City Approach to Online Payments Worthy of Attention

by Markus O’Brien Fehr, Chief of Staff

When it comes to online payments, the City of Toronto has been living in the dark ages with a patchwork system of what bills and services you can pay for online, and what tools you can use to pay them. A controversial decision at City Council this week will mean a new platform this fall allowing property taxes, utility bills, and parking violations to all be paid digitally. Permits, licenses and court fines are being added to the program in later phases. But while convenient, residents should approach this with eyes wide open.

This new platform, developed by U.S. tech firm PayIt, will offer digital features such as a smartphone app, digital wallet for managing preferences, status notifications and e-billing. It will allow payments through Electronic Funds Transfers (EFT), credit cards, or debit cards. City staff have estimated that PayIt will have the ability to earn between $20 and $25 million over the first five years of the contract, and save the City up to $11 million in credit card and other administrative fees.

While this package will certainly offer convenience to Toronto residents, several councilors, including John, voted against the package. Why the concern?

First, residents will need to be mindful that some of the money that the City will be saving will be coming out of their pockets in the form of processing fees. Using a credit card to pay a city bill will result in a 2.35% surcharge. Debit cards will cost 1.5% more. EFTs will continue to offer free service for digital payments.

John successfully moved several unanimous amendments at Council, including one requiring the City to make very clear that using a card will result in these additional fees.

The other issue was how this contract came about in the first place. Council initially rejected an agreement with PayIt in 2020 after their unsolicited offer was reviewed by City staff.  Over the past year, staff invited other parties to match or beat PayIt’s proposal in a “Swiss Challenge.” Ultimately, they recommended PayIt once again.

The best practice for all large public contracts should be a full and competitive process. Questions remain whether that process was adequate in this case. With a wealth of tech knowledge in Toronto, it seemed odd that staff went straight to this U.S. provider without making the process as transparent as it could have been.

Several motions calling for more scrutiny of the procurement process, or calling to delay a decision until the City completes its Digital Infrastructure Plan were defeated during the debate.

It’s fair to celebrate the City making progress on an important customer service initiative. There’s no question that the City is long overdue to streamline digital payments. But Council will need to keep a close eye on this project along with other future procurement decisions to make sure that residents are getting the best possible bang for their buck and not following the City’s path of least resistance.