Several years ago it was easy to send an Interac electronic transfer to a friend. In fact, the transferred funds are fake – or loaned out by the financial institution – overnight, which explains the restrictions on these transfers. The current clearing and settlement system is outdated and causes significant delays.
Not only will the new system enable real-time transactions to be made, but it will also move forward even further. For individuals, it will be possible for example:
- Real-time internet bill payment to avoid late fees;
- Pay the rent to the landlord including all the information on the check (month rent, apartment number, etc.);
- Pay your tax on the spot;
- Pay for a car purchase or a down payment on a property with one click instead of having to go to a bank to receive a wire transfer;
- Receive money from their insurance company to cover damage in seconds.
Governments will also be able to deposit money into citizens’ bank accounts in seconds.
Canadian Payments Update General Manager Andrew MacFarlane spoke about A. Game changer
(Big Change) for the Canadian Monetary System. Money transfers will be faster, irrevocable, secure, backed by data, and their limits can be greatly increased.
This new system provides a robust alternative to real-time money transfers using data, which significantly reduces the volume of verifications in the ecosystem.
In this context, checks that have already been rejected will disappear. In 2019 alone, the volume of their use by consumers and companies decreased by 12% and 15%, respectively.
We are working with the government on dispersal of funds and how they can reduce the issuance of checks, MacFarlane says. We are also working with other sectors to reduce the number of checks in the ecosystem.
Big change for companies
The Canadian Federation of Independent Business (CFIB) is eagerly awaiting this change.
Small businesses are most cash-intensive, but using checks can sometimes cause a delay of several days in reaching them. It can cause delayed payments to suppliers or deliveries
Yasmine Janet, vice president of the International African Union for National Affairs, says.
On the one hand, these same checks keep a record of transactions in the event of verification, which is why many of them continue to be used. The new system will be able to ensure speed and traceability, enough to put an end to this dilemma.
There are other avenues open to companies, such as being able to pay workers ‘salaries immediately after their shift or pay employees’ expenses quickly.
Payments Canada expects banking institutions to develop tools on their online platforms to use this new system and that fintech companies will create new products and services.
The next step will be to integrate this platform with others on the planet.
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