Payments Canada has announced the launch of its national real-time rail payment system, which aims to enhance the speed of everyday transactions for both Canadian businesses and consumers.
The new system is designed to 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 within our nation,” stated Payments Canada CEO Susan Hawkins in a press release on Monday.
“As a national resource tailored to meet our specific needs, the [real-time rail] establishes a contemporary foundation for the payment ecosystem to expand upon.”
This system is anticipated to lead to cost savings by lowering processing expenses, decreasing reliance on cash and checks, and minimizing the duration during which funds are temporarily inaccessible to recipients.
Initial participants in the system 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 upcoming months.
Canadians who are scammed aren’t likely to get their money back; banks have no obligation to reimburse clients. But in Britain, it’s a different story. CBC’s Marketplace travelled to the U.K. to see how that difference has banks taking action against scams.
Payments Canada processes a variety of transactions, including debit card payments, 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 advancement.
“We need to do this for our sovereignty, and we must keep pace with global developments. Many other countries have implemented real-time settlement,” he noted in an interview, pointing out that it is already operational in the United States.
Payments Canada has experienced delays in implementing the real-time rail system, which facilitates near-instant payment clearing on a 24/7 basis, along with other enhancements. The organization had initially aimed to roll out the system by 2019.
The capacity for quicker payment clearing is especially beneficial for businesses, Kim explained.
“This means that if a business is facing cash flow issues and its working capital is low, it can receive payments more swiftly from other enterprises,” he said.
Payments Canada also mentioned that the real-time rail system will include obligatory centralized fraud prevention services and controls, 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, expressed concerns regarding fraud risks associated with real-time payments, noting that some U.S. banks have opted not to offer this feature to their customers.
“Eliminating the lag means there’s less time for verification, which can lead to fraudulent transactions. With the real-time rail, recovering funds is often difficult,” he stated.
“Canada has taken a different approach compared to the U.S., and I believe it is beneficial to have that centralized system in place.”