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Buy now, pay later? Instalment payment services for online shopping come to Canada – CBC.ca

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Online shopping has exploded during the current pandemic, as have the options to pay for purchases.

In addition to the usual debit and credit options that pop up when a customer’s about to buy, a number of services have set up shop in Canada recently that give customers the option to pay in instalments — spreading the cost of shopping trip over multiple payments.

While they all work a little differently, services such as Afterpay, PayBright, Sezzle, Klarna, QuadPay, Splitit, Affirm and others give users the options to pay for purchases over time. Most have lower rates and fees than would be accrued by putting the item on a credit card. Indeed, some have no fees at all — on the user’s side, at least.

Afterpay quietly launched in Canada this past August. While the company is far from a household name here, that isn’t the case in Australia, where the company launched five years ago. It’s grown to have 10 million customers there.

The company has signed deals with dozens of retailers operating in Canada, including American Eagle, Ardene, BikeExchange, Dermalogica, FragranceX.com, Herschel Supply Co., Huda Beauty, GOLI, Maëlys Cosmetics, Native Shoes, Nixon, Perfume.com and Roots.

Would-be customers open an account linked to a bank or other payment account, and the company handles the rest.

The way it works is simple, CEO Nick Molnar said in an interview with CBC News.

“If you’re buying a pair of shoes for $100, instead of paying $100, the customer pays four payments of $25 every two weeks,” he said. “We then pay the retailer the next day. They ship the product up front and we assume all the risk.”

There’s no interest rate added on to the purchase, nor are there any added fees or penalties for late payments. If a buyer stops paying back their purchase, Afterpay simply cuts off their account. But they don’t send the account to a collections agency.

Service free for consumers

The company boasts that less than one per cent of customers fall behind on their payments. Molnar says the system works because it works for both sides — the consumer and the retailer.

“The vast majority of instalment providers across the world have been traditional credit products that rely on very high interest rates to make their business models work,” he said. “[But] we have flipped the model on its head where we charge the retailer a small fee, which means it is completely free for the consumer.”

Kyle Housman, president of Vancouver-based Native Shoes, says only about five per cent of Native Shoes customers use Afterpay, but those that do tend to spend more. (Mike Zimmer/CBC)

Returning to the shoe store example, Molnar says the retailer would pay Afterpay between four and six per cent of the sale — a price they are happy to pay because the payment firm assumes all the risk of nonpayment, and the store gets the cash up front.

Some Canadian retailers are so far pleased with the service. The pandemic has been tough on Native Shoes, a Vancouver-based seller of children’s shoes, as it has on many others. But online selling has grown significantly during the pandemic, something the company credits partly to services like Afterpay, in a time when everyone is watching their spending.

“I think it’s one more option for the customer to be able to choose how they want to pay — the buy now, pay later kind of platform just gives them a little bit more flexibility,” company president Kyle Housman said in an interview.

Native has been using Afterpay since it launched in Canada. The company says only about five per cent of customers currently use it to pay, but it expects that ratio to grow.

While the fee is higher than they’d pay with some other options such as debit and credit , the company is OK if the service grows and expands in part because they have noticed that Afterpay customers tend to buy more than others do — about 25 per cent more, Housman says, either through buying more pairs of shoes, or more expensive ones.

In too deep

But such services can have their drawbacks, according to Shannon Lee Simmons, a financial planner and founder of the The New School of Finance, a financial planning firm.

She’s in favour of anything that can get Canadians away from accumulating too much credit card debt, but says instalment systems can still allow consumers to let their spending get ahead of their income.

“If you’re not doing that mental math, then you’re going to have a problem,” she said in an interview. “You’re going to start owing money before you even get paid.”

And that tendency people may have to buy more when using instalment services could become a problem in the long run.

“They’re banking on that money behavior of [saying] ‘I want this now and I can’t really afford it so I’m going to do it and then I’m just going to break it out over my different paychecks,’ which is a dangerous game for anyone to play,” Simmons said. “They’re really hoping you’re going to spend more than you normally would.”

Housman expects the proportion of customers using the instalment service to grow. (Mike Zimmer/CBC)

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Canada’s M&A boom fuels hiring spree, higher pay

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Record-breaking dealmaking in Canada is encouraging investment banks to beef up staffing, but the increased demand for bankers is forcing some to pay up in unique ways to attract new hires.

Canadian mergers and acquisitions (M&A) year to date surged to a record $206.5 billion and IPOs hit an all-time high of $5.6 billion, according to Refinitiv, after the pandemic crushed dealmaking in the first three quarters of 2020.

HSBC, JPMorgan Chase & Co and National Bank of Canada are expanding their M&A teams.

