly. In Canada, the total payments market grew to 22 billion transactions worth $9.9 trillion in 2019. More recently the COVID-19 pandemic has accelerated the global digital shift across all industries resulting in a global digital transformation, and the payments industry has not been spared. In Canada, 2020 saw a 62 percent reduction in the usage of cash and 42 percent of consumers refusing to shop at businesses that did not offer contactless payments.

While the shift to digital payments in Canada has been rapid and relatively seamless, not all countries had such an advanced payment landscape to facilitate this transformation. Globally, 1.6 billion adults do not have an account with a financial institution or mobile money provider, most of these consumers reside in Southeast Asia. Individuals without a bank account tend to be located outside of major metropolitan centers and have lower income and limited education. This situation has led to a significant challenge in adapting to this shifting landscape for regions with high unbanked and underbanked populations. At a fundamental level, consumers without a bank account are severely limited in what they can

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PAYMENTS do in terms of management of their assets and meeting their day-to-day financial needs. This financial exclusion not only impacts individuals, but the broader overall economy of the region. To serve the underbanked communities, leaders in the banking industry need to develop new solutions that not only provide more digital financial services, but also reduce the barriers of banking and address the needs within the underserved regions. This lack of development of the digital payments industry in many regions of the world provides massive opportunities for growth.

The opportunity to digitize the financial industry The pandemic has made clear the need for more flexible financial services and platforms around the globe. Merchants needed new ways to deliver to their customers’ and at the same time, consumers needed contactless solutions to obtain essential goods and services. The digital payments industry has been able to solve many of these challenges and has experienced unprecedented growth as a result with the market now expected to reach $324 billion by 2026. Meanwhile cash is still the primary method of payment in Southeast Asia where more than 70 percent of adults are either underbanked or unbanked and have limited access to financial services. This lack of development in the Southeast Asian digital payments industry is reflected by both consumers and businesses with more than 70 percent of sellers accepting cash as the only method of payment. Because of the obvious advantage provided by digital solutions and pent up consumer demand, there exists a significant desire on the part of merchants to modernize with 78 percent of merchants expressing interest in other integrated payment services and an expected 79 percent adoption of digital payments by businesses by 2025. The pandemic gave us a glimpse of the huge digitization opportunities that lie in the payment industry and especially in the Southeast Asian market. Regions that had high unbanked populations just two years ago now have a significant number of people that have the ability to open a bank

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account and do what they could not do before with their money. With innovations in FinTech rolling out at a faster rate to both businesses and consumers, the overall economy is expected to grow, and adoption is expected to continue to accelerate. Just being able to open a bank account leads to multiple doors of opportunity that for Canadians, is not given a second thought. How can a small business owner get a loan without a credit score? How could someone apply for a credit card without a bank account? A bank account does not make either of these two-services a given, but it does bring those that are currently unbanked closer to the opportunity and as these platforms become available, demand for additional services that were previously unthinkable will only grow.

Consumer behavior will be the driving force that continues to develop payments and remittance in the region while lending, insurance, and investments will grow annually until they reach their respective inflection points. The infrastructure to facilitate this inflection is still being developed and deployed in the region. This growth will ultimately play a key role in boosting the region’s expected GDP of $4.7 trillion by 2025 for the major economies. The absence of the supporting infrastructure impedes what is possible for merchants and consumers and hinders their ability to obtain and manage credit. Only when the proper infrastructure is in place can the Southeast Asian digital financial service industry reach its full potential. Such a digital transformation is a challenge and will be impossible for banks

The pandemic gave us a glimpse of the huge digitization opportunities that lie in the payment industry and especially in the Southeast Asian market. Southeast Asia: The region with plethora of financial opportunities Only 40 percent transactions in the southeast Asian region are cashless and access to digital financial services has and will increase the use of digital payments which will also create a more competitive market for merchants. While some merchants already accept digital payments and are on the cusp of digitization, digital technology and more readily available data can give new life to their business by offering a greater range of products delivery models. The current Southeast Asian digital financial sector is highly fragmented, more so than any other region. There are a vast number of providers addressing the challenges within the payment landscape of the unbanked, but from different angles. Five key digital financial service verticals in the region include, payments, remittance, lending, insurance, and investments. Of these key verticals, payments and remittance have reached inflection points that the others will surely follow.

to achieve without the technical resources that FinTechs can provide. While new innovations are emerging in the industry, what the Southeast Asian market requires is an infrastructure platform that can provide all the necessary services in one place. Though it is not expected that by 2025 unbanked regions of the world will have the same opportunities as Canadians, access is expected to be vastly greater than it is today with FinTechs providing new opportunities and innovations throughout the payments ecosystem. Michael Penner, Chief Executive Officer, Lynx Global Finance. Penner has over twenty years of international experience as a C-level executive, building digital infrastructure businesses and strategic partnerships across Asia, the Middle East, and Africa. He has significant hands-on expertise in building strategic partnerships and working relationships that have allowed for the successful launch and operation of digital communications, data analytics, and financial and payment technology networks in several countries around the world.

