Kris Zanuldin (Interac) Growth and Expansion of KONEK

Speaker A: Foreign welcome to the Retail Insider video interview series. I'm your host Craig Patterson and we're joined here today with a special guest. This is Chris Zenolden, he's the head of Connect at Interact. Thank you so much for joining us today Chris.

Speaker B: Thanks for inviting me. Glad to be here.

Speaker A: Now can you tell us what Connect is and how uh, Interac developed it?

Speaker B: Yeah, Connect is a new Canadian E commerce payment solution that stands designed to give Canadians more choice and trust in whenever they're transacting online. And um, Interact developed it because I think we, we see an opportunity. I think I, in uh, my previous life, one of the things that I've noticed is in the history of technology the thing that actually drives consumer adoption in any new technologies is accessibility, trust, uh, and convenience. And when we look at the payments landscape today, especially in Canada, I think we've identified an opportunity and a bit of a gap for Canadians and Canadian retailers where we think that that promise of trust, accessibility and convenience isn't fully met. And so that's why we've, we've got Connect now.

Speaker A: Excellent. Are there other ways that Connect also addresses some of the current challenges in Canadian E Commerce payments?

Speaker B: Yeah, I think in Canadian E Commerce it's all payments is always a two sided business. You've got the merchant view and you've got the retailer view and you've got the consumer view. I think on the retailer merchant side, um, it's probably no surprise to any retailer when I say some of the challenges that they're facing today. Rising cost of payments, increasing fraud just because fraud is getting more sophisticated. Um, and then more importantly, um, rising expectations of consumers. I think I like to joke in a previous life, uh, 20 years ago you and I would have been super excited. We went on a website, no matter how many clicks it took, we would order something and two weeks later it'd magically show up. And we were just so impressed. And then nowadays if the customer doesn't get it in a day and uh, they don't have one click button checkouts, they frequently email you where's my stuff? And you have a terrible experience. So the consumer experience are, they're divinely discontent. They're rightly pushing retailers to create better experiences. So merchants are faced with those challenges and on the consumer side I think it's also, we see a lot of interesting trends. Right. One is trust and privacy, especially in Canadian E commerce is a huge concern of Canadians. I think four in five consumers say protection of personal data is really, really important. I also think that when you think about the younger generation which is starting to come online like the Gen Z, uh, we've seen some interesting research on the Interact side where making sure they have all their payment options, especially sort of bank payment or pay by bank debit type of uh, payment options is really important to them and over half of them will actually choose those kind of payment options if it was offered. So that goes back to I think the merchant concern around how do I continue to increase conversions in a world where customers are demanding more out of me.

Speaker A: Let's talk a bit more about some of the merchant benefits. Tell me a bit about why Canadian retailers and E commerce businesses otherwise should consider integrating Connect into their system.

Speaker B: The benefit for me is, uh, I came from that side as well. And I think for a retailer and a merchant you're really focused on two main things, right? Increasing revenue and conversions on uh, your website and E commerce properties and reducing costs. Right. And I think Connect is a bit unique in the sense that obviously we help you do both. I think there's a lot of other solutions out there that can probably help you do one, which is increase conversions, make things more easy, make checkout more simpler. But reducing cost is actually a real challenge, right? Payment cost, as I said earlier, is a huge concern of retailers. It's rising, it's getting more expensive. And I think Connect has this benefit that because we are created out of a collaboration, out of the FI ecosystem where we're collaborating with financial institutions, uh, to deliver Connect, um, our job is actually to do two things for retailers. One is to help increase conversions and make sure you maximize those transactions, but also to reduce your costs, especially cost of payments. And we've seen that by giving consumers full choice, especially the pay by bank option, uh, which is Interact Direct on our side, we can help you reduce those payment costs as well.

Speaker A: And you mentioned conversion rates. And also now what would Connect do in terms of say, card abandonment? That's related though.

