Payments Canada has announced the launch of its national real-time rail payment system, intended to enhance the speed of daily transactions for both businesses and consumers across Canada.
The organization indicates that this innovative system will allow participating entities to exchange, clear, and settle payments securely in real time.
“The introduction of Canada’s real-time rail signifies the dawn of a new era for payments within our nation,” stated Susan Hawkins, CEO of Payments Canada, in a press release on Monday.
“Designed specifically for our country, the [real-time rail] serves as a modern foundation for the payment ecosystem to flourish.”
The new system is anticipated to result in cost savings due to reduced processing expenses, lower reliance on cash and checks, and a shorter duration during which funds are temporarily inaccessible to the recipient.
Initial participants in this system include Wealthsimple, Questbank, Peoples Trust Co., Paramount Commerce, Koho, DoBusiness.com, Digital Commerce Bank, and Bank of America. More participants are expected to join in the upcoming months, encompassing all major Canadian banks.
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Payments Canada handles various types of transactions, including debit card payments, direct deposits, bill payments, wire transfers, and checks.
Henry Kim, a professor at York University’s Schulich School of Business, remarked that this announcement represents progress.
“We must pursue this for our sovereignty, and we need to keep pace with global advancements. Many countries already have real-time settlement systems,” he explained in an interview, noting its existing implementation in the U.S.
Payments Canada has faced delays in establishing the real-time rail system, which allows nearly instantaneous payment clearing around the clock, along with other enhancements. Originally, the organization aimed to implement the system by 2019.
The ability to clear payments more swiftly is particularly advantageous for businesses, according to Kim.
“This means that if a business is experiencing cash flow challenges, it can receive payments from others much more quickly,” he stated.
Payments Canada indicated that the real-time rail system will also include mandatory centralized fraud prevention services and measures, such as payee confirmation, a fraud transaction safety score, a list of fraud risks, and a platform for reporting fraud incidents.
Kim, who collaborates with U.S. credit unions on payment technology, noted that some U.S. financial institutions have expressed concerns regarding fraud risks associated with real-time payments, leading some banks to refrain from offering this feature to their clients.
“Eliminating the delay reduces the time available for verification, which could allow for fraudulent transactions. With the real-time rail, recovering funds can often be difficult,” he added.
“Canada has taken a different approach than the U.S., and I believe having centralized controls is a positive development.”