Canada Nears Launch of Instant Payment Technology

Payments Canada said Real-Time Rail, which allows banks to process payments virtually quickly, will be prepared for testing this summer.

Payments Canada has been under pressure from fintechs for years to accelerate the long-delayed Real-Time Rail fast payment system. At its annual Toronto conference, the organization focused on a new challenge: preparing banks and fintechs to use the system, since testing is expected to start in the upcoming months.

The context: In 2015, the government-reporting non-profit Payments Canada began establishing the foundation for the Real-Time Rail. Similar fast payment processing systems are already in place in the US, UK, and other nations, and they have been credited with boosting competition and bringing down consumer costs. To process small payments for clients, fintechs currently need to use a proprietary service like Interac. In addition, the Real-Time Rail would eliminate the need for bank drafts and paper checks by enabling customers to move funds between bank accounts instantaneously and directly. 

As previously reported by The Logic, the initiative has been slowed back by Canada’s big banks, which now make up the majority of Payment Canada’s membership and could lose ground to rivals with increased access to a national payment rail. Despite Payments Canada’s denial that it was unfairly influenced, bank executives who hold board seats pushed back on Real-Time Rail advancement. 

Every system is operational as the chief payments officer of Payments Canada, Donna Kinoshita, stated in an interview that there is now agreement on the necessity of moving forward. She added that the project has now transitioned from “aspirational” to “real,” saying, “We were all aligned … there were no dissenters.” According to Kinoshita, the Real-Time Rail’s technological backbone should be finished by July. After a year of testing, the system will be put into use.

Bank on it, with the Real-Time Rail nearly complete, Payments Canada’s next challenge is to conduct extensive testing and, eventually, onboard users. Kinoshita stated that “the excitement is palpable” but would not disclose the number of banks and fintechs that had joined up. According to Kinoshita, Payments Canada aims to facilitate innovative use cases rather than merely snatch market share from rival payment systems. She stated, for instance, that the organization is in discussions with the Receiver General regarding the use of the Real-Time Rail to provide emergency relief payments immediately following calamities like wildfires.

An appeal for action as both Susan Hawkins, CEO of Payments Canada, and Jeremy Wilmot, CEO of Interac, stated in their opening remarks at the conference Tuesday morning that updating the payment system is a collaborative endeavor. Whether Canada simply keeps up or establishes a new global benchmark for payment competitiveness will depend on the decisions we make today, Hawkins stated. Banks and fintech companies have “a ton of work to do on their ends” in preparation for connecting to the Real-Time Rail, according to Kinoshita.

No, the team means it, despite ten years of assurances that the Real-Time Rail will soon be completed, Payments Canada’s claim that it is nearly ready is still questioned. During a panel discussion at the Payments Canada Summit on Wednesday afternoon that included individuals involved in constructing its infrastructure, Deloitte senior associate Todd Roberts attempted to reassure the crowded auditorium. He claimed that this program had never, ever, ever been in a better position than it is at the moment. Although skepticism is natural, Kinoshita said she anticipates it will fade once the system is prepared for testing. “From a payments perspective, this is going to be the biggest transformation this country has seen in a very long time, if ever,” she stated.

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