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The UK’s Faster Payments system has been in place for more than a decade, Australia has the Real Time Gross Settlement (RTGS) system, and India has one the fastest and most efficient real-time payment systems in the world.
North America has been comparatively slower in the uptake of instant payments, however the future is looking good for both the US and Canada. In the US, the Clearing House announced the RTP network in 2018, and the Real Time Rail network from Payments Canada looks set to arrive later this year.
What are Real-Time Payments?
Real-time payments, as the name suggests, refer to transactions that are processed and deposited instantly. Unlike traditional electronic payments, which can take several days to process, real-time payments facilitate the immediate transfer of funds between parties.
Why are Real-Time Payments Important?
Real-time payments have several benefits, including:
Speed: It goes without saying that the biggest advantage of real-time payments is the speed of the transfer, which makes them ideal for urgent payments, such as emergency funds, bill payments, and payroll.
Convenience: Real-time payments eliminate the need for paper checks, reducing the risk of fraud (checks cashed twice) and stolen or lost checks.
Security: Because real-time payments are sent digitally, they are very secure, as they use encryption and authentication to protect user information.
Cost-Effective: Real-time payments are cost-effective for businesses and individuals, as they are usually processed on a cost-per-transaction basis, which eliminates processing and transaction fees.
Real-Time Payments in Canada
Canada has been rather slow in adopting real-time payments, with several barriers hindering the rollout of the new system. The launch date has been set back several times, however Payments Canada, the governing body of Canada’s digital payment system, states that 2023 will be the year that the Real-Time Rail (RTR) finally arrives on the scene.
What is the Real-Time Rail System?
The RTR system is a new payment infrastructure that facilitates real-time fund transfers between financial institutions in Canada. The RTR system is operated by Payments Canada, and was announced in 2021 for a 2022 arrival, however as previously mentioned, this has been pushed forward into 2023. The system uses ISO 20022 messaging standards, which offer enhanced security, transparency, and efficiency.
Impact of Real-Time Payments on Canada’s Payments Landscape
The introduction of the RTR system is set to transform Canada’s payments landscape significantly, which has notoriously relied on traditional payment methods such as paper checks, money orders and cash. Real-time payments will offer individuals and businesses speed, convenience, security, and cost-effectiveness, and should ultimately allow for new revenue opportunities and greatly improved cash flow. The RTR system will also enhance competition in the payments industry, as it provides a level playing field for all financial institutions, regardless of their size or location.
Conclusion
Real-time payments are the future of the payments industry, with the results being showcased all around the world. The introduction of the Real-Time Rail system in Canada is set to transform the payments landscape for everyone involved, including consumers, businesses and financial institutions. The RTR system will enable individuals and businesses to make real-time payments, enhancing competition and innovation in the payments industry.