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PAYMENTS

Unattended Payments With the User in Mind

Bridge Toll Kiosk with large touchscreen (Self-Service Technology)

Self-service kiosks in shopping centre (SA Systems)

By Peter Alcock

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ave you ever walked up to a self-service terminal like a parking pay station or self-checkout retail store, and been both puzzled and embarrassed because you don’t know what to do? You’re absolutely not alone! It seems like the more text instructions, or the more icons and pictograms there are, the harder it is to figure out what buttons you’re supposed to press or where you insert or tap your card. The user interface or “UI” is certainly one factor in getting a smooth unattended experience. The first thing is to make the distinction between a self-service (unattended) kiosk or payment terminal inside a shop, airport or car park, and the new breed of totally unattended convenience stores being pioneered by the likes of Amazon with their Amazon Go stores in the U.S. or Pressbyran in Scandinavia. Unattended convenience stores have multiple challenges to overcome, aside from payments, the main ones being inventory control and the prevention of theft. These new stores have sophisticated devices that log when items have been taken or returned, backed up by multiple closed-circuit television (CCTV) cameras, and the operators all use a mobile phone app identifying customers before allowing admission to the store. When customers have finished shopping, the list of items appears on the app and they can simply authorize a payment from their Amazon account or mobile wallet. Once the payment is complete, shoppers simply walk out of the store with their purchases. The system is so sophisticated that it can reliably know when an item has been picked and replaced, picked and hidden on a person, and even picked and hidden in another shopper’s bag. Amazon claims the level of theft is so low as to negate the need for security staff or fraud investigation. Sweden-based Instant Systems developed a completely unattended convenience store concept for Pressbyran which went live in early 2021. Like Amazon Go stores, it uses a

mobile app to authenticate users and tokenize a payment card. The app allows a user into the store through a turnstile and takes payment from the card when they check out before leaving. Turning to more traditional unattended payment systems, most of us are familiar with self-service checkouts in supermarkets or fuel pumps, so what makes for an excellent customer experience? The first thing is engagement and guidance. If a touchscreen is the primary means of user interaction, the “home” screen should be bright and welcoming, with the choices of actions available clearly displayed. Keep the number of screen-presses to a minimum and avoid unnecessary confirmation steps or “Press to continue” pages. Simplicity is the key. Video help showing how to scan an item or where to insert a card can assist new users, but can quickly become annoying once a customer knows what to do. With less complex devices such as parking pay stations or kiosks, there may not be a necessity for a touchscreen at all and a series of buttons may suffice. Nonetheless, thought has to be given to the layout of the panel of the unit especially if there are multiple functions that a user has to interact within the correct order such as a ticket reader, coin slot, bill acceptor, card reader, contactless reader and printer.

How do you set up payments on a self-service device? Any business wishing to accept card payment needs to set up a credit card merchant account with a bank processor, through which the

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PAYMENTS

Case Study Instant Systems Unattended convenience store, Sweden.

SA Systems Airport Kiosks

transactions will pass. Most major processors offer this facility either directly or through a network of ISOs (Independent Sales Organizations). If the business already has a merchant account for eCommerce or face-toface retail operations, it should be straightforward to add a further account for unattended transactions. Processors often insist that unattended, retail POS and eCommerce transactions each have their own MID (Merchant Identifier) since the risks and charges differ between the transaction types. Next, a payment gateway is required, since it’s not possible to connect an unattended device directly to the processor. The payment gateway takes the payment authorisation requests from the unattended terminal and passes those to the bank processor in their specific format. The gateway will have a list of the payment devices — the card reader and PIN pad combination — that they support and have certified with which bank processor. They will also provide software, usually in the form of an SDK (Software Development Kit), that will be integrated into the PC or

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Unattended Card Acceptance Device Ingenico iSelf

PHOTOS COURTESY NMI \ ILLUSTRATION VECTEEZY.COM

Example Unattended Card Acceptance Device - CPI Alio

Example Unattended Card Acceptance Device - Payter P68

withstand hard use, and security is assured. other computer that is running the kiosk, to interface with the payment device.

Payment device choice When self-service kiosks started appearing in retail environments a few years ago, many developers were taking standard retail POS terminals, fashioning brackets and mounting them somewhere on the kiosk. This is suboptimal for several reasons; POS terminals are not designed to be used in an unattended setting where cable connections are exposed and liable to tampering or disconnection, they cannot stand up to abuse and security can be compromised. The best approach is to use a terminal device from a major manufacturer that is specifically designed to be integrated into an unattended kiosk. They can mount securely and neatly within the panel, they can

What about an all-in-one solution? There are self-service specialist companies that can provide a self-service card terminal, including the card payment processing service for a charge on each payment, and this can offer simplicity especially for small operators. The downside is that costs can be high compared with owning the hardware and managing the relationship with a bank processor, and contract length must be assessed in ROI calculations. As customer needs around how and where they pay evolve, businesses must consider the latest innovations in payments technology and how these unattended transactions can be catered to better meet customer needs and preferences. Peter Alcock is Head of Product Marketing at NMI.

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INSIGHTS

How the Pandemic is

Reshaping the Future

of Financial Services

By Andrew Eppich

he COVID-19 pandemic has forced businesses across Canada to digitally transform. According to Equinix’s Global Tech Trends Study, nearly half — 46 percent — of digital leaders in Canada have accelerated their digital transformation plans as a result of COVID-19. That includes the financial services industry, which has been forced to rethink its approach to digital infrastructure in order to enhance customer engagement, improve real-time trading, and protect itself against future disruption. This transformation is particularly necessary if Canada’s financial institutions want to join their international counterparts in embracing three pandemic-driven trends that will ensure their ongoing resilience: Banking as a Service; Open Banking; and the evolution of Open Banking, Open Finance.

