Payments Canada

Last updated
Payments Canada
Canadian Payments Association
Payments Canada logo.png
Agency overview
Formed1980;43 years ago (1980)
Minister responsible
Agency executives
  • Garry Foster, Board chair
  • Tracey Black, President & CEO [1]
Parent departments Department of Finance
Bank of Canada
Key documents
Website https://payments.ca

Canadian Payments Association, carrying on business under the brand name Payments Canada, [2] [3] is an organization that operates a payment clearing and settlement system in Canada. The Canadian Payments Association was established by the Canadian Payments Act in 1980. Among other responsibilities, it regulates and maintains directories of bank routing numbers in Canada. [4]

Contents

In 2016, Payments Canada's systems cleared and settled 7.4 billion payments totaling over $50.8 trillion—or, $201.5 billion on average each business day. [5]

Services

Payments Canada is a corporation that:

Systems

Clearing and settlement systems are essential to the smooth functioning of the Canadian economy. These systems allow financial institutions to calculate how much is owed to each other as a result of their customer's transactions and to transfer those funds to settle those balances.

Payments Canada operates the following clearing and settlement systems. [7]

  1. Lynx — Canada's primary system for clearing and settling large-value, time-critical Canadian dollar transactions. Regulated by the Bank of Canada, it is an electronic wire system that facilitates the transfer of payments in Canadian dollars between Canadian financial institutions across the country. Launched in September 2021, a second release of the system is planned for late 2022 and will enable the ISO 20022 messaging standard. [8]
  2. Retail batch payment system, consisting of: [11]
    1. Automated Clearing Settlement System (ACSS) — a system through which Canadian-dollar cheques and electronic payment items (such as direct deposits, ATM withdrawals, point-of-sale transactions, online payments, and pre-authorized debit and bill payments) are cleared and settled. The system tracks the exchange of payment items and the resulting balances due to and from direct participants. ACSS was established in 1984. [10]
    2. U.S. Dollar Bulk Exchange (USBE) — a parallel system to the ACSS used for payment items in US dollars in Canada.

Governance

The Canadian Payments Association carries business under the brand name Payments Canada, [2] [3] which it adopted in 2016. [10]

Payments Canada is headquartered in Ottawa, with an office in Toronto. The organization has 115 members including the Bank of Canada, chartered banks, trust and loan companies, credit union centrals, federations of caisses populaires, and other financial institutions.

The Minister of Finance has oversight responsibilities for Payments Canada. The Governor of the Bank of Canada has oversight responsibility for the LVTS and ACSS under the Payment Clearing and Settlement Act.

The 13-member Board of Directors consists of the organization's president; three directors who are directors, officers or employees of members that, in the normal course of business, maintain a settlement account at the Bank of Canada; two directors who are directors, officers or employees of members other than those described previously); and seven directors who are independent of the association and of its members.

A 20-person "Stakeholder Advisory Council" (SAC) provides advice and input to represent the interests of users of the payments system. The SAC was established in 1996 on a voluntary basis and was formalized in the Canadian Payments Act in 2001. [12] The SAC provides advice to the Payments Canada Board of Directors on payment, clearing, and settlement matters, and contributes input on proposed initiatives, including by-laws, policy statements, and rules that affect third parties. It also identifies issues that might concern payment system users and third-party service providers, and suggests how they could be addressed.

Payments Canada's "Member Advisory Council" (MAC), created in 2015, serves as a consultative and engagement forum for Payment Canada's members. [12]

Activities

Payments Canada is responsible for ensuring that significant rule changes follow an established public consultation process to seek input from key user groups. In 2010, it facilitated industry-wide development with frameworks for contactless debit payments. Payments Canada is also tasked with leading the Canadian effort to adopt ISO 20022. [13]

In 2015, Payments Canada released a 5-year corporate strategic plan, [12] the core purpose of which was to underpin the Canadian financial system and economy by providing safe, efficient, and effective clearing and settlement of payments. Payments Canada identified three long-term desired outcomes that would lead the organization to attaining their vision, addressing payment trends, and managing risks. These desired outcomes are as follows:

  1. Modernize — undertaking a multi-year program to modernize the core payments systems, including the rules, standards, and technology infrastructure. In May 2017, with the Bank of Canada and the R3 consortium, as well of some Canadian chartered banks, announced the results of a year-long trial of R3 consortium's Distributed Ledger Technology (DLT), which was decided to not be adopted by Canada at the time for reasons of transaction privacy and scalability. [14]
  2. Operate and Enhance — continuing to ensure that the safety, efficiency, and effectiveness of Payment Canada's current systems are met through required enhancements to technology resilience and rules as well as through changes that respond to business needs.
  3. Transition and Renewal — continuing to build Payments Canada's organizational capacity and continuing internal process improvements "by focusing on leadership development, risk management, technology, operations and corporate administration."