Speaker B: I think I've worked in PAIMS for over 20 years and I think, you know, there's a lot of research, both publicly as well. We've done our own, like the, the sort of. The Baymart Institute is a very famous sort of research institute that does a lot of these types, sort of, uh, online checkout, uh, research. And you know, it's no surprise, I think for a lot of retailers that have probably seen this research, right, a big portion of conversion loss, uh, or increases come from how simple, how easy is your checkout flow, right? There's always optimizations that I know retailers, whether you're a small retailer or a large retailer with an E commerce property, you're constantly thinking about your checkout flow. You're just your E commerce flow in general. And I think baymart said something like 35 increase possible in terms of uh, more simpler checkout flows. So one area is around how do we make sure that the checkout is super, super convenient for consumers. But another thing also goes back to uh. One thing I've learned also is going back to. I think one of Connect's biggest uh, benefits uh, to both retailers as well as consumers is choice, right? Payment choice. And it has also been proven that by giving consumers more choice to pay how they want, uh, uh, is really important. And that also affects conversion rates as well. So not only does Connect try to improve the checkout flow by making more convenient, we're also trying to improve conversion rates by getting customers no reason to abandon the checkout because they didn't have the payment choice that they were looking for.

Speaker A: Now we touched on fraud a little bit already. I don't know if we want to get into that with uh, a bit more of a discussion but Connect, uh, as uh, you said ah, has helps reduce fraud already um, compared other payment options. Right.

Speaker B: So I think there's two major things that we do. One is um, you know fraud is a really complicated space. Uh, having had to build a fraud prevention system in my old life, it's a cat and mouse game and uh, depending on the cycle with AI lately, you know, we all feel like the mice right now. The good guys feel like the mice, not the cats. But it is challenging. But I think there's a couple of things. 2 uh, things that I think that Connect offers retailers in terms of fraud prevention. One is we are basically integrated and offering what is in my view some of the best in class fraud detection, fraud prevention sort of uh, systems, right? Multi layered systems from checkout protocols all the way down to tokenization and also fraud detection, uh, because it's coming from the financial institutions, right. Who have to fight that battle on a daily basis. So the good news from retailers is you get access to what is essentially the best in class fraud prevention sort of systems and detection systems from financial institutions. The second thing is, I think because of the nature of uh, our desire to reduce sort of uh, ecosystem costs and the fact that we're sort of uh, partnered with and backed by the financial institutions, all retailers that use Connect also have full liability shift. So if a customer authenticates and uses Connect on the retailer side and Fraud gets reported, the retailer is not liable for that. The issuers and the IFIs have taken uh, full response responsibility for that which is a huge sort of uh, benefit for retailers. As, as we know fraud liability is a big cost for retailers it would be.

Speaker A: I feel like I've got potential scams coming at me all the time.

Speaker B: I know. Yeah.

Speaker A: How easy is it for merchants to integrate Connect into their existing checkout systems?

Speaker B: Yeah, I think integration is the name of the game. One of the things that we've done is we've built it to be a more modern payment solution. So it's based on APIs and a single integration point uh, that allows merchants to easily integrate it. The other thing that we've done actually is we've, we've recognized and this is a pain point that I remember when I was on the retail side is people don't realize downstream. For a lot of retailers and merchants your settlement systems, your reporting systems is all very tightly integrated with your acquirers and who offer a lot of your payment processing services. Right. And so we've actually integrated with the acquirers. Moneris being the first uh, that that will allow retailers to benefit from the Connect integration as seamlessly and easily as possible for Dominaris or Acquire integration. And that was intentional because we wanted to make it both easy to integrate and we made it modern and easy to create. But also we wanted to make sure that we weren't creating more operational burden. And by being part of the acquire integration package, uh, it seamlessly sort of all slots in so the retailer doesn't have to worry about separate downstream operational uh challenges like reporting and settlement. Which I know has become a pain point.

Speaker A: Talk a bit about the functionality and user experience. Uh, can you walk us through the checkout experience for customers using Connect and uh, what would it look like in practice?