How infrastructure transformation enables Banking as a Service In many ways, Canada’s banking industry is ahead of the curve when it comes to digital services. Bank of Montreal launched its first digital platform in 1996, and its Big Five counterparts had all followed suit by the early

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2000s. Today, according to the Canadian Bankers Association, 76 percent of Canadians do most of their banking digitally. Canada is also ahead of the curve when it comes to contactless digital payments: 34 percent of Canadians with a credit or debit card use contactless payments on a regular basis, according to Payments Canada, with the pandemic accelerating the technology’s use. A recent Interac survey found 53 percent of Canadians using digital payments more frequently since March 2020. The country has been slower, however, to adopt trends such as Banking as a Service, which is enabling banks, FinTechs, and digital startups around the world to create new business models by offering financial services through the cloud. Successfully delivering these services requires interconnection – secure, direct, low-latency data exchange between partners – and interconnection requires not just digital transformation, but infrastructure transformation. For example, the below diagram depicts a BaaS model running on hybrid digital architecture, with a mix of on-premises, public/private cloud, and co-location. In this fictional scenario, the

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INSIGHTS

bank is partnering with a FinTech provider to deliver financial services on behalf of a brand such as a retail or hospitality company. While the bank handles any card transactions in-house, it remains free to collaborate with other FinTechs for realtime and cross-border payments. In markets such as Europe, these types of partnerships are steadily growing into BaaS ecosystems incorporating banks, FinTechs, clouds, networks, payment rails, fraud detection, and other service providers. Interconnection is critical to the reliability of these ecosystems, by ensuring low-latency data securely flows between partners and their digital infrastructure across every region in which their services are offered. With the right interconnection strategy, banks and FinTechs can establish a digital core they can use to easily scale and create new BaaS business models for any brand.

Bracing for Open Banking – and Open Finance Under open banking, third parties are authorized to use application programming interfaces (APIs) to access financial

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information, which they can then use to develop associated services and apps. Open banking is not yet available in Canada, but the Canadian government is considering the best way to enable its safe introduction, and it’s important that businesses prepare their infrastructure for when it arrives. European businesses have been able to provide open banking services since 2015, when the European Parliament adopted the revised Payment Services Directive, known as PSD2. While still at the early stages, PSD2 has enabled third parties across Europe to access payment account information and conduct payments on behalf of their customers. It is mature enough to be paving the way for open finance. It is open finance that will be the true game-changer, a complete mobile and digital experience that will help consumers and businesses better manage their finances and financial services. For consumers, it could mean seamlessly transferring funds between products to maximize the interest they receive, or receiving e-mail or text warnings advising them of how a prospective purchase could affect their finances.

For businesses, open finance represents an opportunity to collaborate with new partners on developing and delivering personalized financial services at an unprecedented scale. Any business that collects transactional data could be involved: telcos, hospitality and tourism companies, and retailers, for example, could all become reliable sources of customer data. Without interconnection, however, the transition to open finance will be tricky. The greater the number of connected endpoints, the greater the chances that data could be delayed or lost. Yes, COVID-19 accelerated digital transformation. But it’s only by adopting the infrastructure needed to successfully power that transformation, and using it to securely interconnect with third parties, that financial service providers will be able to take full advantage of the pandemic’s greatest opportunity: Using BaaS, open banking, and open finance to support the development of new and exciting insightdriven, revenue-generating services. Andrew Eppich is Managing Director, Equinix Canada.

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REGULATORY NEWS

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INTERVIEW

Legacy Banking Needs to Change Its Tune An Interview with Sudipta Kumar Ghosh

By Kathryn Atkins

udipta Kumar Ghosh is an experienced technology and product executive in banking and financial services who focuses on implementing solutions aligned with digital and mobile-first growth strategies to deliver exceptional customer experiences. During his twelve years of involvement in this sector, he has leveraged APIs, Microservices, Cloud, Agile, and DevOps to build next-generation banking. Mr. Ghosh has an MBA from the Kellogg School of Management and is currently a director of software engineering at Capital One. In his most recent few years of working in the industry — and leading several complex digital and Cloud transformation initiatives — he has developed serious concerns about the future of traditional banking, the primary one being the legacy banks’ ability to compete with FinTechs. He believes

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INTERVIEW

traditional banks need to undergo substantial digital and Cloud transformations to survive. We caught up with him to learn how banks arrived in this situation and hear his ideas for averting this outcome.

Kathryn Atkins: I understand that you have significant experience in leading technology transformation efforts for banks. Can you tell us a little about the legacy banking system and how that is different from FinTech?

“Banks have had their customers for years, and many of their clients are still doing business with walk-in banks.”

Sudipta Kumar Ghosh: FinTechs are those companies that use technology in innovative and customerfriendly ways. In many cases, they are seen as a threat to the financial services industry because they better understand what customers want in their banking experiences. When I say FinTech companies, I mean those like Venmo, PayPal, Quicken Loans, etc. In comparison, it’s evident that banks are still relying on existing, outdated technology infrastructure and customer experiences, hence losing market share to FinTech.

