On our journey to implement a new real-time clearing capability (RTR) in Canada, Payments Canada is speaking with industry experts about their faster payments experience around the world. Recently, we had the chance to sit down with Katja Lehr, Director, Americas Bank Product at PayPal Inc. about PayPal’s global real-time experience, what it has meant for their business and what Canadians have to look forward to.
Can you tell me about PayPal's experience with real-time payment capabilities in other countries?
We are engaged in a few different real-time initiatives around the world, most notably in the UK where we are the single largest user of their faster payment system. This was one of the first real-time systems to launch in the world, so there is a lot to learn from that experience. Everyone thought that the real-time capability would just shift volume from the batch processing system to the real-time system, but actually, the new rail created new volume, new business. This is a great outcome for a system, which was merely thought to move existing payments faster.
Can you expand more on these benefits of a real-time system for PayPal and its customers?
Our customers are loving real-time payments. Managing funds is time consuming and needs planning – for a business as much as a consumer. Let’s use an example: I have to pay a bill that I have completely forgotten about which is due today. I don’t have enough money in my bank account. However, I have money in my PayPal account – I received my friend’s share of the rent. Without a real-time system it will take anywhere between one to three days to get the money to my bank account. With real-time payments, I’ll get it in seconds. I can pay my bill in time, avoiding late fees. Real-time payments ease the planning effort while providing flexibility and freedom. In a world where almost everything is available within an hour, where many things are happening at a whim, it’s about time payments are catching up to provide the flexibility and freedom we are used to in so many other areas of life.
What is the ideal business model for using a real-time payments capability?
While PayPal has chosen to work with banking partners to process payment transactions, I believe it should be a choice. By opening up systems, you allow businesses to grow and new business ideas to flourish, which is much more unlikely to happen when you limit access to a system. Certainly there have to be rules to manage risk, but there are clear opportunities and advantages to widening system access.
What is the greatest takeaway from RTRs in other regions? What should Canada do differently?
Payments Canada has done a great job of engaging with stakeholders and participants - inside and outside the banking world - to inform decision making for the real-time capability. Canada is doing a lot to align everyone and develop a product that works for everyone.
To me, the most important thing is to introduce a ubiquitous system. It is impossible to imagine today what the system will be used for tomorrow. There are guaranteed to be use cases we haven’t considered. Think of Bell and the introduction of the telephone. He thought it would be used by people to call in and listen to concerts and look where we are today. By keeping it open and providing access in a controlled manner, new products and services emerged that benefited everyone.
What are you/ PayPal most looking forward to about Canada's new RTR? What should Canadians look forward to?
We are looking forward to the launch! We will most certainly be a user.
For Canadians, besides instant access to funds, they should also be excited about new options for payments. Canada already offers a ubiquitous electronic push payment solution for consumers with Interac e-transfer – other countries such as the U.S. don’t have this. There will still be a mind shift as people get used to more efficient ways to push payments electronically. There will be new, better and faster options than cash and cheques. There’s a lot to look forward to.