“It continues to be an active market with lots of active discussions with clients going on as well, and so that has absolutely spurred on a need to fortify the ranks within the teams,” said Scott Lampard, head of global banking for HSBC Bank Canada.

HSBC plans to boost overall investment banking headcount by 20%-25%, mainly at the analyst level to support pitching and executing deals, Lampard said.

PENT-UP DEMAND

With the pace of transaction expected to continue at pace, banks are paying more to hire and retain existing teams, offering a range of new services, like sending in a consultant to create the ideal home office, recruiters say.

“We’ve been doing this for nearly 20 years and we’ve never seen a market like this,” said Bill Vlaad, CEO at recruitment firm Vlaad and Company. “Everybody is scrambling,”

“Many of the banks have increased base salaries quite dramatically, mostly in 2021,” he said, adding salaries had increased 20%-40% across M&A roles.

“Now if you want to attract, you have to put something else on the table.”

To poach talent, banks are adding signing bonuses, extra vacation days, healthcare increases, special programs for mental wellness and home office perks, all tailored to individual requests, Vlaad said.

TD Securities, Barclays, CIBC World Markets are the top M&A advisers year to date. All three declined to comment on hiring plans.

Of the top deals announced this year, Rogers Communications Inc’s C$20 billion ($16.2 billion) bid for Shaw Communications Inc and Canadian National’s bid $33.6 billion offer for Kansas City Southern are the two biggest.

Despite the pandemic, five of the top six Canadian banks paid an average of C$3.1 billion ($2.50 billion) in total bonuses last year, up from C$2.9 billion ($2.34 billion) in 2019, an analysis of filings by Reuters showed.

Headcount at National Bank Finance will be up by four or five people in M&A versus the same time last year, David Savard, head of M&A at the bank, told Reuters.

That put the team at 28 for the large-cap M&A team and 10 for the mid-market team, he said, adding both areas were “booming”.

“There seems to be some pent-up demand for entrepreneurial-led companies and private companies doing M&A coming out of COVID,” he said.

David Rawlings, CEO for JPMorgan Canada, agreed headcount would be likely higher in the near future.

“We think activity will continue to be strong and are currently looking to selectively hire with a particular focus on senior diverse candidates,” said Rawlings.

($1 = 1.2453 Canadian dollars)

(Reporting by Maiya Keidan; Editing by Denny Thomas and Lisa Shumaker)

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French court overturns ruling saying sale of cannabidiol is illegal

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France’s highest appeals court on Wednesday overturned a ruling that stores in the country can’t legally sell cannabidiol (CBD), a non-psychotic compound related to cannabis that is being researched for a variety of medical applications.

Based on the free trade of goods within the European Union, the Cour de cassation ruled that judges could not find the sale of CBD in France illegal if it had been legally produced in a member state of the bloc.

The Court of Justice of the EU ruled last year that no national law can prohibit the sale of CBD legally produced in a member state, the French court also said.

“Without considering whether the substances seized had not been legally produced in another member state of the European Union, the court failed to provide a basis for its decision,” it said, referring to a ruling of a lower appeals court.

The Cour de cassation did not rule whether selling CBD in France was legal or not, and ordered a lower court to rule again on a case involving the owner of a shop selling CBD.

“We are happy”, CBD shop owner Mathieu Bensa, who was not involved in the case, told Reuters after the ruling.

“We did not understand why France was the last country in the European Union that had not given access to the sale of hemp plants”, he said.

Derived mainly from the hemp plant, CBD is increasingly used as a relaxant.

Cannabis stocks have attracted growing interest on world stock markets, particularly on the Toronto stock exchange after Canada became one of the first major economies to legalise the recreational use of marijuana.

Cannabis use is outlawed in France but the country has one of Europe’s highest consumption rates.

(Reporting by Matthieu Protard, Benoit Van Overstraeten and Ardee Napolitano; Editing by Mark Potter)

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Canada Energy Regulator allows resumption of Trans Mountain oil project

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The Canada Energy Regulator (CER) has issued a notice https://bit.ly/35Sm87H allowing Trans Mountain Corp to resume work on its Trans Mountain Expansion (TMX) oil pipeline project.

The company was ordered in April to halt work on a section of the project in Burnaby, British Columbia, for four months to protect hummingbird nests.

The C$12.6 billion ($10.17 billion) TMX project will nearly triple capacity of the pipeline, which runs from Edmonton in Alberta to the coast of British Columbia, to ship 890,000 barrels per day of crude and refined products when completed late 2022.

(Reporting by Arpan Varghese in Bengaluru; Editing by David Goodman)

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