Atkins: In what ways do legacy banks misunderstand or misinterpret what their customers want and expect? Ghosh: Banks have had their customers for years, and many of their clients are still doing business with walk-in banks. They even put up with drive-through banking for a while because it was still “their local bank.” Then, bank regulations made it so competitors could quickly enter the financial services market. New ways of banking were made available to these same customers, not just in the United States but everywhere. The European Payment Services Directive (PSD2) makes it easy for customers to decide how they want to fulfill their banking needs and lets them put all their banking data in one place. Plus, other regulation technology tools

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(abbreviated as RegTech) are making it easier for new competitors in the financial services industry to enter the market. RegTech uses Big Data, A.I., and blockchain to increase regulatory compliance, reduce financial risk, and eradicate laundering and fraud. Bottom line, customers have better ways to pay for their products and services, borrow money, pay each other, and pay their bills than using a bank. Banks haven’t caught up.

Atkins: But aren’t banks offering more services like mobile access, for instance? Ghosh: Yes, but that’s just one feature of what FinTechs like say, Apple Pay, is offering. It seems that many banks are simply saying “me-to,” thinking that they’re keeping up when they don’t understand the bigger picture. As a case in point for Apple Pay, Apple’s business model is not limited to Apple Pay by itself but exists within an ecosystem that today’s banks haven’t internalized. Apple iPhones, watches, computers, iPads, and more create a comfortable (especially for Apple fans) yet exciting and trusted brand-sphere for its users. Banks have a strong foundation of customers from years of being in that industry and were protected by government regulations. But government regulations are changing, and customers have many different expectations.

Atkins: That’s steep competition. But can’t the banks change? They’re big companies with lots of resources. Ghosh: Yes, they can. In fact, banks will have to if they want to survive. But if they resort to competing on one feature at a time, they will lose the chance to recreate an industry they once dominated.

Atkins: What is their biggest reason for not changing? Ghosh: In addition to not understanding today’s customers’ needs, a huge problem is the existing infrastructure underpinning most banks today.

Atkins: So, what is “infrastructure” as it relates to banks? And what are its problems or weaknesses for legacy banks? Ghosh: Great questions. Traditionally based

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INTERVIEW

financial services or banks have been slow to react to FinTech disruption because they are heavily dependent on infrastructure and legacy platforms. By infrastructure, I mean the actual huge black computers that we think of from the movies, which are called “mainframes.” The data they use to conduct the millions of financial transactions are stored in physical (outdated) data centers that they own. These platforms and infrastructures cannot support the latest digital products, services, and applications that banks need to offer to compete with FinTechs. Other downsides of legacy infrastructure are a slow time to market, increasing maintenance costs over time, and the use of ancient tools and analytical packages. Furthermore, schools no longer teach “old tech” machine languages like Cobol and Fortran, considered dead languages like Latin or Greek. Current languages would be things like Java, Python, and Go. And banks need to recruit newly educated engineers, but they must also train existing employees to help them skill up.

Atkins: What is the alternative, then? Ghosh: The simple answer is that financial services companies, and others that want to compete in the marketplace today, need to embark on a complete digital and Cloud transformation initiative. That means moving their data from these legacy applications in their physical data centers to the “Cloud” and rewriting the customer experience using digital-first technologies. Storage in the Cloud is less expensive for one, but also, the cost of maintaining the mainframes over time is pretty high. A Q4 2019 Cornerstone Advisors survey of 300 community-based financial institutions showed that 45 percent of banks had not yet launched a digital transformation strategy.

Atkins: It seems pretty straightforward. Why are traditional financial institutions reluctant to Digital or Cloud transformation? Ghosh: Any technology transformation will carry huge initial costs. Along with the project investments, the right talent needs to be hired. Once in the Cloud, as I said, the cost to maintain it is much less expensive. However, a bank’s executive team may be reluctant to make this investment if they don’t understand all the benefits of migrating to Digital or Cloud.

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But before that, the riskiness derives from not having a clear migration strategy in place. Further fears come from anticipating cost overruns, not to mention the significant disruption of the day-to-day business. While these are valid concerns, banking executives and their teams should be asking if the company’s platforms and legacy infrastructure can survive the pressure from FinTechs’ customer expectations, innovations, and the banking industry’s own regulatory pressures. If they don’t question themselves, their shareholders surely will.

Atkins: Well, what would be some steps for banks to move to the Cloud?

“Traditionally based financial services or banks have been slow to react to FinTech disruption because they are heavily dependent on infrastructure and legacy platforms.”

Ghosh: Moving to the Cloud is not a magic bullet by itself. Financial institutions serious about making this transformation have more work to do, starting with the following steps. First, they need to identify and choose their Cloud Service Provider(s) for capabilities to be hosted on the Cloud. Google Cloud, Microsoft Azure, and AWS are some key players in this market. When choosing a provider, it is especially important for banks to make sure the provider’s cybersecurity requirements are aligned with the bank’s overall security strategy and their customers’ expectations. Second, they need to decide what capabilities and in what order they need to migrate to the Cloud. Ideally, the first wave of competencies should be the customer-facing applications and the heavy analytical tasks. These use-cases need robust storage or computing powers that should scale up or down on demand. That type of scalability is one of the biggest benefits of working in the Cloud. Third, banks (anyone looking to make a

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INTERVIEW

digital transformation, actually) need to define a “governance” model. And it’s the key to their success. The governance model defines what technology/Cloud capabilities are approved for usage and what access to controls engineers should have. It would also be a part of alerting and monitoring infrastructure and costs, training developers on controls mandating how the infrastructure is provisioned, etc. Without a vigorous governance model, banks will struggle to maintain a standardized and uniform operating standard across the organization.

