By Doug Kreviazuk, Executive Director, Fintechs Canada.
Recently, I had the opportunity to pose a series of important questions to the new CEO for Payments Canada, Tracey Black. In a two-part interview, Tracey discusses their strategic priorities, the risks and challenges currently being faced in the payments system and the potential impacts on proposed legislative developments, and the potential opportunities from broadening access to the payments system and facilitating an Open Banking Framework for Canada.
Q: As the new CEO, what are your priorities for Payments Canada/payments system?
Tracey: Payments Canada remains focused on three strategic objectives anchored in our recently published corporate plan: to modernize the Canadian payments systems, operate and enhance current systems and facilitate interoperability and innovation in the payments ecosystem.
Payments Canada’s core purpose is the safe, sound and efficient operation of Canada’s payment systems. Our payment systems are critical financial market infrastructures that clear and settle hundreds of billions of dollars every business day. As part of our payments Modernization initiative, we have enhanced the retail batch payments system, also known as the Automated Clearing Settlement System (ACSS), through the addition of a third exchange. We’ve also modified the credit risk model, and taken the steps necessary to broaden member access. We are in the midst of replacing our high-value payments system, the Large Value Transfer System (LVTS), with a Real Time Gross Settlement (RTGS) system – Lynx – that will go live in 2021. Lastly, we are introducing a real-time payments system for Canada, referred to as the Real-Time Rail (RTR), that will support 24/7 availability of real time, irrevocable payments. This system is planned to launch in 2022.
From the ‘facilitate’ perspective, we aim to add value for the entire payment’s ecosystem. Our SUMMIT conference activities are an example of how we bring the ecosystem together. This year we were not able to hold our in-person conference due to COVID-19 and instead introduced a SUMMIT webinar series. We have seen strong interest in these webinars with hundreds of people logging in to virtually attend. Another example of how Payments Canada adds value for the ecosystem was the program management role we played in the launch of CRA Direct Deposit capability across many of our members. This initiative dramatically increased the number of Canadians who were able to easily register to receive emergency benefits, for example the Canada Emergency Response Benefit (CERB), through direct deposit – a faster, safer and more convenient method of payment than cheque.
COVID-19 has acted as a catalyst for many industries, payments included. Our expectation is that the acceleration to digital payments will continue, and we will continue to support our members, and the ecosystem more broadly, in efforts to digitize payments.
Q: Payments modernization has experienced some delay. How confident are you that the current goal for delivering the RTR in 2022 will be met? What is the key risk to delivery?
Tracey: The Modernization initiative is a very large and ambitious program that spans three payment systems. As is frequently the case with these large initiatives, there has been some re-planning to ensure that there is no impact to the safe, sound and efficient operation of these systems, and in consideration of the needs and readiness of all Modernization stakeholders. As the larger program evolves, we have committed to re-publishing dates each year (in December).
Central to our ongoing effort is working closely with all of our key partners, such as our member financial institutions, to assess program activities and manage prioritization as appropriate. This includes gathering feedback to support creating capacity for our partners as they respond to the impacts of COVID-19. To date, the Modernization program has seen minimal delay resulting from COVID-19. Prior to COVID-19, our Lynx launch date was targeted for the second calendar quarter of 2021. COVID-19 has caused a slight delay in this projected launch. We are now targeting the third calendar quarter of 2021 for Lynx launch. We are continuing to target a 2022 launch for the RTR.
The RTR relies on the Lynx system for aspects of settlement, and a potential second wave of COVID-19 could cause delivery risk for Lynx. It is important that we implement Lynx in 2021, and we have been very proactive in our planning to ensure that the new high-value payment system can be delivered on time. Another consideration with regard to the RTR is that we require regulatory approval of the bylaw for the new system, and the approval process is lengthy. A second wave of COVID-19 could have an impact on the bylaw approval timeline, potentially delaying the launch of the RTR.
Q: Regulation is critical to the success and growth of the payments system, what are your views on the need for “RPOF – the Retail Payments Oversight Framework”?
Tracey: RPOF will help to level the payments playing field by bringing payment service providers (PSPs) under regulation. The planned framework, when combined with the necessary changes to the Canadian Payments Act, will enable Payments Canada to welcome PSPs as members and participants in our national payments systems. We are very supportive of this outcome.
We have a new finance minister and we are looking forward to working with Minister Freeland to bring needed changes to the payments’ marketplace in Canada, including RPOF, that will support increased innovation and competition.
— To be continued in Part II released on September 10, 2020–
Doug: There is a renewed sense of optimism from Payments Canada’s CEO to support the broadening of opportunities in the payments system for non-traditional emerging players. Continuing along a path for change to embrace PayTech firms that align with other developed nations is critical to Canada’s future success. We support the direction of Payments Canada and will work with them to create a new reality for the payments system and all who use it.