Speaker B: Yeah, if you were a consumer I think you know you would uh, first encounter Connect probably in two places. One is obviously at a retailer or merchant checkout. But uh, second is also because one of the benefits of being part uh, of the financial institution ecosystem without sort of launch partners on the financial uh, institution side is they're also encouraging uh, their consumers, their customers to sort of enroll into Connect. And that's really important because as we all know the first time setup journey of any payment solution, you know, regardless of which payment solution it's always a bit more of a uh, labor intensive uh, sort of ah, process. You have to sort of authenticate it and sort of add your, your, your create your account. Uh, but We've tried to make that as easy as possible. And the benefit of us is that we get to leverage the financial institutions entire authentication system. So you would log in as if you were logging into your bank account. And once you do that, you know, we've established that authentication and you can create a passkey which is really important for the future return journey. So the next time or when you're at the checkout, you literally just authenticate uh, with Connect as if you were authentic to your bank and in some cases just a pass key like a facial id. Uh, and then you would be presented with uh, the full range of payment options, which is the real benefit of Connect. Right. We have a tagline internally North Star. We say our vision is to tell customers, pay who you want, how you want, easily. Right. And so giving them the full range of options. And that's really important because Canada is a diverse nation and customers are diverse. And even depending on the situation, if you're buying a large ticket purchase item online, like a plane ticket versus you know, you're just buying, you know, paper towel reorders, the way you want to pay and how you want to fund that could be different. And by giving the consumer that choice at time of checkout, I think that that again goes back to the conversion uplift. And so you'd basically choose that. And just like any other sort of uh, payment solution, you're ready to go. And the good news is we would pre fill a lot of the checkout information with the information we obviously receive from the bank. You would obviously have the chance to edit that. But this goes back to trying to make it as smooth and seamless as possible and not put a lot of work on the customer side.

Speaker A: Let's talk a bit about the like Canadian advantage as well as uh, we'll get a little more into security and trust. Uh, why is it important? Uh, that is a made in Canada payment solution backed by Canadian financial institutions, uh, which I think is terrific.

Speaker B: Yeah, I think uh, there's a couple reasons. One is, as I mentioned, Canada is a very diverse nation. I think we have a lot of diversity in terms of the customer base. And I think it's important to recognize that, you know, this is not the days of Ford Model T, you can have any color as long as it's black. You, you need to give customers choice. And that's one of the big uh, sort of things that we're very committed to with Connect is to give customers choice uh, in how they pay. And, and because of that I think it's also generational in nature. As I said. People uh, change how they want to pay in that choice depending on the generation. So that's one aspect is the diversity of Canada itself is, is important. The second thing is Canada is a very, if you operate a business in Canada, you'd recognize this. It's a very specific regulated uh, sort of environment. Uh, and it's important for whatever payment solution that you're utilizing or service that utilizing recognizes the nuances of how it is to operate and be successful in Canada. And so, you know, the benefit of obviously being uh, backed by the financial institutions in partnership with us on Connect is that you're basically benefiting from people that are really in the know about what it means to be Canadian, uh, as a business and uh, all it entails from a regulation and sort of um, uh, security standpoint. And lastly, I think it's also really uh, important that Canadians have a very high degree of trust, especially now financial institutions. And they have a lot of trust in our sort of financial system. Right. Which is obviously government regulated, uh, more so than in some other countries. And I think that trust is really important. And so retailers who use Connect can obviously benefit from that trust. You're basically tapping into by association one of the most trusted or some of the most trusted institutions that Canadians view, not just Interact, but also that financial institutions.

Speaker A: That's right. Because Interac is known, it's got a long standing reputation. I guess he's safer security and reliability and digital payments and it's Canadian.

Speaker B: Exactly. And I think for us with Connect, it's just uh, a extension of that. Right. Like I think everything that Interact has provided to Canadians with our other products and services around privacy and security, we're just extending that with Connect. And I think that's really important that again, going back to the retailer perspective, you get to really benefit from that trust and security.

Speaker A: That is terrific. Now Staples Canada I believe is the first national merchant to adopt Connect. Uh, tell me a bit about how that's going and what that means for Staples and its customers.

Speaker B: Yeah, we're really excited. Staples is right now we're in the last mile of the upcoming launch and they would be this sort of comes back full circle. They'll be the first sort of retailer in Canada to really showcase the promise of what we're trying to deliver for Canadians with Connect. Right. A more convenient, trustworthy experience that's built for Canadians, by Canadians, um, that gives them as much accessibility and choice as possible from a payments experience perspective. And you know, having Staples as a partner is great as a first launch merchant to really showcase that promise and um, I don't want to sort of steal ah the thunder but when they go live you know you start to see like really a best in class in our mind sort of payment experience uh, that really starts to show that promise uh, for Canadians. And so they've been a really good partner and I'm really excited to seeing them showcase basically all the things that you and I have just been talking about.