“The most effective digital organizations use DevOps principles coupled with heavily automated deployment and testing methods.”

Atkins: Any other considerations? Are there ways to control Cloud costs? If so, how is that done?

Ghosh: Monitoring and optimizing costs are critical parts of successful Cloud migration efforts. It’s almost counterintuitive. It’s less expensive over the long term to store data than in a physical data center. Still, because the Cloud has an unlimited capacity and computing power, costs can quickly get out of control if the usage is not monitored. All Cloud service providers have cost monitoring tools; however, these tools may not help an organization identify where the bleeding is happening. Training the developers on various Cloud infrastructure best practices and a robust governance model will help keep costs under control.

4. Turning off non-production instances after work hours — and again, having the teams working together on adhering to those goals.

Atkins: Those are helpful. Is there anything else you’d like to share about digital and Cloud transformations? Ghosh: Yes. Digital transformation and customer focus are not once-and-done efforts, unfortunately. They require an unwavering commitment toward creating a culture of innovation and continuous learning. Successful digital organizations build microservices that link with easy-to-configure APIs that are hosted in the Cloud. This makes it less difficult to replace the code if upgrades need to be done quickly. The most effective digital organizations use DevOps principles coupled with heavily automated deployment and testing methods. They focus on enabling high reusability, faster development time, the use of CICD (Continuous Integration, Continuous Delivery), and an underlying control on infrastructure provisions. Another way banks are trying to catch up is by outsourcing the talent (engineers and data scientists) to help in the transition. We don’t recommend it. While a known talent gap is challenging CIOs, it’s also true that outsourced vendors’ employees often do not develop any appreciation for the company’s strategic needs — a requirement for the long haul and dedication required of this type of internal transition.

Atkins: It certainly sounds like legacy banks have their work cut out for them. But you have laid out some excellent paths for their success. Thank you for your time, Kumar. Ghosh: Thank you for providing me an opportunity to share my insights with the readers of The Journal of Digital Transformation. Kathryn Atkins is the principal of Writing World and an award-winning freelance business writer.

Atkins: Can you tell us specifically what will keep costs under control? Ghosh: I have four suggestions. 1. Using the right instance size for your applications; 2. Using the server less whenever possible; 3. Choosing the right pricing model, and

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ECONOMIC RECOVERY

Canadian Corporate Debt: Navigating the Risks Amidst the Economic Recovery Continued from page 9

have declined by 2.0 and 14.1 percent respectively, while operating profits and the interest coverage ratio have steadily increased. While manufacturing as a whole appears to be on solid footing, auto production is being directly impacted by supply chain disruptions and the shortage of semiconductors. Over the pandemic, sales plunged and haven’t recovered (Chart 5). Supply chain disruptions are expected to persist well into next year, which will undoubtedly weigh on future production and profits. We are already starting to see evidence of this in motor vehicle and trailer manufacturing, where operating profits and the interest coverage ratio have deteriorated markedly since the final quarter of 2020. A slightly different story is emerging for motor vehicle parts manufacturing, where operating profits and the interest coverage ratio have improved since the beginning of 2020. Should supply shortages intensify and ultimately weigh down sales and profits, the economic impact would likely be small as motor vehicle and parts manufacturing accounts for just 0.6 percent of real GDP and 0.7 percent of overall employment.

sector, with the arts, entertainment and recreation, and accommodation and food services industry warranting special attention. Debt levels in the industry increased markedly over the pandemic, but are low compared to its peers, with gross and net debt accounting for just 2.4 and 1.9 percent of total debt. However, the industry’s interest coverage ratio has deteriorated alongside operating profits, signaling that some firms in the industry could have difficulties meeting their interest obligations (Chart 4). Over the course of the pandemic, many firms in the industry relied on government support programs such as the Canadian Emergency Business Account (CEBA) to offset the decline in cash flows. As government support is withdrawn firms could face financial hardship should operating profits fail to rebound to levels that will support the additional leverage added over the pandemic. That said, a further deterioration in firms’ balance sheets is unlikely to have a financial market impact as firms that operate in the sector are typically small and usually don’t tap into the corporate debt market. Of all firms operating in the industry, 77 percent have less than 20 employees (Chart 6). Nevertheless, the effect on the wellbeing of Canadians could be wide reaching. Employment in the sector has contributed an average of 9.2 percent to total employment over the past decade, but the level of employment is still currently 17.6 percent below pre-pandemic levels.

Oil and Gas Has Weathered the Storm

A Shot in the Arm for High Contact Services Chart 6 shows that firms which operate in the arts, entertainment and recreation, and accommodation and food services industry tend to be small with 77.0 percent of firms having less than 20 employees. COVID-19 and the associated lockdowns have had an unequal impact on the service

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While the global pandemic has created headwinds for some industries, the oil and gas sector has benefited from the changing macroeconomic environment. The past 20 months have seen volatile swings in oil prices. In April 2020, the North American benchmark oil price, West Texas Intermediate (WTI) fell into negative territory, reaching -$36.98 on concerns over diminishing demand and storage capacity. As the global economy re-opened, prices surged by over 100 percent, to their current

level of around $80. While the oil and gas sector is one of the most highly indebted sectors, with gross and net debt accounting for 8.7 and 13.7 percent of total debt, both measures have declined by 11.7 and 11.1 percent since the first quarter of 2020. In addition to declining debt, the industry has experienced a swift increase in operating profits due to rising oil prices and a notable improvement in the interest coverage ratio (Chart 4). One element of uncertainty facing the industry in the near-term are the carbon reduction objectives put in place at the COP26 climate change conference. Nevertheless, the renewed strength in the sector bodes well for the economy as the sector currently accounts for 5.3 percent of industry GDP and has contributed an average of 5.2 percent to economic growth over the past decade.

