Bank of Canada is disappointed by payment system modernization delays, official says

The Bank of Canada is disappointed with the country’s lack of progress toward launching a modernized payments system, a senior bank official said Thursday.

Ron Morrow, executive director of payments, supervision and oversight at the central bank, said in a speech in Toronto that Canada lags other countries in rolling out real-time payment capabilities.

Canada’s Real-Time Rail system, which would allow instant transfers and settlement of payments to occur on a 24/7, 365 basis, was originally scheduled to be fully operational in 2022.

After numerous delays, however, Payments Canada said in April the system would only begin industry testing in 2026. No timeline was given for a countrywide launch. Payments Canada is the non-profit organization that owns and operates Canada’s national payment infrastructure and is funded by 110 financial institutions, including the country’s largest banks.

“I think it’s fair to say that we’re all disappointed this initiative hasn’t yet been launched,” Mr. Morrow told the Payments Canada Summit. “We’re behind other jurisdictions in rolling out real-time payment capability.”

Brazil, for example, managed to build and launch a national real-time payment system in just nine months, University of Toronto finance professor Andreas Park recently told The Globe and Mail.

Former Bank of Canada governor David Dodge said in a June, 2023, Globe opinion piece that the real-time rail system now “risks being out of date by the time it is implemented.”

Alex Vronces, executive director of industry group Fintechs Canada, said in an e-mail that he was glad to hear that the Bank of Canada is disappointed.

“As a country, we all should be,” Mr. Vronces said. “It’s embarrassing that Canada remains one of the few countries in the world to not have a real-time payment system by now.”

The existing system provides competitive advantages to Canada’s large banks at the expense of the country’s growing ecosystem of fintech startups, small banks and credit unions, Mr. Vronces said. Not only can banks charge fees for access to the payments system that they control, he said, but they also earn income on money that is sitting in the existing system that is still awaiting transfer and settlement.

“The only group who has anything to lose from the real-time rail are the biggest banks,” Mr. Vronces said. “Real-time payments take away a source of income for them – what’s called float.”

In a statement, Payments Canada chief delivery officer Jude Pinto said real-time rail “is a complex, large-scale, multiyear program.”

The exchange component was completed in 2023, Mr. Pinto said, and the clearing and settlement component will be built out through 2024 and will include real-time clearing for a large volume of already existing payments.

While Mr. Pinto said “the ecosystem is anticipating the launch of the real-time rail,” he did not comment on when the launch is expected.

There are more than 3,000 payment service providers in Canada that will need to register with the Bank of Canada within the first two weeks of November, Mr. Morrow said in his speech. The central bank was given regulatory responsibility over the retail payments industry in 2021 – when the number of payment service providers in the country was closer to 2,000 – and Mr. Morrow said official oversight is set to begin in the fall of 2025.

“There are a lot of benefits we can work toward if we have a real-time payment system, like lower fees for consumers and businesses sending money within borders and across them,” Mr. Vronces said. “The real-time rail is the system that will have the most level playing field in terms of access. But after all these years of delay and disappointment, we still don’t have a launch date.”