Technology lawyers focus on the development and finance of technology-based businesses. Technology law involves working with investors, start-up or later stage enterprises, venture capital investors, technology lenders, and technology-oriented investment dealers in such matters as private and public financings; stockholder and employment matters; strategic alliances, partnerships, and joint ventures; stock exchange listings; and mergers & acquisitions. This often necessitates working closely over a long period with a technology business at all stages, from initial business and financial start-up plans to an IPO and beyond to such high-end matters as mergers & acquisitions or corporate governance.
Payments Systems Modernization
Digital payment mechanisms and processes, of course, lie at the heart of almost all e-commerce. It follows that there is a great deal of interest in what policy makers are going to make of products like electronic wallets and mobile payments. In the summer of 2011, the Task Force for the Payments System Review released a discussion paper that identified four challenges: increasing fairness in credit and debit card networks; updating the regulatory and governance structure of these networks; improving online authentication, security, and privacy; and transition to a digital economy.
In July 2015, changes to the Canadian Payments Act were implemented to establish a new governance and oversight framework. In anticipation of changes to the Canadian Payments Act and the Payment Clearing and Settlement Act, a new Strategic Plan was developed by Payments Canada, the organization responsible for the clearing and settlement infrastructure, processes, and rules essential to transactions.
According to research by Payments Canada and EY Canada, processing payments cost Canadian businesses C$2.9 to C$6.5 billion annually. “This high cost is due to delays in processing and to inefficiencies that stem from a lack of data and transparency in payments messaging.”1
One element of the modernization of Canadian payments systems is a new high-value payments platform, known as Lynx. Lynx will replace the Large Value Transfer System, which on an average business day clears and settles over C$200 billion. Lynx will “replace the current system, enhancing the safety, soundness, cyber resiliency and flexibility of high-value payments in Canada by updating our technology, rules and processes.” The launch date for Lynx has been advanced from Q3 to Q2 2021.
According to Payments Canada, the initial release of Lynx “will consist of a new real-time gross settlement system, including an enhanced, fully collateralized risk model that complies with Canadian and international risk standards. It will enable easier and quicker onboarding of new participants, improved system resiliency and automated testing, as well as improved global interoperability and reporting.”
Other upcoming platforms in the modernization include The Real-Time Rail (RTR), “a new system that will conveniently allow payments to be sent and received in seconds 24/7/365, to be launched in 2022,” and Retail Batch Payments (RBP), which will replace the existing retail batch payment system with “a centralized system and enhanced risk model.”
COVID-19 and Tech Growth
In a May 2020 article in Lexpert® Magazine,2 Deborah Weinstein, a partner at LaBarge Weinstein LLP, was asked what the novel coronavirus will mean to the tech market:
It’s early days, but as of now, we’re already seeing 10 or 15 per cent of deals either dead or stalled. But 85% are still going on. I think the worst is yet to come, uncertainty as to when things will change. Real blows will come in the next quarter as their customers stop buying things.
On the venture capital side, venture capitalists are telling companies they’ve invested in that their budgets have to be stress-tested based on revenue or on cash flow. Cash is king during recession, and cash flow is King Kong. There are so many tech companies that don’t make money, meaning produce a positive cash flow. When you start to see companies fail, it will be due to one thing that makes companies fail: They run out of cash.
We’re also already hearing about layoffs in the tech industry. The tech companies that will tend to survive are those that have moved to a model of revenue known as SaaS: Software as a Service. Those will fare better, especially as most technology has moved to those services. Instead of salespeople having to sell software by licence, they’re now charging a monthly fee. If it is a significant technology to the operation of one’s business … we’ll keep paying those monthly fees. So, the coronavirus won’t hit some software companies as much as others; the SaaS companies will be better off.
The bright side is that, coming out of this, I think M&A will really pick up because you will have companies that don’t have cash flow, so there are opportunities for large tech companies to acquire very significant technologies at significantly less than they were worth six months ago. There is an insatiable need for technology or technology advancements.
- “2020‒2024 Corporate Plan.” Payments Canada. Accessed September 15, 2020. https://www.payments.ca/sites/default/files/pc20_corporate_plan_en.pdf.
- Raymer, Elizabeth. “Financing tech growth.” Lexpert® Special Edition – Technology. May 12, 2020. https://lexpert.ca/article/financing-tech-growth/.