In recent years, countries around the world have been moving to upgrade their legacy systems to enable real-time payments and data-rich transactions. In 2016, Canada announced plans to build a new core clearing and settlement system. The plan includes: establishing real-time payments capability (RTR), enhancing automated fund transfers and aligning with global regulatory standards.
Payments Canada is leading the charge on this plan and their vision is the creation of a truly modern payments system that strengthens Canada’s competitive position and is fast, flexible and secure.
In November 2020, Payments Canada selected Mastercard’s Vocalink as the clearing and settlement solution provider for Canada’s new real-time payments system, the Real-Time Rail (RTR).
In March 2021, Payments Canada announced Interac Corp. as the exchange solution provider for Canada’s real-time payments system, RTR. This announcement follows a selection process that included participation from the Bank of Canada.
Interac will leverage the technology behind the Interac e-Transfer service, which is currently used daily by millions of Canadians when building the exchange solution for the RTR. This includes support for the ISO 20022 messaging standard, as well as compliance with the Bank of Canada’s risk management standards for prominent payment systems.
The RTR is a fundamental part of Payments Canada's multi-year industry program to modernize the infrastructure, rules and standards that underpin payments in Canada.
Operated by Payments Canada and regulated by the Bank of Canada — the RTR will allow Canadians to initiate payments and receive irrevocable funds in seconds — 24 hours a day, 365 days a year. By leveraging the ISO 20022 data standard, the system will support payment information travelling with every payment. The RTR is expected to launch in 2022.
In late May, Fintech Cadence hosted a panel to discuss a major technological improvement in the RTR payment space.
Here’s who participated:
The moderator: Elvis Wong, Director of Financial Health, Fintech Cadence.
Panellist 1: Cyrielle Chiron, Chief Strategy Officer, Payments Canada.
Panellist 2: Hamed Arbabi, CEO and Founder of VoPay.
Panellist 3: Kirkland Morris, Vice President, Enterprise Initiatives and External Affairs, Interac Corp.
Here are the highlights:
All three panellists seem excited about real-time payments and know that they are a key driver of innovation in the space.
Cyrielle says, “It is exciting because you don't modernize the payment structure of a country every day. Real-time payments have been such a catchphrase (globally) over the past few years, and Canada is (finally) joining a club that is pretty meaningful. If you look around, there are markets like India that have done unbelievable things."
Kirkland points out that Australia is our payments counterpart, and their journey to NPP (New Payments Platform) was a tough one. However, they’re beginning to find their stride.
Hamed is confident that advancement in real-time payments will boost innovation across many industries, and meet universal demand for faster payments. It will also boost revenue for businesses. He sees some industries such as supply chain management, seeing enormous gains due to enabling real-time payments from customers or businesses to vendors.
RTR Payments and Fintech
With Interac having real-time payments already in place, panellists dig into why Real-Time Rails (RTR) will make an even bigger difference.
Interac has done a fantastic job in meeting consumers' needs over the past two decades. So, in many ways, through an existing solution, there is an ability to offer some of the benefits that relate to that real-time payments experience. But, that’s done without the ability to settle in the background at the same time, according to Kirkland.
Currently, there is a whole elaborate set of arrangements that extend provisional credit to use, so they get the effects of immediate payment without money, changing hands, behind the scenes instantly. RTR provides the opportunity to catch that clearing and settlement infrastructure in the back-end with the user’s front-end.
Other benefits include: *ISO 20022, the global standard for electronic data interchange between financial institutions. It allows Canadidans to move past the bare minimum components of a payment and into higher quality data, speed and safety of payment settlement. Canadians will also see an increase in transaction size.
*Australia used ISO 20022 for their NPP
RTR and Data Transparency
Data. Data. Data. You’ll hear the word many times in the RTR space. Panellists envision using that data in the real world.
With ISO 20022 you get more data. For example, when you look at bank statements you’ll see a transfer from XYZ and it’ll have numbers and you’ll have an amount. With RTR you’ll have more information, such as including a message, invoice details etc. in a transfer, says Cyrielle. For consumers, it’ll make life easier.
For businesses everything will be easier: Think reconciliation. No more wasted time trying to figure out where a payment came from. No more paper cheques, invoices or trying to match a PO.
Payments will be received faster, will be easier to reconcile and ideally will go straight to processing. Everything will be connected. You’ll be able to link to a request to pay, press a button and everything goes into processing.
Businesses today spend an awful lot of time, energy and unfortunately, dollars, reconciling payments.
“But if you can marry all of the information together directly in a payment message, the ability to take out manual intervention and the ability to automate and further find efficiencies, in some of those back-office functions is real. That opportunity is real,” says Kirkland.
Moreover, this level of innovation benefits the economy. It’ll benefit our country by being more efficient and reduce the number of manual errors. Again, the opportunity is real.
Thank you to Fintech Cadence for the opportunity to join a panel of industry leaders from Interac and Payments Canada. We are very excited to see how RTR in Canada unfolds and we are privileged to be part of this movement. Stay tuned for more panel discussions and real-time rails insights over the next few months!