Payments Canada has announced the implementation of its real-time rail national payment system, which aims to enhance the speed of everyday transactions for businesses and consumers in Canada.
The organization states that this 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,” said Payments Canada CEO Susan Hawkins in a press release on Monday.
“As a national resource tailored for our needs, the [real-time rail] establishes a modern foundation for the payment ecosystem to evolve.”
It is anticipated that the system will lead to cost savings through lower processing expenses, decreased reliance on cash and checks, and a reduction in the temporary unavailability of funds for recipients.
Initial participants in the program 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 forthcoming months.
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Payments processed through Payments Canada systems encompass debit card transactions, pre-authorized debits, direct deposits, bill payments, wire transfers, and checks.
Henry Kim, a professor at York University’s Schulich School of Business, remarked that this announcement is a positive development.
“We must do this for our sovereignty, and we need to match the advancements seen globally. Many countries already have real-time settlement systems,” he noted in an interview, pointing out that such systems are already in place in the U.S.
Payments Canada has experienced delays in rolling out the real-time rail, which facilitates near-instant payment clearing around the clock, along with other enhancements. The organization initially set a target to have the system operational by 2019.
The capability to expedite payment clearing is especially beneficial for businesses, Kim explained.
“This means that if cash flow is tight and a business is low on working capital, they can receive payments from other businesses much quicker,” he added.
Payments Canada also indicated that the real-time rail system will incorporate mandatory centralized fraud prevention measures and controls, such as payee confirmation, a fraud transaction safety score, a list of fraud risks, and a platform for reporting fraud.
Kim, who collaborates with U.S. credit unions on payment technologies, expressed concerns regarding fraud risks associated with real-time payments among U.S. financial institutions, with some banks opting not to offer this feature to clients.
“Eliminating the delay reduces the time available for verification, making it easier for someone to execute a fraudulent transaction. With the real-time rail, recovery of funds is often not possible,” he explained.
“Canada has adopted an approach that differs from the U.S., and I believe this centralized system is a significant improvement.”