Canada’s Real-Time Rollout Offers Glimpse of Payments Possibilities

Real-time payments are coming to Canada in 2023 as the country’s Real Time Rail (RTR) scheme gets switched on for a nation that’s been making good use of instant electronic transfers for two decades, offering a wealth of near-real-time experience to markets where real time is headed.

As the Bank of Canada and Canada’s Retail Payment Activities Act create ideal conditions for the expansion of instant digital money movement, one of the entities involved in bringing real-time to Canada is Interac Corp., whose pioneering Interac e-Transfer system grew from a coalition of financial institutions that collaborated to solve for transfer speed in the early 2000s.

Now super familiar — and even foundational — to Canada’s financial system with its account-based transfers, in 2021, Interac was designated as a Prominent Payments System (PPS) by the Bank of Canada. This recognizes the importance of the system to Canada’s economy and its financial system as a whole.

“Their rationale and reason for this designation was due to the prominence of the service in the country, as in the number of users, the number of financial institutions and the amount of volume that is going through the service,” Anurag Kar, assistant vice president, money movement products at Interac, told PYMNTS.

“It’s fully ingrained in the retail consumer’s [financial flow] in Canada,” he said, adding that “a lot of businesses, micro, small or even medium-sized businesses, use the service.”

Likening the Interac e-Transfer product to Zelle, Kar told PYMNTS that rather than taking the freestanding app approach, Interac e-Transfer works more like instant direct debit, allowing consumers to send or receive funds within seconds or minutes between debit accounts. The Interac e-Transfer functionality is embedded in most of the country’s major mobile banking apps as a feature.

“If I log into my financial institution’s mobile banking app … I just have to provide an identifier, like a mobile number or an email address, and then I can send them money,” he said. “That individual then gets a notification that they either have received an auto-deposit of those funds, or can click to deposit funds, depending on how they are set up to use the service.”

This is important, as Kar sees digital advancements of the pandemic becoming permanent fixtures of the payments landscape — and that’s proving especially true regarding the financial tools they’re using.

“[With Interac e-Transfer] I can go out with my friends, I can have those experiences as life is kind of coming back, and then I can pay [people] back or split the bill right away,” he said. “That’s why we’ve seen a lot of adoption and heightened usage over the course of a pandemic. Everyone wanted to essentially have a digital payment channel to pay back or be paid.”

See also: Payments Canada Selects Interac For Real-Time Rail Exchange Services

Making the Business Case

The pandemic-led digital shift is also having a lasting impact on Canadian businesses, with PYMNTS research finding Canadian firms expressing a high interest in real-time payments.

Kar said that nearly every company had to take a crash course in payments digitization at the start of the pandemic. If they didn’t, they couldn’t collect payments or interact with customers — or even provide basic products or services.

“What businesses really see out of Interac e-Transfer is a quick, simple, real-time capability for them to receive fund,” Kar said. “That’s why we started seeing a lot of businesses adopting it.”

This is giving businesses new and faster payments solutions, from microbusinesses to enterprises, as each realizes the role that real-time can play in cash flow and reconciliation.

“It’s available through the financial institution’s mobile online banking channels, or, if you’re a large corporate, you can send money out to essentially anyone in the country through an account number by uploading a file or calling a bunch of APIs from their financial institution,” he said.

He called it “essentially a large, real-time processing system where behind the scenes, we do a lot of fraud detection, risk management, and then notify individuals that you have money.”

Interest among financial institutions and their corporate clients led to the 2021 launch of Interac e-Transfer for Business, Kar said. While the consumer product was targeted at allowing retail consumers to send money to a digital alias via an email address or mobile number, the new Interac e-Transfer features offer elements that are more tailored to companies’ needs.

“For businesses, we also added the ability to send money to account numbers and append any kind of transactional data that someone needs to provide to the recipient for reconciliation purposes,” he said.

The first observation from that product launch?

“We are seeing more and more usage of Interac e-Transfer to replace paper instruments, things like checks,” Kar said. “It is something that can be catered to with the transfer by providing the same data that’s in a check in a digital payment so someone can reconcile the payment.”

Related: AI, Passive Authentication Are ‘Game Changers’ for Frictionless Commerce

Ready for Real-Time

In May, Interac announced it had processed 1 billion transactions in the prior 12 months — a new record for the platform — equaling $338 billion in payments, a 16% increase over 2020.

This is being driven largely by Canadian consumers reemerging and reengaging with the physical world, dining out and attending events, with more people splitting checks via digital means and driving higher new volumes through a system that’s widely used already.

“As individuals are going back to their normal life, going out with friends and having a good time, you don’t need to pay someone back or transact with cash,” Kar said. “Even for microtransactions, you can use digital payments for it. Maybe scanning a QR code to make a charity donation as you’re walking through the train station, or maybe paying back a friend, we’re seeing these experiences.”

As for the coming year, Kar said, “In the next 18 months, our growth trajectory is to continue to build up these experiences for the retail customer, and at the same time allow those businesses to either transact with themselves or that retail customer base that we have.”