Payments Canada has announced the launch of its national real-time rail payment system, designed to accelerate everyday transactions for both Canadian businesses and consumers.
According to the organization, the new system will allow participating members to securely exchange, clear, and settle payments in real time.
“The introduction of Canada’s real-time rail signifies the start of a new chapter for payments in our nation,” stated Payments Canada CEO Susan Hawkins in a press release on Monday.
“As a national asset created specifically for our country, the [real-time rail] provides a modern foundation for the payment ecosystem to evolve.”
The new system is anticipated to lead to cost savings through decreased processing expenses, a decline in cash and cheque usage, and a reduced duration during which funds are temporarily inaccessible to recipients.
Initial participants in the system include Wealthsimple, Questbank, Peoples Trust Co., Paramount Commerce, Koho, DoBusiness.com, Digital Commerce Bank, and Bank of America. More participants, including all major Canadian financial institutions, are expected to join in the coming months.
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Payments Canada systems facilitate various types of transactions, including debit card payments, pre-authorized debits, direct deposits, bill payments, wire transfers, and cheques.
Henry Kim, a professor at the Schulich School of Business at York University, remarked that the announcement is a positive development.
“We need to pursue this for our sovereignty, and we must keep pace with the rest of the world. Many countries already have real-time settlement,” he noted in an interview, pointing out that the U.S. has already implemented such systems.
Payments Canada has experienced significant delays in rolling out the real-time rail system, which allows nearly instantaneous payment clearing around the clock, along with other enhancements. The organization initially aimed to establish the system by 2019.
The ability to expedite payment clearing is particularly advantageous for businesses, Kim added.
“This also implies that if you’re short on cash, a business can receive payments much quicker from other businesses,” he stated.
Payments Canada indicated that the real-time rail system will incorporate essential centralized fraud services and controls, such as payee confirmation, a fraud transaction safety score, a compilation of fraud risks, and a platform for reporting fraud incidents.
Kim, who collaborates with U.S. credit unions on payment technology, expressed some concerns among American financial institutions regarding fraud risks associated with real-time payments, with some opting not to offer this feature to their customers.
“Eliminating the lag reduces the time available for verification, which can enable fraudulent transactions. With the real-time rail, recovery of funds is often not possible,” he explained.
“Canada has taken a different approach compared to the U.S., and I believe it’s beneficial to have that centralized system.”