Much like contactless mobile payments, 'faster payments' are making a methodical push throughout Canada, an advance that's moving quicker than many other countries, especially the U.S.
Interac, Canada's national debit network, began pushing "instant" transactions about 20 months ago in an effort to bring real-time payments to e-Transfer, its digital money transfer service for person-to-person, business-to-business and business-to-consumer payments.
It made a concerted effort to expand faster payments in the past year, and recently crossed a couple of milestones—50% of transfers in Canada are now received instantly, allowing for immediate access to funds once deposited through online banking. And more than 65% of funds are deposited using a mobile device, according to Interac. Overall, more than 436,000 transactions are sent per day on average, with more than 958,000 on peak days. Interac's e-Transfer service, which debuted in 2002, has also reached an overall high water mark, with more than 13.5 million transactions totaling more than $5.2 billion in August 2016.
The U.S. is still in nascent stages of developing real-time transfers to power P-to-P and some business payments, with myriad initiatives ranging from Nacha's same-day ACH settlement to Early Warning's clearXchange bank P-to-P network, which covers more than half of the U.S. online banking market.
Much of Canada's financial services industry came on board with faster payments in the past year, said Peter Maoloni, assistant vice president of online products and platforms for Interac, Canada's national debit network.
"The financial institutions and acquirers seem to value digitizing cash and checks," Maoloni said. "That has allowed us to carve out a good footprint."
Canada is a relatively smaller market than the U.S., and that meant fewer institutions had to buy in to create a network effect that would be appealing to consumers.
This meant that proponents of faster payments could streamline their message, and that each institution's participation had a significant ripple effect that made those arguments stronger.
At 99.9% of financial services participation, "that coverage helps dramatically with adoption, since people know the service is going to be available regardless of the bank that the other party is using," Maoloni said.
Security is touted as a major part of the system's appeal, since with faster payments, sensitive information is not in flight for as long. "We have really stressed the safety of instant transfers," Maoloni said.
Ease of use has also been important, Maoloni said. "The real value of a real time transfer is you don't have to share any financial information, it's a truly social payment and I don't need to know account numbers for where the money is going."
Interac does not have input on bank processing strategy, but Maoloni said there's a broad push to take paper out of financial services in Canada. Canada has long ranked high in international rankings for mobile payments adoption and Interac partnered with Canadian banks on early tests of mobile contactless payments. Canada has also made strides in the past year in combating fraud and is an almost entirely EMV compliant country. Additionally, Interac helped Apple Pay achieve national coverage despite minimal support for the mobile wallet in Canada at its launch.
More recently, Interac began marketing its technology to countries outside of Canada, a strategy that Maoloni hopes will get a boost from the debit network's domestic success.
Canada has also made real-time payments the first item in a national vision to improve the country's payments system. While the country has had "good" success, there is still room to improve, according to Gareth Lodge, a senior analyst at Celent.
"There is yet to be the perfect solution anywhere," Lodge said. "Just as some countries can learn from the experience of Canada, equally Canada is learning from other countries, too, such as the need for ISO 20022."
Also, debit is challenging for real-time payments internationally, Lodge said. The account structure for debit is 16 characters, but [international bank account numbers] in other countries can be much longer, he noted.
"The time stamps for debit cards aren't as precise as some real-time solutions," Lodge said. "These aren't necessarily bad things, but taken together perhaps suggest long-term real-time payments needs real-time rails."