The Journey of Canada RTR and UK NPA Real-Time Payments

From Delays to Innovation:

Payments Canada’s Real-Time-Rail (RTR) is the country’s new real-time payment system, enabling account-to-account (A2A) money transfers 24/7 for low-value payments with immediate fund availability and irrevocability. This initiative is part of a roadmap to modernise the country’s payment systems.

Despite the geographical distance between Canada and the UK, both countries have notable similarities in their national payments transformations. In the UK, Pay.UK launched a similar initiative called the New Payments Architecture (NPA), aimed at facilitating low-value, A2A instant payments based on the ISO20022 format. Both programs also feature overlay services to promote competition and increase participation. Both initiatives have faced delays, pushing their go-live dates back by several years, with revised launch dates still pending.

Payments Canada is also considering implementing Confirmation of Payee to prevent misdirected payments and combat fraud.

How Canada and the UK started out in real-time payments

Understanding the drivers behind these transformations is important, as both countries have been leaders in real-time payments for over a decade. Canada introduced electronic A2A payments in 2003 with the Interac e-Transfer service, one of the first to use aliases such as mobile numbers and emails to enhance customer experience. Today, Interac has over 300 participating financial institutions.

Faster Payments (FP) was launched by the UK Payments Council in May 2008. The service ensured fund availability within seconds for most payments rather than days. Sixteen years later, over 98 countries offer some form of real-time rails, accessible by more than 72% of the world’s population.

Where RTR and NPA stand today

Payments Canada chose Interac to provide the exchange component for RTR, which allows the exchange of real-time payment messages. This was completed in June 2023. For the clearing and settlement component, Payments Canada partnered with IBM and CGI to deliver and operate the solution. IBM Canada was also the lead technology partner for the successful implementation of Lynx, an RTGS system. The RTR launch date is expected to be sometime in 2026.

In the UK, the New Payments Architecture (NPA) program was paused in November 2023, following the publication of HM Treasury’s Future of Payments Review (FoPR) report. The pause is expected to last until HM Treasury releases the output from its National Payments Vision process, currently underway. In response to the NPA pause, the Payment Systems Regulator (PSR) asked Pay.UK in March 2024 to consider, in discussion with Vocalink, some short-term enhancements for the current Faster Payments system.

The need for real-time payments will only increase

Whether you’re a bank in Canada, the UK, or a global financial institution, the payments industry is converging on common themes: the need for real-time processing, adoption of ISO20022 with enriched data, and pressure on revenues from payments services. Some of these trends are regulatory, while others are industry-driven, but their pace is accelerating.

Responding to these trends in isolation is no longer an option, as it will lead to missed opportunities to differentiate products and services, reuse common technology components, and streamline the application landscape.

Banks operating in both Canada and the UK have been able to process A2A payments for decades. However, attempting to adapt existing applications to meet the demands for real-time processing and enriched data sets is a strategy doomed to fail. Patching aging mainframe platforms, which are nearing their end-of-life, to support strategic initiatives will only increase technical debt, slow down time to market, and stifle innovation.

From my experience, several UK banks have leveraged the NPA initiative as a catalyst to modernise their end-to-end application landscape. Transitioning to modern, cloud-based, cost-effective, and scalable technologies to build the next-generation payment platforms is the way forward to reap the benefits of ISO20022, thus increasing the return on investment.

The key steps banks need to take to modernise and future-proof their payment processing capability include:

• Evolving their business model by leveraging data to provide value-added services.
  • For example, leveraging ISO20022-enriched data to understand customer behaviour and provide customised offerings.
• Decoupling the payments value chain to separate payment initiation, execution, and clearing and settlement.
• Building on the right technology platforms that accelerate change, ensure security and resilience, and reduce costs.

When future-proofing a payments ecosystem, I believe banks should regain or maintain full control over their payment processing platforms. A framework approach not only facilitates this but also significantly increases speed to market. Additionally, when it comes to decoupling the payment value chain, it is crucial to rethink and reorganize payment processing flows - implementing an order management strategy can simplify complex channels and enable client-specific processing.

While Canada and the UK may be geographically distant, it is evident that the global payments industry is becoming more interconnected, converging on common themes and drivers where modernisation is inevitable.