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Canada's ‘Roadmap’ to Modernize Online Money Transfer

By Brian Carlson

Payments Canada – a non-profit funded by financial institutions that helps establish Canada’s clearing and settlement infrastructure, along with processes and rules for payment transactions – delivered in March 2018 on the country’s first milestone in a multiyear payments modernization program to make fast money transfer online easier. It implemented a new credit risk model for the country’s existing retail payments system, the Automated Clearing Settlement System (ACSS), that aligns it with international best practices and risk management standards.1

Begun in 2015, Payment Canada’s modernization program aims to improve the way Canadians pay for goods and services and transfer money online. The task is substantial, given the fact that Payments Canada cleared and settled CAD$50 trillion in payments in 2015,2 or about $39 trillion in U.S. dollars. There’s also some urgency to better support online money transfer, as Canadians have seen a 20 percent drop in the use of cash since 2011.3


To help guide U.S. businesses that trade with Canada, this article provides an overview of Payments Canada’s modernization plan, its progress to date, and anticipated future changes.


The Canadian Payment System Modernization effort breaks down into three core planning pillars. First, a “Vision” whitepaper defined a broad set of needs and requirements to help drive the definition of a future-state fast online money transfer system. Next, the “Roadmap” whitepaper focused on how Payments Canada could meet that vision. Finally, the “Target State” whitepaper lays out all the details of the program based on information gathered for the Vision and Roadmap.


The Vision for Online Money Transfer in Canada


In April 2016, the Developing a Vision for the Canadian Payment Ecosystem whitepaper was released.4 The whitepaper was put together through an industry-wide consultation exercise that identified the needs of the marketplace and the features required for a modern payment ecosystem, according to Payments Canada.5 The document defines eight needs of a modern payment system for fast money transfer online.


Topping the list is the need for near-real-time payments, where and when needed, followed closely by an ability to make payment transactions data-rich with expanded and standardized information using the ISO 20022 standard. The other needs, in order, are transaction transparency, including payment status notifications to all relevant parties; make payments easier, using only an email address, telephone number, or social media handle; enabling international fast online money transfer for consumers and businesses in a practical and convenient way; activity-based oversight, with rules focusing on the services provided rather than the types of institutions providing them; and open, risk-based access with clearly defined requirements for payment system access without compromising security. (A risk-based access approach identifies and mitigates against access by entities with a high potential for money laundering or terrorist financing.6)


Finally, Payments Canada set a goal for the new payment system to be a platform for innovation. It wants the system to be flexible and adaptable, supporting innovation, decreased cost, and greater efficiency.7


The Roadmap to Fast Money Transfers


In November 2016, using the Vision whitepaper as a guide, Payments Canada released the Roadmap & High-Level Planwhitepaper.8 Working in collaboration with financial industry and other stakeholders, the Roadmap paper focuses on how Payments Canada can deliver on its vision for fast online money transfer. It’s based on five major initiatives.


The first initiative was the ACSS, already delivered in March. Payments Canada noted in the Roadmap that the aging technology of its existing platform wasn’t flexible enough to evolve and support the growth of modern payment systems, such as blockchain Distributed Ledger Technology, or to meet future regulatory requirements.


Next up: real-time capability. Canada is looking to develop an always-on system that can deliver funds in less than 60 seconds. This would allow for real-time clearing, rich remittance information through ISO 20022, and improved functionality for consumers, as well as small to mid-sized businesses (SMEs).


Third is enhancements to Canada’s automated fund transfer (AFT) system for batch payments, which will continue operating in parallel to the new real-time system. Enhancements include adding a third exchange, accelerating settlement, and transitioning to the ISO 20022 standard, all expected by the end of 2019. The remaining initiatives are to align with global regulatory standards and modernize Payment Canada’s rules framework. Canada plans to develop a modern set of digital-centric rules for high-value and retail payments that “will enable Payments Canada’s rules to remain relevant, reflect current market practices, achieve the appropriate balance between flexibility and compliance and facilitate innovation.”9


The Target State of Online Money Transfer Services


Finally, in December 2017, Payments Canada released the Modernization Target State Companion Reader.10 This whitepaper brings together concepts from the Vision and Roadmap to provide a detailed look at key requirements, including the core systems and their support structures, risk and regulatory requirements, access and settlement models, and tech platforms to transfer money online fast.


The Modernization Target State envisions three core payment systems that will coexist and complement one another in order to provide a broader set of payment options. The first is named Lynx, after the fast, agile animal, because it will enable high-value payments processed in near real-time. Lynx will replace the existing Large Value Transfer System (LVTS), Canada’s current real-time payment system, and will support ISO 20022.


The second payment system is SOE, or Settlement Optimization Engine. SOE is a batch payment system for lower-value, less time-sensitive payments and will replace the existing ACSS and U.S. Bulk Exchange (USBE). USBE is a parallel system used for payments in US dollars, drawn on a U.S. dollar account at financial institutions in Canada, but settled in the U.S. The plan is for the new batch system to enable faster automated online money transfer, such as those associated with payroll and bill payments. The final system is called RTR, or real-time rail. This is a new, always-on payment infrastructure to support immediate online money transfer of low-value transactions. The system will allow users to make payments using aliases (e.g., phone number, email) without needing the payees’ account number.


Also included in Modernization Target State is an overview of the proposed regulatory framework objectives. This is based around an overall goal to provide fair and open risk-based access. With Lynx, for example, the objective is real-time gross settlement with a “cover-all” credit risk model that requires all payments to be fully covered by liquidity in the system, in order to manage risk without need for a guarantee from the Bank of Canada.11



Canada’s new payment system is moving out of the planning phase, having achieved its first milestone in March 2018. With the modernization program, Payments Canada hopes to help financial institutions clear online money transfers faster, enabling more modern functionality like same-day payroll, expedited bill payments, and faster settlement of invoices. U.S. businesses navigating payment waters north of the border may wish to be aware of these changes as they roll out.

Brian Carlson

The Author

Brian Carlson

Brian Carlson has over 20 years’ experience as a content marketer, content strategist, editorial leader, and content management specialist. He has served as Head of Content Marketing for Travelers Insurance, Editorial Director of CIO magazine, and Content Director of EE Times.


1. “Canada delivers first milestone on payments modernization program,” Payments Canada;
2. “Modernization,” Payments Canada;
3. “Modernization,” Payments Canada;
4. Developing a Vision for the Canadian Payment Ecosystem, Payments Canada;
5. “A Vision for Canadian Payments Ecosystem,” Payments Canada;
6. “Risk Based Approach,” Thomson Reuters;
7. Developing a Vision for the Canadian Payment Ecosystem, Payments Canada;
8. Industry Roadmap & High-Level Plan, Payments Canada;
9. Ibid.
10. Modernization Target State, Payments Canada;
11. “Mod Blog: The Formalities and Informalities of Risk,” Payments Canada;

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