Future-proofing our payments systems

Executive Director of Payments, Supervision and Oversight Ron Morrow talks about how payments have evolved in Canada and why it’s important to modernize our payment infrastructure.

Canadians have more payment options today

Over the past few decades, our lives have become increasingly digitalized. This is particularly true for how we pay for things. Canadians use debit and credit cards, and they pay by e-transfer or through online payment providers. Some are even getting into cryptocurrencies and stablecoins.

At the same time, bank notes remain an important form of payment. They are widely available and accepted and also safe and easy to use. Simply put, cash is a universally accessible form of public money. For this reason, the Bank of Canada will continue to support bank notes as long as Canadians want them.

However, the Bank has also been looking into whether emerging digital payment technologies might displace the use of cash. It is our job to provide a safe and secure form of public money. This may mean we could someday be asked to issue a digital version of the Canadian dollar. We are building the capacity to be able to do so, if needed. But for now, Canadians are well served by the payment options they have.

Modernizing our payments infrastructure

As payments increasingly go digital, the Bank has been focusing on improving the speed, efficiency and competitiveness of Canada’s payments infrastructure through four main pillars. They are:

• Lynx. Launched in 2021, this is Canada’s safe and secure high-value payment system. Lynx is used by banks and financial institutions to settle $400 billion in payments each and every day.
• Real-Time Rail. This will be Canada’s first real-time payment system—allowing businesses and consumers to send and receive payments 24/7, 365 days a year. It will also offer the potential to link with payment systems across borders.
• Batch payment systems. Canada’s current batch payment system has been clearing cheques for 40 years. It has evolved to also clear electronic items such as pre-authorized debits, but the system does face challenges and it needs modernizing.
• Retail payments supervision. This became the Bank’s newest mandate in 2021. This autumn, over 3,000 service providers will need to register with the Bank and follow new rules aimed at safeguarding consumers.

Ensuring a better system for consumers

Payment service providers have been largely unregulated in Canada up until now. The Bank’s oversight will give Canadians further confidence in the safety and reliability of these companies. And payment service providers that are supervised by the Bank will be eligible to become members of Payments Canada. This membership will help make them more competitive.

We expect innovation in payments to continue and probably accelerate. As Canadians, we need to take the steps to continuously improve our payment systems—or risk our economy suffering.