Lloyd Darlington, president and CEO, Emfisys, and head, e-business, Bank of Montreal, pushed forward his message at Navigating Through Sea Change, a Canadian Payments Association (CPA) conference in Victoria.

Canadians rely on a behind-the-scenes payments system to process cheques, bill payments, debit card deposits and withdrawals plus other financial transactions. Almost 17 million items are processed daily with a total value of more than $125 billion.

Darlington says the CPA provides Canada with superior clearing and settlements systems second to none. But legislation regarding cheque presentation is inhibiting the introduction of new technology. This would reduce costs and increase efficiency, he says. "At the speed technological change is taking place, we can't afford to spend a decade getting our house in order."

Just under 1.5 billion cheques were physically exchanged and settled between CPA members last year, taking up to six or more business days if a decision not to pay had been made. Darlington says: "This is an area where moving from paper to electronic channels can produce great benefits, savings and efficiencies. Instead of physically presenting those 1.5 billion pieces of paper for payment verification, authorisation and settlement, electronic cheque presentment would involve digitally transmitting electronic codes."

Truncating items at central points would mean cost-effective tracing and archival mechanisms could be established, he says. "Financial institutions would be able to evolve to digitised archiving. That would permit online access by branches and possibly by customers so that they could obtain official information or copies of cheques."

Darlington says that any proposal to enhance the efficiency and cost-effectiveness of the clearing process must accommodate the presentment provision of the Bills of Exchange Act. The provision is more than a century old.

Under financial services reform legislation, the CPA will have a mandate to facilitate relationships between other clearing and settlement systems involved in exchanging, clearing or settling payments. It will also be involved with the development of new payment methods and technologies.

While Darlington applauds the government's efforts, he says a lot more needs to be done. He urges the CPA to work harder and faster, particularly on two other core requirements - the creation of a Public Key Infrastructure (PKI) and the introduction of a payment mechanism such as e-cheques.

PKI technology assures consumers and businesses that their electronic transactions are legitimate, confidential and secure. "We need these payment methods now if Canada is to participate fully in the e-commerce market that is estimated to grow to $4 trillion by 2004," he asserts.