How Canada's real-time payment rail challenges bank innovation

Canada has officially launched its long-awaited real-time payment (RTP) rail, and the ripple effects will soon hit the retail and service sectors. For business owners, this marks a shift from waiting days for funds to clear to seeing transaction settlements happen in seconds. While the headline focuses on banks upgrading their systems, the real story for merchants is the increased competition it creates for your payment processing business. With instant settlement now a technical reality, fintech providers are racing to offer cheaper, faster alternatives to traditional credit card processing. As these rails become mainstream, you can expect to see new consumer financing tools that offer instant payouts at the point of sale without the high interchange fees associated with credit cards. For retailers, this means improved cash flow and the ability to offer customers more flexible 'pay-by-bank' options that settle immediately. However, there is a catch. Real-time payments are irrevocable. Once the money moves, you cannot easily reverse it like a standard ACH or credit card transaction. You should start asking your current payment processor how they plan to integrate real-time rails and whether they will pass the cost savings of avoiding credit card networks down to your bottom line.

Source: American Banker — Top News

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