Bottom Line The elevated level of nonfinancial corporate debt is not a new story for the Canadian economy. However, the current global health crisis has created a new economic backdrop that could present headwinds for some of the most heavily indebted sectors, namely real estate and construction. These themes may also weigh on automotive manufacturing, but the economic impact would not be as wide reaching given its small share of the aggregate economy. Smaller firms that operate in the arts, entertainment and recreation, and accommodation and food services industries may also face financial hardship, not due to onerous debt levels, but rather the withdrawal of government support programs. The story is not all bad, however, as the once struggling oil and gas sector has benefited from the surge in oil prices. All told, the new economic backdrop brought upon by the global health crisis has provided unique challenges and opportunities for Canadian industries to navigate. James Orlando, CFA, is a Senior Economist and Brett Saldarelli, Economic Analyst at TD Bank in Toronto.

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Four Key Technologies Address Supply Chain Disruptions Impact on Work Truck Finance

upply chain disruptions are a prominent concern across the globe. “We are all aware of the container ships lined up at ports, and months’ long delays in delivery times,” says Kirk Mann, Senior Vice President and GM of Transportation Finance, Mitsubishi HC Capital America. “However, supply chain issues and inefficiencies are not a new topic in the transportation industry. Efforts are driving the development and adoption of technology-based solutions to increase efficiencies, productivity and profitability that would largely prevent or mitigate the issues we’re experiencing today. “Planning appropriately and deploying new technologies are just part of the solution,” Mann says. “An equally critical aspect of addressing these issues is to ensure that human needs and consumption are carefully considered. Both must be evaluated and satisfied in order to enable great growth for the industry.” The following four technologies are ones that Mann identifies as having the most potential to positively impact supply chain issues now and in the future, some of which he discussed during a panel presentation at the recent Fleet Forward conference.

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AI-Based Demand and Supply Forecasting – Demand and supply forecasting enabled with artificial intelligence uses historical and contextual data to predict demand and supply requirements, and allows companies to be more proactive for network and planning capacity. For example, it enables the ability to determine the number of vehicles needed for transport and direct them to the locations where demand is expected, which decreases operational costs. According to Mckinsey Digital, AI-enabled forecasting can reduce supply chain network errors by 30-50 percent and provide up to a 65 percent reduction in lost sales due to out-of-stock inventory. This technology is seeing increased adoption and capital outlay across multiple industries.

2 3 4

Warehouse Automation – Labor costs and shortages and increased throughput requirements are driving interest in automation technology that provides improved scalability and lower costs. The key takeaway from a 2020 industry study by DC Velocity and ARC Advisory Group was that “the future of warehousing depends on investment in software and automation technologies.” 96 percent of respondents in the study’s survey indicated that they expect the warehouse automation value proposition to increase over the next three years, compared to the manual alternative. Computer Vision – AI-enabled computer vision provides a bird’s-eye view along the supply chain. Among its uses are helping to load and unload trucks, trailers and shipping containers; and identifying the condition of assets, including possible damage. Amazon utilizes this technology to reduce the time to unload a trailer of inventory from hours to just 30 minutes. Its use for ports and container ships has similar potential. Truck Inventory Platform – A portal of truck inventory across geographic areas would enable dealers who sign up to search for real-time inventory of truck types and their availability. Currently, dealers are posting trucks available to order, but that are not readily available for delivery. Ideally, a portal would enable moving excess supply to areas of demand. However, a setback of this solution is that it requires the industry to work cooperatively in a highly competitive environment.

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EQUIPMENT FINANCE ROUNDUP

Mitsubishi HC Capital Canada Named One of Canada’s Most Admired Corporate Cultures Mitsubishi HC Capital Canada (formerly Hitachi Capital Canada) has been named as a winner of the 2021 Canada’s Most Admired Corporate Cultures™ program. This national program recognizes best-inclass Canadian organizations for fostering high performance corporate cultures that help sustain a competitive advantage. Employee engagement is one of three pillars of Mitsubishi HC Capital Canada’s corporate strategy, which it implements with employee-focused activities, policies and procedures throughout the organization. They include the president welcoming all new hires and sharing the company’s business plan, an open-door policy, employee-led efforts to present market opportunities to senior leadership, and leadership and training programs, among others. “We are very deliberate in our focus on building a corporate culture, and have so much to offer employees,” said François Nantel, President of Mitsubishi HC Capital Canada. “I’m proud of everyone in our organization for making our engagement efforts so successful that we’ve been recognized with this prestigious award.” “At Waterstone we believe corporate

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culture drives performance and that it’s your organization’s greatest asset,” says Marty Parker, President and Chief Executive Officer of Waterstone Human Capital and Chair of the Canada’s Most Admired™ program. “Each of the 2021 award recipients puts culture at the centre of everything they do, and demonstrates a commitment to culture as competitive advantage. They set an excellent example of how crafting and sustaining a high performance culture can drive incredible growth and performance.” The Canada’s Most Admired™ Corporate Cultures awards will be presented at an awards gala at the Metro Toronto Convention Centre on March 31, 2022. Mitsubishi HC Capital Canada is a specialty finance company that brings a consultative approach and expertise to customers of all sizes to help their businesses grow every day. Serving as a collaborative partner, we provide customized financing solutions for a wide range of industries, including manufacturing, construction, work trucks/ transportation, IT, staffing, healthcare and clean technology/mobility. We are committed to the United Nations Sustainable Development Goals to improve the communities where we operate.

