Canada’s Real-Time Payment Rails: 5 Reasons for SMEs To Get Excited

Nov 23, 2022

In the last real-time payment rails article, we dug into payment rails and how they worked. In this article, we outline why SMEs should pay attention to what is happening in Canada regarding the real-time payment rails launching next year and how it will alter how business is conducted.

Canada’s Real-Time Payment Rails 

The real-time payment rails, or RTR, will be Canada’s first national real-time payment system. It will allow Canadians to receive funds in seconds and initiate payments in real-time. To put it another way, the RTR is about to make things much easier for financial institutions, businesses, and consumers alike.

The Canadian RTR plan includes:

Established real-time payment capability

Enhanced automated fund transfers

An alignment with global regulatory standards, including ISO2022

We expect real-time payments will transform businesses across the country. As Payments Canada’s CTO John Cowan explains, Canada’s current payment systems cannot clear and settle payments in real-time. End users spend hours reconciling and validating data because of limited data fields. As many will attest to, after receiving payment, they have to match up the funds deposited into their account with the information that goes along with it. 

Payment Rails Explained 

A payment rail is a network that allows for the exchange of complex data in order to initiate the movement of money between parties. The parties could be consumers or businesses, and both parties can move funds on the network. Payment rails fundamentally provide the same functionality but differ in terms of payment type, speed, technology or location.

The 5 Reasons SMEs Should Get Excited

1. Move Away from Cheques

Canada’s real-time payment rail is about to make cheques obsolete. 

Since the pandemic, Canadians have slowly been moving away from cheques, but it’ll take time until they are obsolete. In fact, up until last year, Canadians were still using close to a billion cheques each year.

Cheques are a strain on businesses. They are expensive, prone to payment fraud and eat away at an accounting team’s time. Their slow processing time is a drag on a company’s cash flow and the economy. This outdated paper method can take anywhere from 4-8 business days to process and cost upwards of $15 to handle. 

SMEs will be happy to embrace RTR payments which offer a faster, safer and more efficient method. 

2. SMEs Will Have Their Pulse on Cash Flow 24/7/365

Every SME knows that cash flow is king. With this new modernized payment rail in place, a lack of visibility into a company’s cash position will be a thing of the past. The business’s available resources will be known in real-time – making it easier to deploy strategic decision-making to help the organization grow and scale. 

For instance, consider a common problem in every company, late payments. The unknowns surrounding when a payment will arrive or when a payment will be processed weigh heavily on workforce resources. From the hours spent chasing payments to the reconciliation process, the costs to the bottom line can be in the thousands. In fact, the old saying “time is money” could not be more relevant. With a request to pay functionality, this challenge is no longer. 

When a business can request payment with the same ease as sending an email, consumers can pay on time and immediately, and the receiver gains instant access to those funds.

Moreover, payment networks designed to be immediate and inclusive of payment requests provide additional data alongside the payment, helping to eliminate the need for time-consuming account reconciliation. 

3. Wider Reach for SMEs 

“Many businesses have been interested in payment systems that can deliver funds within minutes or even immediately,”

Hisham Salama, Bank of the West.

Need to send money five seconds from now? No problem; the real-time rail delivers ubiquitous reach any time of the day, any day of the week. With the RTR in place, enterprises can reach nearly every deposit account in Canada to either send funds or request funds. In an instant. The faster money moves through the system, the more we all benefit. 

4.  Reduce Fragmentation and Streamline Payments

This has been a long-standing complaint from SMEs. The payment process is fragmented, and businesses need instant payments that integrate with all aspects of running a business. The current payment system is costing SMEs time and money.

By having the RTR as a centralized system, SMEs will cut back on the time wasted on payments.

Document fraud, converting bank statements to different formats, and errors are simply three of the challenges faced. Canada’s new payment rails promise to do away with the time-intensive process of entering data, making corrections and validating by hand and human.  Financial reconciliation processes are about to become more efficient and accurate. 

5. Streamline Payments

On-demand payments are on the rise. For nearly a century, the concept of payday has been thought of as every two weeks or monthly. However, according to The Paypers, the need for immediate payment is growing. 

Real-time payments enable payroll on demand delivering increased flexibility and convenience to businesses and their employees. As the Canadian gig economy expands, the use cases for earned wage access (EWA) or on-demand payments continue to spread. 

From bonuses to contractors, the ability to pay immediately will have far-reaching effects. Employers that offer on-demand pay will likely see better employee retention rates, more productive employees and reduced payroll costs.

Preparing for Canada’s RTR Launch 

The launch of Canada’s real-time payment system will allow companies to evolve at a faster pace. And while it may take time for businesses and customers to fully embrace the new abilities that real-time payments offer, companies must look at ways to prepare and investigate the competitive advantages of the new payment system. 

We Can Help

VoPay’s scalable B2B payments platform embeds financial services and real-time payment capabilities into existing products, applications, or services for Canadian businesses. 

Contact one of our payment specialists today to watch your business grow

Related Posts

Never miss an insight

Get the latest Open Banking, Fintech & LendTech articles delivered
straight to your inbox every month!

Sign Up for Our Newsletter

This field is for validation purposes and should be left unchanged.