Payments Canada has announced the launch of its national real-time rail payment system, aimed at accelerating everyday transactions for both businesses and consumers in Canada.
The organization indicates that this new platform will allow participating members to securely exchange, clear, and settle payments in real time.
“The introduction of Canada’s real-time rail marks the start of a transformative period for payments in our nation,” stated Payments Canada CEO Susan Hawkins in a press release on Monday.
“Designed specifically for our country, the [real-time rail] serves as a modern infrastructure for the payment ecosystem to flourish.”
The anticipated benefits of the system include cost savings through lower processing fees, decreased reliance on cash and cheques, and a reduced timeframe during which funds are temporarily inaccessible to recipients.
Initial participants in the system consist of Wealthsimple, Questbank, Peoples Trust Co., Paramount Commerce, Koho, DoBusiness.com, Digital Commerce Bank, and Bank of America. More participants, including all major Canadian banks, are expected to join in the upcoming months.
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Payments Canada systems process 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 this announcement is a significant advancement.
“We have an obligation to enhance our sovereignty, keeping pace with global advancements. Many countries already utilize real-time settlement,” he noted in an interview, mentioning that it is already operational in the U.S.
Payments Canada has faced delays in implementing the real-time rail system, which permits nearly instantaneous payment clearing around the clock, alongside other enhancements. The organization initially intended to have the system ready by 2019.
The ability to expedite payment clearing is particularly advantageous for businesses, according to Kim.
“This means that for businesses facing cash flow challenges, they can receive payments much more quickly from other companies,” he explained.
Payments Canada also mentioned that the real-time rail system will include essential centralized fraud prevention services and controls, such as payee confirmation, a fraud transaction safety score, a list of fraud risks, and a platform dedicated to fraud reporting.
Kim, who collaborates with U.S. credit unions on payment technology, expressed that there are concerns among American financial institutions regarding fraud risks associated with real-time payments, leading some U.S. banks to opt out of offering this service to their clients.
“When the delay is removed, there is less time for verification, which increases the risk of fraudulent transactions. With the real-time rail, it’s often difficult to recover funds,” he stated.
“Canada has implemented a different approach compared to the U.S., and I believe it’s beneficial to have that centralized system.”
