By: Ammar Mustafa
Andrew McCormack has an extensive background, from leading blockchain research, specifically, Project Jasper to being a leader at Payments Canada as a CIO.
Today he joined us to present a modern payment system. A modern payment system is fast, flexible, and secure. As of 2015, dozens of countries were focused on real time payment systems. Today, over 40 different regions embarked on a journey to implement real-time payment systems.
Canada can look to its neighbour, the US, for a prime example of a modern payment system. The National Automated Clearing House Association (NACHA) runs the automated clearing house (ACH) to enable clearance of credit and debit transaction on the same business day. With this system, funds are available in seconds.
Another example of real time payment system can be found in the UK. The Faster Payments Systems (FPS) that has been in use for about a decade and has been adopted by 21 financial and non-bank institutions. This system reduced payment times from the standard three working days to around a few seconds!
As you can see, there are various modern payment systems that exist today. To revamp Canada’s payment system, Payments Canada is currently developing new systems to modernize our payment system. The Large Value Transfer System (LVTS) will be replaced by Lynx, and Automated Clearing and Settlement System (ACSS) will be enhanced but the long-term goal is to replace it with the Retail payment system. Lynx, named after the quick, agile animal will comply with the Bank of Canada’s risk management standards to provide a safe and secure foundation to provide real time payments with ISO 20022 enabled. Its estimated date of arrival is in September 2021.
Like Lynx, the improved retail batch payment system will offer more security and faster payments. In fact, with this system irrevocable funds will be available within two hours. This will enable automated and more convenient fund transfers. This system will also add the ability of a third exchange.
What is ISO 20022?
ISO 20022 is a standardised approach that can be used by all financial institutions worldwide. This is the secret sauce that will help innovate payments from a banks perspective as it will improve compatibility, flexibility, and analytics. ISO 20022 also provides opportunities for cost savings and enhanced fraud prevention and data security. It will replace paper-based payments with data-rich electronic payments that can help improve customer service by the additional data supported through ISO 20022.
Real-time payments are a global trend and Canada must keep pace to satisfy demands and stay competitive. The good news is the future of payment systems in Canada seems to be on its way to modernize with the development of Lynx and Retail payment systems that include more security, faster payments, and the addition of a standard messaging system, ISO 20022. In an era where productivity is determined by the speed of our technology, the future of payments in Canada is going to be significantly improved and will help spur growth and innovation for individuals and businesses. Payments Canada is set to release these real-time payment systems starting 2021 to help support our growing need for fast technology.
About the writer:
Ammar is currently in his first year of BTM at Ryerson University, where he strives to seek initiative inside and outside the classroom. In doing so, not only has he learned to work with his peers but also build a foundation for a relationship with like-minded students. Although he is a first year, Ammar does not let that limit him as he is eager to learn and continuously tries to improve himself and others around him. Besides learning about technology, Ammar is passionate about exploring a wide variety of topics from sports analytics to management.
You can connect with Vlad on LinkedIn here.