ELFA Launches Knowledge Hub to Maximize Member Access to Industry Research and Information As the key source of business intelligence that is critical to its member companies, the Equipment Leasing and Finance Association has launched the Knowledge Hub, a one-stop online library that provides easy access to its wide range of industry research and information. The development of the Knowledge Hub was based in part from input provided by ELFA Business Council Steering Committees about the association data, benchmarking and statistical resources that they use and their preferred delivery channel. The Knowledge Hub comprises ELFA’s most popular industry information, which will be highlighted throughout the year, including: ◉ Business Technology Performance Index (BTPI) ◉ Credit Manager and Collection Managers Surveys ◉ Economic Impact State Fact Sheets ◉ Equipment Leasing & Finance Compensation Survey and Small & Medium Enterprise Compensation Survey ◉ Industry Information Help Desk ◉ Industry Topics dynamic web pages

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EQUIPMENT FINANCE ◉ Monthly Leasing and Finance Index (MLFI-25) ◉ State Tax Manual and State Law Compendium ◉ Survey of Equipment Finance Activity (SEFA) and SEFA Interactive Dashboard ◉ What’s Hot/What’s Not Equipment Market Forecast ELFA members provide the foundation of the association’s survey-based research, and their feedback enables benchmarking and predictive, actionable decisionmaking for businesses in a variety of areas. “Access to ELFA research and data is one of the primary benefits of being an ELFA member,” said ELFA President and CEO Ralph Petta. “With so much information and varying needs among members, the Knowledge Hub makes it easier than ever to learn about and find the resources in one centralized location. I encourage members to visit the Knowledge Hub often for indispensable intelligence for all areas of your business. The Knowledge Hub is, in effect, your company’s own research department.”

Ritchie Bros. hits CA$53+ million with final Edmonton auction of 2021 Through six auctions this year, Ritchie’s Edmonton, AB site sold 47,000+ items for CA$517+ million. The firm conducted its sixth and final Edmonton auction of the year last week, selling 4,400+ equipment items and trucks for 780+ owners, achieving CA$53+ million (US$42+ million) in gross transaction value. Approximately 93 percent of the items in the December 9 - 11 online auction was purchased by Canadian buyers, including 55 percent sold to Albertans. The remaining 7 percent was purchased by international buyers from as far away as Ireland, Israel, and Singapore. “Pricing in our Edmonton sale remained strong across all major equipment and truck categories,” said Andrew Lutic, Regional Sales Manager, Ritchie Bros. “If you have surplus equipment to sell, I encourage you to contact us today so you can take advantage of this sellers’ market.

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We are attracting record demand today and achieving record pricing across all our marketplaces.” Ritchie Bros. conducted six online auctions from its Edmonton site in 2021, registering 106,000+ bidders and selling 47,000+ items for more than CA$517 million. “Thank you, to all our loyal customers,” added Trent Vandenberghe, Regional Sales Manager, Ritchie Bros. “We greatly appreciate the trust you put in us and we look forward to continuing to help your businesses in the future.”

Five Big Sellers from Edmonton in December: ◉ 2018 Tigercat 870C feller buncher, CA$460,000 (US$363,768) ◉ 2014 Komatsu D155AX-7 crawler tractor, CA$390,000 (US$308,412) ◉ 2019 Kenworth T800 tri-drive sleeper truck tractor, CA$240,000 (US$189,792) ◉ 2017 Hitachi ZX350LC-5N hydraulic excavator, CA$220,000 (US$173,976) ◉ 2009 ETM 120-ton, 64-wheel lowboy, CA$192,500 (US$152,229)

Gross Transaction Value (GTV): CA$53+ million (US$42+ million) ◉ Total Registered Bidders: 12,500+ ◉ Total Number of Lots: 4,400+ ◉ Total Number of Consignors: 780+ Ritchie Bros. was forecasting more than 30,000 equipment items and trucks in its upcoming auctions and online marketplaces, including a Montreal, QC auction on with close to 3,000 items and a B.C. Regional Event with approximately 1,000 items selling by Timed Auction. The company also has weekly featured online auctions at IronPlanet; a daily reserved option with Marketplace-E; and a brand new equipment listing service called Ritchie List, with more than 40,000+ items already listed.

