This American Banker posting discusses a new instant payments development in Canada, whereby a number of banks are rolling out a more robust e-Transfer system service (e-Transfer for Business) that includes ISO 20022 messaging and added security features that allow for real-time settlement. The new product is targeting additional volume from businesses that continue to use paper checks and more expensive wire transfers, but who have not found the existing e-Transfer system to be a compelling tool. This new system is rolling out one year ahead of the expected Canadian Real Time Rail instant payments system. We had no previous knowledge of this development.
‘Thirteen of the country’s financial institutions are launching an instant business-to-business payments service more than a year ahead of the rollout of the country’s fast payments system, the Real-Time Rail….The companies will run the service on the existing Interac e-Transfer platform, but they’ve added features such as fraud vetting and the global ISO 20022 payments messaging standard in an effort to wean more companies off paper checks and wire transfers. The new features are meant to address the limitations of e-Transfer, a next-day settlement system which is popular with consumers but hasn’t achieved significant business adoption.’
The new system service increases the transaction limit from the current C$10,000 to a new limit of C$25,000. Apparently, this is deemed to be sufficient to attract the expected volume jump that they seek. We can say that the original $25,000 transaction limit on The Clearing House’s RTP did not stimulate great payables volume, so that was increased to $100,000 last year. We now expect that limit to be increased even further, so this contrasts a bit with the e-Transfer for Business expectation. Nonetheless, this provides another option in Canada, and once we get a briefing will know a bit more about settlement and so forth.
‘“The new service enables real-time reconciliation and automation of account payables and receivables and working capital as well as enhanced payment tracking from end to end,” Siromani said….Another important aspect of the new service is the automation of risk assessment to speed up payments. Although traditional Interac e-Transfer transactions are near-real-time, sending financial institutions may delay e-Transfer payments depending on the risk profile of a transaction….“Interac and participating [financial institutions] use a risk-detection model to analyze real-time payments fraud risks before e-Transfer for Business transactions are sent,” Siromani said. This enables all e-Transfer for Business transactions to be processed in real-time with funds arriving in recipients’ accounts within seconds….RBC is running an educational campaign about the service, targeting markets such as insurance firms that need to optimize their claims payments, with documents and payments being sent together. “Over time, as suppliers and buyers get to know e-Transfer for Business, there will be a network effect in terms of adoption, with users bringing in new users,” Siromani said.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group