Payments Canada holds Canada's largest payments conference, The Summit, on an annual basis. [15]

Related Research Articles

<span class="mw-page-title-main">ISO 4217</span> Standard that defines codes for the representation of currencies

ISO 4217 is a standard published by the International Organization for Standardization (ISO) that defines alpha codes and numeric codes for the representation of currencies and provides information about the relationships between individual currencies and their minor units. This data is published in three tables:

<span class="mw-page-title-main">SWIFT</span> Financial telecommunication network

The Society for Worldwide Interbank Financial Telecommunication (Swift), legally S.W.I.F.T. SC, is a Belgian cooperative society providing services related to the execution of financial transactions and payments between certain banks worldwide. Its principal function is to serve as the main messaging network through which international payments are initiated. It also sells software and services to financial institutions, mostly for use on its proprietary "SWIFTNet", and assigns ISO 9362 Business Identifier Codes (BICs), popularly known as "Swift codes".

<span class="mw-page-title-main">ACH Network</span> United States automated clearing house

In the United States, the ACH Network is the national automated clearing house (ACH) for electronic funds transfers established in the 1960s and 1970s. It processes financial transactions for consumers, businesses, and federal, state, and local governments. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit for payroll, Social Security and other benefit payments, tax refunds, and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other kinds of bills.

<span class="mw-page-title-main">Interac</span> Canadian interbank network

Interac is a Canadian interbank network that links financial institutions and other enterprises for the purpose of exchanging electronic financial transactions. Interac serves as the Canadian debit card system and the predominant funds transfer network via its e-Transfer service. There are over 59,000 automated teller machines that can be accessed through the Interac network in Canada, and over 450,000 merchant locations accepting Interac debit payments.

The Large Value Transfer System, or LVTS, was the primary system in Canada for electronic wire transfers of large sums of money, and was operated by Payments Canada. It permitted the participating institutions and their clients to send large sums of money securely in real-time with complete certainty that the payment will settle. In September 2021, Payments Canada replaced LTVS with its Lynx high-value payment system.

Real-time gross settlement (RTGS) systems are specialist funds transfer systems where the transfer of money or securities takes place from one bank to any other bank on a "real-time" and on a "gross" basis to avoid settlement risk. Settlement in "real time" means a payment transaction is not subjected to any waiting period, with transactions being settled as soon as they are processed. "Gross settlement" means the transaction is settled on a one-to-one basis, without bundling or netting with any other transaction. "Settlement" means that once processed, payments are final and irrevocable.

The Australian financial system consists of the arrangements covering the borrowing and lending of funds and the transfer of ownership of financial claims in Australia, comprising:

<span class="mw-page-title-main">Cheque</span> Method of payment

A cheque, or check, is a document that orders a bank to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The person writing the cheque, known as the drawer, has a transaction banking account where the money is held. The drawer writes various details including the monetary amount, date, and a payee on the cheque, and signs it, ordering their bank, known as the drawee, to pay the amount of money stated to the payee.

ISO 20022 is an ISO standard for electronic data interchange between financial institutions. It describes a metadata repository containing descriptions of messages and business processes, and a maintenance process for the repository content. The standard covers financial information transferred between financial institutions that includes payment transactions, securities trading and settlement information, credit and debit card transactions and other financial information.

In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. This process turns the promise of payment into the actual movement of money from one account to another. Clearing houses were formed to facilitate such transactions among banks.

A payment system is any system used to settle financial transactions through the transfer of monetary value. This includes the institutions, payment instruments such as payment cards, people, rules, procedures, standards, and technologies that make its exchange possible. A common type of payment system, called an operational network, links bank accounts and provides for monetary exchange using bank deposits. Some payment systems also include credit mechanisms, which are essentially a different aspect of payment.

Sort codes are the domestic bank codes used to route money transfers between financial institutions in the United Kingdom, and in the Republic of Ireland. They are six-digit hierarchical numerical addresses that specify clearing banks, clearing systems, regions, large financial institutions, groups of financial institutions and ultimately resolve to individual branches. In the UK they continue to be used to route transactions domestically within clearance organizations and to identify accounts, while in the Republic of Ireland they have been deprecated and replaced by the SEPA systems and infrastructure.

