Although Canada has yet to set a launch date for its
A bill is before Canada's House of Commons to amend the Canadian Payments Act to allow non-bank Payment Service Providers (PSPs) to become members of Payments Canada, which operates the country's core payment networks. Payments Canada is currently open only to financial institutions. Alex Vronces, executive director at trade association Fintechs Canada, says it is likely that the bill to amend the Canadian Payments Act will pass this year.
Additionally, this past November, the government issued final regulations under the Retail Payment Activities Act, providing a framework for the Bank of Canada to oversee and regulate PSPs such as payment processors, money transfer services and digital wallet providers operating in Canada.
The Canadian government sees the legislation as a means of making payment services safer and more secure for consumers and businesses. Currently, the Bank of Canada is finalizing its supervisory guidance for payment companies, covering areas such as funds safeguarding and operational risk management.
Becoming Payments Canada members and complying with the Retail Payments Activities Act will be preconditions for PSPs to get Bank of Canada settlement accounts and direct access to the RTR and the Automated Clearing and Settlement System (ACSS), said Ron Morrow, the Bank of Canada's executive director of payments supervision and oversight. The ACSS batch payments system processes most Canadian retail payments, with settlement occurring on the following day.
As the ACSS is based on a set of bilateral relationships between participants, if anyone joins the network, then all the other members have to change their systems to admit the new member. "Payments Canada is rethinking the design of the ACSS so it might make sense for PSPs to wait until the new version is developed before joining the ACSS," Morrow said.
"There are 2,500 PSPs in Canada and they will need to register with us this November," Morrow said. "It will then take us 10 months to process the applications and review them. Finally, in September 2025 we will publish a list of PSPs that are overseen by the Bank of Canada and of PSPs whose application was rejected."
Wise, a U.K.-based cross-border payments provider with operations in Canada, plans to register with the Bank of Canada as a PSP when registrations open in November. This echoes the company's strategy in the U.K.; when the Bank of England opened up Faster Payments to nonbanks, Wise was the first PSP to be admitted.
Even though competition increased for Wise as more companies joined Faster Payments, the benefits were well worth the effort, said Brigit Carroll, Wise's policy lead for the Americas.
When Wise gained direct access to the U.K.'s Faster Payments scheme and got a settlement account at the Bank of England in 2018, it
Wise would like to see similar developments in the U.S. as well, following the examples set by the U.K., Canada and other major economies.
"We think the Fed should expand FedNow direct access to nonbank payment service providers, as U.S. consumers don't just use banks for payments," Carroll said. "This would increase competition and lower costs. The U.S. is the only G7 country that hasn't opened up direct access to real-time payments or not laid out plans to do so."
Currently, nonbank PSPs can access U.S. payment networks only via bank partners. Out of 9,000 U.S. financial institutions, only 600 have so far joined the FedNow real-time payment scheme, according to Elisa Tavilla, Javelin Strategy & Research's director for debit advisory services. None of Wise's partner banks has so far provided it with indirect access to FedNow, even though this is allowed.
Modernizing U.S. payment systems through the wide adoption of FedNow and other networks will dramatically lower costs and speed up payments for consumers and small businesses, said Penny Lee, president and CEO of the U.S. fintech trade group Financial Technology Association.
"As 82% of Americans use digital payments, it doesn't make sense to limit access to banks," Lee said. "Bringing in well-regulated fintech companies will ensure the benefits of faster payments are extended to all consumers."
While Canada is moving ahead with legislation that will give payment companies direct access to its core payment systems, the country's plans for faster payments were delayed multiple times.
In March 2021, Payments Canada selected domestic debit scheme operator Interac to provide the RTR's payments messaging exchange capability. The RTR's clearing and settlement technology will be provided by Mastercard, which also supplied the technology for The Clearing House's RTP system in the U.S. The RTR will offer 24-hour instant transfers using the
Unlike Canada's existing near-real-time payment service, Interac e-Transfer, the RTR will operate on a fully collateralized good-funds model where there is no credit in the payments network and transactions are final.
Christie Christelis, president and CEO of Technology Strategies International, a Toronto-based payments consultancy, doubts the RTR will be launched this year. "Canada's largest banks don't see many compelling benefits of making the required investments to bring the RTR to fruition and have been dragging their heels as it opens them to more competition," he said.
But Fintech Canada's Vronces said the government is adamant that the RTR must be built, even if banks have not been enthusiastic about the project.
"Bank opposition to the RTR has become more muted of late, even though they will lose the float they currently enjoy on funds being transferred to other institutions," Vronces said.
