Most people never think about what happens after they send a payment. A bill gets paid. A friend receives money. A purchase goes through. It all appears seamless to the customer.

But each of these transactions relies on two critical steps: clearing and settlement. These processes make sure every payment is verified, funded and completed safely. They are the hidden backbone of Canada’s payments, working behind the scenes to keep money moving with confidence.

Clearing and settlement explained

Clearing and settlement are the two steps that finalize every payment in Canada.

• Clearing is when payment details are verified. It ensures account numbers are correct, the amount matches what was submitted and the payment format follows the rules of the system processing it. It also confirms that both the sending and receiving institutions are ready to process the transaction.
• Settlement is when money actually moves between financial institutions. This happens through Bank of Canada accounts, using central bank money rather than commercial funds. This provides a stable and trusted way to complete payments, giving institutions confidence that the transfer is secure. Once settlement is complete, the payment is final.

These steps underpin everything from everyday Interac® payments to high-value corporate transfers.

Where clearing and settlement happen

Clearing and settlement take place inside the core systems that move money across Canada. Operated by Payments Canada, each one has its own rules and processes — and each requires a dedicated Bank of Canada account to settle payments:

• ACSS (Automated Clearing Settlement System) – Retail and batch payments
• Lynx – High-value and time-sensitive payments
• Interac e-Transfer^® – Person-to-person and small business payments
• RTR (Real-Time Rail) – Canada’s upcoming instant payment system supporting ISO 20022 data-rich messaging.

The treasury work behind each payment

There’s more to payments than a digital transaction. Behind the scenes, institutions must ensure they have the right funds in the right place at the right time (known as liquidity) to complete payments successfully. That requires managing a range of treasury functions, completed by teams like the one at Central 1, including:

• Pledged collateral – Each morning, you must pledge assets to the Bank of Canada to secure that day’s payments. This collateral helps guarantee you can meet your payment obligations and needs to be monitored and adjusted as the day progresses.
• Real-time funding coverage – Payments move through different systems on different timelines. Liquidity needs to be available precisely when each one happens, requiring you to constantly balance and shift funds.
• Continuous monitoring – Payment volumes shift by the hour. You must track and manage available funds in real time to avoid shortfalls, stay within limits and respond to shifting demands.

It’s a dynamic, day-long process that runs in the background of every payment and that’s just as essential as the payments system itself.

Why partnering with an infrastructure provider like Central 1 matters

Clearing and settlement may happen behind the scenes, but their impact reaches across every part of a financial institution or fintech’s operations. From payment reliability and regulatory compliance to customer experience, these steps shape how money moves.

For many organizations, managing this work directly can be complex and resource intensive, with diverse systems, liquidity demands and regulatory obligations to navigate. Partnering with an infrastructure provider like Central 1 helps reduce that burden.

Here’s what that means for you:

• Reliable access to national infrastructure
  Connect to Canada’s core systems – ACSS, Lynx, Interac e-Transfer and soon the RTR – without building or maintaining your own technical integrations.
• No need to manage Bank of Canada accounts
  Payments can settle through Central 1’s accounts and are backed by collateral we manage and monitor throughout the day, reducing oversight, risk and administrative load.
• Lower operating and funding costs
  Shared infrastructure and pooled expertise reduce technology spend, resourcing demands and borrowing costs tied to daily payment flows.
• Built-in compliance and regulatory management
  Evolving system rules, audits and regulatory requirements are handled on your behalf, reducing internal effort and exposure.
• Confidence in liquidity and settlement
  Active liquidity management and real-time monitoring help ensure payments meet cut-offs, settle smoothly and remain fully funded.

Working with a partner like Central 1 frees your teams to focus on innovation, service and growth — rather than the complex mechanics of moving money.