Speaker A: Now without naming any names specifically, are there any other merchant types or sectors that you see as natural early adopters uh, that could benefit from Connect?

Speaker B: Yeah, I think the benefit of Connect when you think about the key things that we've just talked about Craig, like it's about having a service that's very trustworthy, that maximizes sort of uh, sort of choice from a payment perspective that also has best in class almost bank grade security and sort of fraud detection. There are a lot of sectors that can really benefit from that. So it's almost ubiquitous in some ways. But you know, in my previous life think about retail. When you're trying to ship goods that's always important because you don't want scammers to basically intercept those. When you're in digital goods that's also really important because you can't really uh, see sometimes who's transacting in digital goods sort of uh, sectors and then travel high ticket items. Right. It's, it's a, it's a, it's a high ticket, high, highly sensitive sort of sector when it comes to fraud. So again these are the sectors that would naturally benefit from, from a payment service like, like Connect. But as we said we built this to be from the ground up as ubiquitous as possible because in some ways it's, it's our promise back to consumers as well that the more connects available you can pay who you want right how you want.

Speaker A: Let's talk about the future roadmap for Connect. How do you see Connect fitting into the broader digital uh, landscape in Canada while benefiting uh, E Commerce and other retailers uh, in the longer term I guess you'd say whatever longer term is as AI makes time shorter.

Speaker B: We uh, have a roadmap and we definitely keep an eye on all the future trends. Uh, Interact as a whole also does that and obviously we partner with our uh, financial institution counterparts to make sure that we're always keep in mind. So we have a pretty robust roadmap uh around things that we're already starting to anticipate uh, and I think for me it's two things. One is bringing to life that consumer promise, right? Like I think, you know, Canada deserves a better payment service, uh, that's more accessible, more trustworthy and it's obviously made for Canadians. And uh, one, one part of our roadmap is looking at all the future trends and making sure we're building out towards that vision. You don't build Rome overnight. So obviously this is a multi, multi year journey that we're on. But the second thing is I think there's a huge amount of opportunity still for Canadian E commerce. I think if you look at the, and we've all seen the numbers before, right? Offline payment methods. Offline commerce is starting to shift more into digital. Digital is growing twice as fast as offline. But you know you're talking about the difference between still 7 trillion in Canada online versus something like 38 trillion offline. Right. So that shift is still happening. So retailers are still in some ways benefiting or are uh, positioning still to make sure that they're ready for that huge shift from offline to online. And then even in the payments world you're starting to see digital wallets taking a uh, larger and larger share of driving that growth. As volumes start to ship online, digital wallets are taking more and more market share. And I think it's important for us as Canadians to make sure that there is a Canadian solution, a Canadian wallet out there that is built uh, as we said we offer something uniquely to both retailers and consumers. On the merchant side, we're not only offering you more conversion from a checkout perspective, a convenience perspective that we're offering our customers, but we're also offering, offering you a way to lower your cost. Right. Which I, I can safely say not all payment services can claim that. Right. And so um, so we're in it to, to help sort of the ecosystem and to drive that E commerce. So as E commerce in Canada starts to grow, which it will and it is, uh, and merchants want to take advantage, I think uh, they deserve a better payment solution that can help them uh, accelerate that.

Speaker A: Now for merchants that want to learn more about Connect, what's the best next steps?

Speaker B: I think first, uh, thing is uh, you can definitely go visit Connect ca uh as we prep for launch and reach uh, out to interact to find out more about how you can sort of um, get introduced and integrate Connect. And the second thing is if you are a Moneros uh, merchant who's our first sort of acquired that's going to be partnering with us, you know definitely, uh, reach out to them and find out more as well about how you can sort of integrate with Connect.

Speaker A: Congratulations on the launch. I think this is going to be a success. It sounds like something that's going to be terrific for Canadian retail industry, for consumers and for everyone. So thank you so much for joining us today. This has been Chris denaldin. He's the head of Connect at Interac. Thank you for so much.

Speaker B: Thanks again for having me on. I appreciate it.

Speaker A: And I'm Craig Patterson. I'm the founder and publisher of Retail Insider. Thank you so much for watching us today or listening, uh, to us on this podcast. However you're consuming this, be sure to subscribe if you haven't already. Thank you again. Take care. Bye for now.