During the Glenbrook Payment Book Camp we make clear that national payments systems are domestic by definition. Each country has its own set of systems to effect payments. We point out that national payment systems differ in many of their details. Regulation, operating rules, governance, ownership, technology, and more are highly variable.
At the same time, we also point out that major components are generally similar. An overnight, batch-based system for low-cost, low-value retail payments and an instant, irrevocable wire system for high-value transfers are typical of most countries.
Across the planet, countries are planning, designing, trialing or enjoying fully deployed immediate funds transfer systems, new ones that instantly transfer lower value payments. The UK’s Faster Payments system and The Clearing House’s Real Time Payments (RTP) are two examples of this system type.
Beside increased speed of payment, a second push for changes to national payment systems is the need for a richer representation of the data surrounding the payment transfer itself. Remittance data, for example, communicates what the payment is for, which invoices a payment may be covering, and what trade terms were taken by the payor. ISO 20022 is the internationally recognized method for representing this information and support for it has become a new priority not just for system operators but for financial institutions and enterprise customers.
Generally, major upgrades, never mind deployment of an entirely new system, are performed in a step-wise manner because of the critical nature of these systems, the cost, and the difficulty of herding system stakeholders through the many stages needed to achieve broad support and usage.
Undeterred by those realities, Canada is taking on a comprehensive upgrade to multiple systems over the next few years, including its overnight settlement and wire systems while simultaneously planning for its own immediate funds transfer system, codenamed Real Time Rails. Significantly, each system upgrade will include support for ISO 20022.
Payments Canada is the non-profit organization mandated by the federal government to manage, operate, and upgrade these systems.
In this Payments on Fire episode Glenbrook’s George Peabody speaks with Justin Ferrabee, Payment Canada’s COO about his organization’s work, how its systems differ from those in the U.S., and what’s ahead. It’s a great conversation between payments geeks.