27 Apr 2021  /  by:

Sue Whitney, VP Payments Strategy

How this credit union is getting ready for real-time payments

“Faster payments is something that our members have been requesting for some time and we’re excited that Canada’s new Real-Time Rail (RTR) will allow us to provide more convenient payments options to our members, especially our small business members,” reveals FirstOntario Credit Union’s VP Digital Channels and Experience, Ron Renton.

Renton and the team at FirstOntario have had Canada’s Payments Modernization initiative on their roadmap for some time and have teamed up with Central 1 and a range of fintechs as “key strategic partners” to support them on the modernization journey.

It’s no secret that Canada must catch up to other jurisdictions which are well advanced in their modernization journey, such as the United Kingdom and Australia. Over the last decade, the global payments environment has become much more dynamic, creating even greater challenges for financial institutions. Complex regulatory requirements, outdated and poorly integrated legacy systems, and an increasingly competitive marketplace all put pressure on traditional financial institutions to evaluate opportunities for payments transformation. In addition, the COVID-19 pandemic has accelerated Canadians’ preference for digital payments methods and this trend is expected to continue. Canada has been able to learn from what’s happened in other countries as they rolled out new systems, particularly real-time payments.  Now it’s our turn to modernize and give Canadian consumers and businesses the fast, flexible and secure payments options they crave.

Canada’s Real-Time Rail is set to go live in late 2022, featuring account number-based routing and ISO 20022 messaging to support data-rich payments; allowing fast, flexible, and secure payments, while acting as a platform for greater innovation.

“Payments Modernization is something that we’ve been acutely aware of and have been looking forward to for quite some time now,” said Renton, explaining that FirstOntario sees the modernization initiatives as “an opportunity to offer much-needed value to our members when it comes to payments.”

To prepare, the credit union has aligned with Central 1 and a number of fintechs to support them on their journey. “We’ve chosen partners to ensure we stay onside and ahead of the emerging technologies, like RTR, and to ensure we are able to share the benefits of modernization with our members as quickly and innovatively as possible,” Renton explained. He added: “We plan to launch capacities that are made possible by the RTR as soon as possible. We’re adapting by investing strategically in in our core, payments, and digital banking infrastructure to make it easier to innovate and provide value for our customers once there is more clarity from Payments Canada on how and when new capabilities can be built.”

FirstOntario’s small business members are a key demographic which is set to benefit greatly from payments that settle in real time.

“Real-time payments will offer a lot of benefits to our small business members from the ability to better manage their liquidity, to the opportunity for more straight-through processing,” said Renton.

“Real-time payments give our small business customers the ability to make immediate payments to suppliers, billers or even customers in the form of rebates or refunds,” he explained, adding: “This ensures that their business activities are not held up due to slower payment methods, and businesses can use real-time payments to further their reputation by providing better experiences to suppliers, employees, and customers.”

Canada’s new RTR will launch with ISO 20022 messaging to support data-rich payments. This will bring “speed of delivery” to FirstOntario’s small business customers. Renton adds that another benefit will be “the information that can be transmitted with a payment will be invaluable for businesses especially in the area of accounts receivable/payable.” He comments: “The ability to improve or automate reconciliation processes due to standardized messaging provided by ISO20022 will give our business members the ability to spend less time in the ledger and more time connecting with customers and building relationships in the community.”

When asked how the COVID-19 pandemic is shaping payments patterns among FirstOntario’s membership, Renton replied: “As expected, COVID-19 has changed the way our members do business, preferring cards to cash. Even small ticket items are paid for with debit and credit which has also meant a change in our ATM volume. During the pandemic, we have seen a steady uptick of Interac e-Transfer® usage among our membership. We expect reliance on digital payment technology to increase as Payment Modernization kicks off with expanded rules, information, and real-time capabilities.”

With Interac chosen as the exchange solution provider for Canada’s new Real-Time Rail, all eyes are on its forthcoming new functionality: Interac e-Transfer for Business and subsequent potential fintech payments offerings coming with the RTR.

“We expect that the new focus on Interac e-Transfer features for businesses will only increase the usage of this already ubiquitous service,” said Renton, adding: “Features such as instant transactions, higher transactions limits, and the ability to include richer remittance data will only serve to make Interac e-Transfer a more attractive service for businesses. As Interac e-Transfer is already our number one money movement transaction, it will be interesting to see how new RTR services will be able to compete in the future.”

Looking to the future, Renton sees an increased competitive advantage for FirstOntario. “We’ll have proven that we’re nimble and able to offer the innovative payment services that our members want and expect to be able to complete digitally either on a desktop or more likely on their mobile devices,” he predicts.

Partnering with Central 1 and others is key to FirstOntario’s payments modernization strategy. Renton concludes:

“Our confidence in Central 1 is reflected in the strategic decision we made to partner with them for both Payments Modernization and Digital Banking. FirstOntario, like many other credit unions and financial institutions, is counting on Central 1’s leadership in these key areas that are so critical to our success. By partnering with Central 1 to complete our Digital vision, we have been given a seat at the table to ensure that our voice is heard in the shaping of Central 1’s modernized payments infrastructure and innovative products and services. We are confident that this was the right decision for FirstOntario.”

To discuss Central 1's payments modernization strategy with one of our payments experts, contact paymentsmodernization@central1.com