Payment systems the Bank of Canada oversees

Learn what a payment system is, how payments are processed and which payment systems are overseen by the Bank of Canada.

What a payment system is

A payment system is a set of payment methods, procedures, rules and technology used to exchange money.

Canadians make financial transactions every day to:

• purchase goods and services
• make financial investments
• transfer funds from one person to another

Giving someone a bank note is simple, but exchanging digital payments between two parties can be quite complex and can involve many systems and players. A payment system provides its participants with a common way to transfer funds safely and securely.

How payments are processed

Digital payments generally involve the following processes:

• Exchange—the process of transmitting and issuing instructions for payments between payment system participants.
• Clearing—the process of reconciling and, in some cases, confirming payment orders before settlement. This process can include offsetting payments and establishing final balances for settlement.
• Settlement—the release of payment obligations between two or more parties. Transactions are considered complete once settlement takes place confirming funds are eventually transferred from one bank account to another.

Direct and indirect participants in payment systems

A payment system generally has different classes of participants based on specific characteristics or obligations of a participant. Typically, entities can be either direct or indirect participants in a payment system.

Direct participant

A direct participant instructs, clears and settles payments on its own behalf. If a payment system uses central bank money, direct participants need to have a settlement account for that system with the central bank and be able to connect directly to the payment system. Direct participants may also act as intermediaries for indirect participants.

Indirect participant

An indirect participant can take various forms. In general, an indirect participant in a payment system relies on a direct participant to perform payment clearing and settlement on its behalf.

Payment systems overseen by the Bank

Under the Payment Clearing and Settlement Act, the Bank of Canada oversees the following payment systems:

• Payments Canada’s Lynx
• Payments Canada’s Automated Clearing Settlement System
• Payments Canada’s Real-Time Rail
• Interac Corp.’s Interac e-Transfer^®
• Interac Corp.’s Inter-Member Network (IMN)
• Visa Inc.’s VisaNet
• Mastercard International Inc.’s Global Clearing Management System (GCMS) and Single Message System (SMS)

Lynx

Lynx is an electronic wire system that facilitates the irrevocable transfer of high-value, time-critical payments in Canadian dollars.

Direct participants in Lynx must have a Lynx settlement account with the Bank of Canada. Some organizations participate directly in the system, but others arrange Lynx payments for their customers through direct Lynx participants.

Lynx is owned and operated by Payments Canada.

Automated Clearing Settlement System

The Automated Clearing Settlement System (ACSS) clears cheques and electronic items, such as pre-authorized debits, direct deposits and Interac debit payments. The system provides for the exchange of payment items between members of Payments Canada who participate in the ACSS and the subsequent clearing and settlement of those payment items.

ACSS is owned and operated by Payments Canada.

Real-Time Rail

The Real-Time Rail (RTR) provides continuous exchange, clearing and settlement of data-rich electronic payments 24 hours a day, 7 days a week, 365 days a year, with immediate availability of funds. It enables Canadian consumers and businesses to exchange funds in real time.

RTR is owned and operated by Payments Canada.

Interac e-Transfer

Interac e-Transfer is an electronic payment system offered through online banking with participating Canadian financial institutions. It provides the following services:

• person to person
• person to business
• business to person
• business to business

This system is operated by Interac Corp. and used by many Canadians.