Payments Canada continues to move ahead with its Real-Time Rail (RTR) system, announcing that Tata Consultancy Services (TCS) will serve as the integration lead.
TCS is a global IT service, consulting, and business solutions company. As the integration lead, TCS will help plan and coordinate activities with industry stakeholders for the integration of RTR components, and deployment of the new system.
Canada is currently in the process of developing a RTR system which is meant to modernize the country’s core payments infrastructure. RTR will allow for payments to be sent and received within seconds. It is something that has been touted as key in a world of emerging FinTech startups.
Originally scheduled for launch in 2022, Payments Canada has now said that the RTR system is slated to begin in mid-2023.
The partnership will make use of TCS’s knowledge of the Canadian payment industry and experience with large payment initiatives. TCS will work with Interac, the RTR’s exchange provider, and Mastercard’s Vocalink, the clearing and settlement solution provider, to ensure a successful delivery.
TCS claims experience helping update complex payment engines for global banks. TCS’ payments clients include national payment system operators, central regulators, security exchanges, custodian firms, brokerage firms, payment card schemes, global card issuers and card acquirers, device manufacturers, global money transfer organizations and FinTechs.
Mastercard-owned Vocalink was selected in 2020 to provide the clearing and settlement services portion of the RTR. Interac was picked for the RTR, using the already-existing technology behind its Interac e-Transfer service, to build the exchange component.
“With three decades of experience in delivering market infrastructure solutions, TCS will be a valuable partner in the delivery of the Real-Time Rail,” said John Cowan, chief technology and operations officer of Payments Canada. “Testing and deployment is a critical step in the introduction of the new real-time payment system, and we’re excited to work with TCS to execute on this next step for the RTR as we help shape the future of payments in Canada.”
Operated by Payments Canada and regulated by the Bank of Canada, the RTR will allow Canadians to initiate payments and receive irrevocable funds in seconds, 24 hours a day, every day of the year.
Payments Canada called the RTR a fundamental part of its multi-year industry program to modernize the infrastructure, rules, and standards that underpin payments in Canada.
But in order to modernize the infrastructure, Payments Canada needs to complete it first. Canada has lagged when it comes to a real-time payment system. More than 54 countries globally already use a similar system. And Payments Canada has been working on modernizing its system since 2015, consulting with more than 100 organizations within the payments ecosystem.
A FinTech executive with knowledge of the system and who preferred not to be named told BetaKit on background that they weren’t surprised to hear that Payments Canada had settled on a global consultant. “They could really use the help,” the individual told BetaKit. “I just hope it will accelerate the process.”
According to a recent story in The Logic, Payments Canada CEO Tracey Black cited the project’s complexity for the delay. But The Logic reported the reason for the delays is that “Canada’s largest financial institutions still largely control the direction of Payments Canada” and reported that individuals who had worked closely with Payments Canada said costs, along with which features to include in the system, have been the subject of debates.
A report from Deloitte, titled Payments Modernization: Balancing the Risks and Rewards, noted a RTR system comes with a lot of positives: “With real-time payments, for instance, consumers can send and access funds as they need, businesses can improve their cash flow management, large enterprises can qualify for better terms of trade with their suppliers, and government agencies can rapidly disburse emergency relief funds.”
But the same report also pointed out the risks of developing the system. “Concerns that the industry, Payments Canada, and regulators will not be able to collectively execute the plan in Canada—due to its scale, scope, and speed—are raising a number of delivery risks.”
The report said competing priorities, skills shortages, and capacity constraints may prevent the project from being completed on time, potentially increasing costs and risks.
Currently, Payments Canada’s Lynx system is designed to process large-value, time-critical payments in real time for 16 major financial institutions, as well as the Automated Clearing Settlement System. The system was developed last year.
Deloitte’s report warned that reliance on new technologies could complicate setting up a system, particularly if they’re not compatible with systems that currently process critical payments. “Aside from execution risk, this could lead to customer confusion, service disruptions, system failures, and widening gaps in risk management oversight,” the report notes.
And that’s exactly what appeared to take place recently when CBC News reported that a couple’s $10,000 wire to their son’s account was mistakenly deposited into a stranger’s account and then vanished.
Werner Antweiler, an associate professor at the Sauder School of Business at the University of British Columbia, told CBC that “such errors are a direct result of Canada’s flawed wire transfer system” called Lynx.
Payments Canada’s systems cleared and settled over $135 trillion – more than $539 billion every business day – in 2021. Clearing is the process that allows banks to collect or pay out for items drawn upon or paid into accounts within their institution, while settling allows banks to accept cheques and bank drafts from other financial institutions for deposit.
Transactions that pass through these systems include debit card payments, pre-authorized debits, direct deposits, bill payments, wire payments, and cheques initiated and received by Canadians and Canadian businesses.
Feature image by Mohamed Hassan via Pixabay.