The Clearing House Automated Transfer System, or CHATS, is a real-time gross settlement (RTGS) system for the transfer of funds in Hong Kong. It is operated by Hong Kong Interbank Clearing Limited, a private company jointly owned by the Hong Kong Monetary Authority (HKMA) and the Hong Kong Association of Banks. Transactions in four currency denominations may be settled using CHATS: Hong Kong dollar, renminbi, euro, and US dollar. In 2005, the value of Hong Kong dollar CHATS transactions averaged HK$467 billion per day, which amounted to a third of Hong Kong's annual Gross Domestic Product (GDP); the total value of transactions that year was 84 times the GDP of Hong Kong.

The National Payments Corporation of India is an umbrella organization for operating retail payments and settlement systems in India, is an initiative of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India. It was created by RBI for operating retail payments and settlement systems in India.

The Clearing House is a banking association and payments company owned by the largest commercial banks in the United States. The Clearing House is the parent organization of The Clearing House Payments Company L.L.C., which owns and operates core payments system infrastructure in the United States, including ACH, wire payments, check image clearing, and real-time payments through the RTP network, a modern real-time payment system for the U.S.

The Clearing House Payments Company L.L.C. (PayCo) is a U.S.-based limited liability company formed by Clearing House Association. PayCo is a private sector, payment system infrastructure that operates an electronic check clearing and settlement system (SVPCO), a clearing house, and a wholesale funds transfer system (CHIPS).

The Swiss Interbank Clearing (SIC) system is a mechanism for the clearing of domestic and international payments.

The International Payments Framework (IPF) was an initiative launched in 2010 to create a global framework for payment processing by the International Payments Framework Association, a trade association headquartered in Atlanta, in the United States. The IPF standard is currently used by some organisations to process payments between the United States and Europe.

<span class="mw-page-title-main">Cross-Border Interbank Payment System</span> Financial markets payment system

The Cross-Border Interbank Payment System (CIPS) is a Chinese payment system that offers clearing and settlement services for its participants in cross-border renminbi (RMB) payments and trade. Backed by the People's Bank of China (PBOC), China launched the CIPS in 2015 to internationalize RMB use. CIPS also counts several foreign banks as shareholders, including HSBC, Standard Chartered, the Bank of East Asia, DBS Bank, Citi, Australia and New Zealand Banking Group, and BNP Paribas.

<span class="mw-page-title-main">Automated clearing house</span> Type of electronic network for financial transactions

An automated clearing house (ACH) is a computer-based electronic network for processing transactions, usually domestic low value payments, between participating financial institutions. It may support both credit transfers and direct debits. The ACH system is designed to process batches of payments containing numerous transactions, and it charges fees low enough to encourage its use for low value payments.

References

  1. ↑ "Leadership Team". 2 August 2016.
  2. 1 2 Finextra (15 June 2016). "Canadian Payments Association rebrands as Payments Canada".
  3. 1 2 "Canadian Payments Act". May 6, 2021. section 3(1).
  4. ↑ "Financial Institutions File and routing numbers". FAQs. Canadian Payments Association. Archived from the original on March 30, 2015. Retrieved January 21, 2018.
  5. ↑ "Annual Report 2016" (PDF). Payments Canada. Retrieved 2 June 2017.
  6. 1 2 "Consolidated federal laws of Canada: Canadian Payments Act". laws-lois.justice.gc.ca. 17 November 2016. Retrieved 26 November 2016.
  7. ↑ "Canada's Major Payments Systems". www.bankofcanada.ca. Retrieved 27 November 2016.
  8. 1 2 "High-value payment system - Lynx". Payments Canada. 2021-08-26. Retrieved 2021-09-06.
  9. ↑ "High-value payment system - LVTS". Payments Canada. 2021-07-20. Retrieved 2021-09-06.
  10. 1 2 3 https://www.payments.ca/sites/default/files/payments_canada_our_history_timeline_english.pdf [ bare URL PDF ]
  11. ↑ "Retail batch payment system". Payments Canada. 2021-07-20. Retrieved 2021-09-06.
  12. 1 2 3 "2016-2020 Corporate Plan" (PDF). payments.ca. June 2016. Retrieved 26 November 2016.
  13. ↑ "The economic benefit of adopting the ISO 20022 payment message standard in Canada". www.payments.ca. 17 November 2015. Retrieved 26 November 2016.
  14. ↑ "Could DLT underpin an entire wholesale payment system?". The Globe and Mail. 25 May 2017.
  15. ↑ "The Payments Canada Summit". The Payments Canada Summit. Payments Canada. Retrieved 2 June 2017.
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