Real-time payments systems are evolving rapidly around the world – these networks represent the future of financial services, yet Canada’s AFT system is lagging. While several other countries have made great strides in building more efficient networks (designed for both individuals and businesses to receive and make traceable, real-time payments), Canada requires significant changes if it wants to keep pace with global trends.
What are real-time payments?
Real-time payments (RTPs) refer to the transfer of funds between two bank accounts within seconds or minutes.
This type of payment technology offers immense value compared to traditional methods: immediate availability guarantees that money can be received almost instantly, while confirmation messages indicate whether the transaction has succeeded or failed.
Additionally, RTPs offer improved convenience through 24/7/365 availability and greater transparency thanks to end-to-end tracking information available to both sender and receiver.
Real-time payments in Canada
Currently, the Automated Funds Transfer (AFT) system that Canadian banks use does not support the necessary features for real-time payments: all transactions must go through the batch processing infrastructure before being sent out for settlement on specific business days.
Depending on bank-handling procedures, this process can take several days or longer. As a result, many Canadian consumers experience long periods of uncertainty when it comes to transferring money abroad or waiting on incoming international transfers – making it difficult for people and businesses alike who rely on timely transactions.
What needs to change?
Canada’s AFT system must keep pace with nations embracing modernizing payments networks. We need to extensively overhaul several outdated regulations while also increasing investments from Canada’s leading institutions. Banks require new infrastructure capable of dealing with real-time payment protocols (such as ISO 20022 messages); this will require significant investments in information technology systems both within individual banks and across multiple institutions for RTPs to become widely available.
Technical challenges aside, organizations may also struggle with compliance standards set out by local regulators to use real-time payments technology securely. Achieving regulatory recognition will likely be needed before any meaningful change can happen at scale.
Moving forward, federal organizations should look at establishing uniform standards regarding RTP protocols. Additionally, governments need to explore new incentives that encourage investment from banks – either for developing their own technological solutions or partnering with existing innovative start-ups that operate outside traditional banking channels.
Taking these crucial first steps will help make RTPs a reality – one that will allow Canadians access to transformative and much-needed financial services without having to worry about delays or costly fees currently associated with cross-border transfers.
What’s next for RTP
Integrating RTP networks into Canada’s AFT system will provide enormous benefits domestically and abroad. RTPs have the potential to allow government agencies and private organizations alike to enjoy greater efficiency when it comes to moving money quickly around the world – while also reducing or eliminating any tangible costs along the way. The onus is on Canadian leaders – both in government and the private sector – to make RTPs a priority in 2023 and beyond.