PCI Pal expands to Canada, appoints Tim Watts as VP of Sales PCI Pal, the global provider of cloud-based secure payment solutions, has appointed

Tim Watts as Vice President Sales for Canada, where he will be responsible for leading the sales growth strategy across Canada. Watts will be focused on increasing market reach in the region, responsible for driving sales success with our partners in the region, as well as overseeing and executing PCI Pal’s direct sales function. He will report to PCI Pal’s Chief Revenue Officer, Darren Gill, and will be working with PCI Pal’s new team in Canada, which will include sales support, marketing, and operations functions. Based at PCI Pal’s Canadian head office in Toronto, Watts has a background of sales leadership, country management, and a track record for high levels of individual contributor sales in the customer engagement space. With more than 18 years’ experience in technology sales, Tim joins PCI Pal from Uniphore, a US global provider of conversational AI and Automation, where as Sales Director he was responsible for driving revenue, customer success, networking and relationship building within the local contact centre community. He has also held roles in a number of companies in the business communications and contact centre space. James Barham, CEO of PCI Pal, said, “With an advanced approach to data security, Canada is one of the largest contact center markets in the world. I’m hugely excited for Tim and the new team to join us, providing on-the-ground, local expertise to support our existing partners and customers in Canada. As the first international provider in our space to launch in Canada, we will be bringing our market leading easy-to-use, light-touch, cloud solutions to Canadian companies looking to facilitate and secure their customers’ payments across business communication environments.” PCI Pal provides SaaS solutions that empower companies to take payments securely, adhere to strict industry governance, and remove their business from the significant risks posed by noncompliance and data loss. Its mission is to safeguard reputation and trust by providing customers with secure payment solutions for any business communications environment including voice, chat, social, email, and contact center.

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MARKET RESEARCH

Workplace Changes from COVID-19 Won’t Be Permanent, Most Believe Staff

o far, the changes in how we use our offices, who works from home and the other disruptions or adjustments in corporate life aren’t impressing those who might make decisions on organizational structure in the future. Only 23 percent of CIOs surveyed expect remote workplace changes from the COVID-19 pandemic to become permanent. The new IBM Institute for Business Value (IBV) study reveals CIOs’ influence on business strategy and operations is growing as technology pervades surveyed enterprises. When asked which other C-Suite members will be most critical over the next few years, CEOs surveyed named their tech chiefs (CIOs and CTOs) at more than twice the rate of CMOs, CHROs or any other position excluding CFO and COOs. The annual global study also revealed critical challenges CIOs are facing and recommendations to help overcome those challenges and drive agility, innovation and growth for their organizations. “The COVID-19 pandemic has accelerated the need for AI and hybrid cloud applications to power business critical processes,” said Kathryn Guarini, chief information officer, IBM. “In our post-pandemic era, the role of technology has never been more critical and it’s up to CIOs to influence strategy, break down internal silos, and drive agility and innovation across every part of the business.”

CIOs surveyed lead digital transformation with focus on AI, hybrid cloud and sustainability While CIOs continue to deliver the core IT services that power day-to-day business operations, they are also often expected to help drive innovation and business growth. Many surveyed CIOs emphasized the importance of data and automation to break down siloes and create new value streams. The number of CIOs surveyed reporting high maturity in AI-enabled workflows increased 560 percent compared to two years ago, and 37 percent of CIOs surveyed cite process

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automation as the top opportunity for positive impact within their organizations. Respondents indicated the greatest use of automation is in IT, finance, and manufacturing — at 40 percent, 35 percent, and 35 percent of workloads, respectively. Hybrid cloud is a key underpinning for AI-powered intelligent workflows. The number of CIOs surveyed reporting high maturity in their hybrid cloud operations increased 700 percent compared to 2019. The IBV’s recent study on cloud transformation provides further insight on how hybrid cloud is becoming the dominant IT architecture. Many CIOs are also looking to use technology to drive progress against corporate objectives like sustainability. 42 percent of CIOs surveyed expect technology to have a significant impact on sustainability in the next three years — highest of all areas of impact.

CIOs and CTOs may be working at cross-purposes in the drive for business value Many CIOs are increasingly serving as a bridge across other business functions, connecting the dots to balance and rearrange technology resources and capabilities to drive agility and efficiency. Within the walls of the technology function itself, however, only 4 in 10 CIOs surveyed report they frequently interact with CTOs, despite the fact that effective collaboration can drive financial benefits. The consequences of this disconnect can be significant — if CIOs and CTOs are using data and AI for different use cases without coordination across culture, processes and tools, the organization may lack a crosscompany view and ability to govern critical data properly.

implemented remote work strategies, but only 23 percent expect remote workplace changes from the COVID-19 pandemic to become permanent. In contrast, nearly two in three (65 percent) employees surveyed report they’d prefer to work exclusively remotely or in a hybrid model, if given the choice. These findings may indicate a potential blind spot for CIOs if employee preferences for flexible schedules and work locations are not going away. In this period of “The Great Resignation,” the CIO’s ability to adopt effective technology applications and productive collaboration strategies for the workforce could make a significant difference in the war for talent. The study includes recommendations from IBM for leaders including: ◉ Embrace an open hybrid cloud approach and AI technology to help drive enterprise agility, innovation and growth. ◉ Bridge the divide with the CTO to expand technology’s leadership influence. ◉ Seize the moment to lead organizational strategy around the hybrid workplace.

Methodology The IBV 2021 CIO study surveyed 2,500 CIOs from over 45 locations and 29 industries. It was conducted in cooperation with Oxford Economics and benchmarked against nearly 20 years of IBM’s C-suite surveys. The full study is available at https://www.ibm.com/ thought-leadership/institute-businessvalue/c-suite-study/cio . The IBM Institute for Business Value (IBV) delivers trusted business insights from our position at the intersection of technology and business, combining expertise from industry thinkers, leading academics, and subject matter experts with global research and performance data. The IBV thought leadership portfolio includes research

CIOs surveyed may be underestimating the challenge of an ongoing hybrid workplace

deep dives, benchmarking and performance

Fully 83 percent of CIOs surveyed say they

industries and technologies.

comparisons, and data visualizations that support business decision making across regions,

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