.svg)
Payments Canada has announced that Peoples Trust will become a direct participant of the country’s bulk payments system, the Automated Clearing Settlement System (ACSS).
Following approval from Payments Canada, Peoples Trust, a subsidiary of Peoples Group, has been granted Direct Clearer status to the ACSS.
Peoples Trust, which provides consumer and commercial lending and investment products, first announced its intention to switch from Indirect Clearer to Direct Clearer status in July 2020.
In a statement, Payments Canada said Peoples Trust’s successful application marks the first time that a new Direct Clearer has been granted access to the ACSS since its launch in 1984.
The transition to Direct Clearer status allows Peoples Trust to exchange and clear payment items on its own behalf, and effect settlement directly with the Bank of Canada.
This is possible due to regulatory changes made in August 2020 that removed volume requirements for direct participation in the ACSS.
Prior to August 2020, there was a volume requirement for direct participation in the ACSS, which required direct participants to process a minimum of 0.5 percent of total clearing volume.
Tracey Black, president and CEO of Payments Canada, said the removal of the volume requirement has been key to opening up the country’s payments ecosystem and encouraging greater participation.
“We are working to enhance payment experiences for Canadians through our modernisation programme and other modern payment initiatives,” she said.
“Broader access to Canada’s payment infrastructure is integral to these efforts, and we are excited to congratulate and welcome Peoples Trust as a new Direct Clearer on the ACSS.”
Grant Mackenzie, president and CEO of Peoples Trust, said that becoming a Direct Clearer is an essential step in the company’s strategic roadmap, and a major step towards its goal of being the partner of choice for fintechs and paytechs.
“We are continuing to enable them by providing access to the Canadian payment ecosystem,” he said.
“Our gratitude and thanks go to the Bank of Canada, Payments Canada and the existing Direct Clearers for their support in helping us succeed in this collaborative achievement.”
Direct Clearer status also gives Peoples Trust access to the United States Bulk Exchange (USBE).
Canada’s retail batch payment system is made up of the ACSS and USBE - a dual currency clearing and settlement system through which the vast majority of payments are cleared.
The USBE is used for payment items in US dollars that are drawn on US dollar accounts at financial institutions in Canada, but are settled in the US.
Settlement is effected through correspondent banks in New York and is accomplished through a series of wire payments — a process that does not involve the Bank of Canada.
Balances are then calculated on a bilateral basis between each pair of participants rather than on the multilateral basis, as in the ACSS.
Opening up payments
News that the ACSS has added its first direct participant since 1984 is part of a wider trend among policymakers and payment infrastructures to open up their payments systems to a wider range of participants to support greater market competition.
In the UK, for example, the Faster Payments New Access Model launched in 2014 aimed to improve and expand PSP access to payment systems.
In 2015, the scheme also launched a "pre-funding" settlement system, which guarantees settlement between all payment participants, eliminating any shared risk.
This was a key change because it meant smaller challenger banks could join the scheme without being exposed to losses if a larger bank failed.
The removal of the 0.5 percent volume requirement for direct participation in the ACSS represents a similar attempt to reduce barriers for smaller and alternative providers.
In November, VIXIO reported on the views of payment service provider Square (now listed as Block), which argued that expanding access in Canada’s payments market is critical to promoting innovation and competition.
This year, for example, Payments Canada is expected to launch Real-Time Rail (RTR), a national real-time payments system that aims to enable fast, data-rich payments for government and business purposes.
“Right now access is most clear for large financial institutions when the RTR launches,” said Grace Jung, head of industry relations at Square.
“For payments service providers to have direct access to the RTR, it will require creating a membership class in tandem with the establishment of the Retail Payments Activities Act (RPAA).”
However, at the earliest, she noted that this could take two years to achieve. “That’s a long time to wait for something that affects the lifeblood of a business,” she said.
Payments Canada said it is working closely with industry partners to modernise Canada’s payment systems, and to ensure that Canada and Canadian businesses remain globally competitive.
