Global momentum toward expanding access to payment systems: A conversation with Wise
Wise was the first non-bank to connect with the Bank of England’s Faster Payments Service (FPS). Nick Catino, Global Head of Policy & Social Impact, shares the benefits and opportunities that Wise experienced from having direct access to the UK’s national payment infrastructure. He also talks about the need for modern payments in Canada, including amendments to the Canadian Payments Act (CP Act) to broaden Payments Canada membership and access to our systems.
You spoke at The 2023 Payments Canada SUMMIT about the need for broader access to Canada’s payment infrastructure. What would broader access mean for international PSPs like Wise and their customers?
Expanded access to Canada’s payment infrastructure would foster competition and innovation in Canada and lead to lower costs for consumers and small businesses. The Canadian government can achieve this through the amendments to the Canadian Payments Act (CP Act), which will enable direct access for payment service providers like Wise once we’re registered and supervised by the Bank of Canada under the new Retail Payments Activities Act (RPAA) framework.
This will allow payment companies to become members of Payments Canada and directly clear and settle payments while unlocking lower-cost, faster payments. It will also boost financial stability by reducing reliance on the handful of bank partners who offer services to fintechs. There are currently single point-of-failure concerns with most fintechs relying on the same bank partners — if one of them wobbles, this could affect the entire fintech ecosystem and all their customers.
Expanding access to payments by allowing payment companies, alongside banks, to access the system, can help ensure that risks are diversified and consumers benefit from better services.
What benefits and opportunities have you seen or experienced in other jurisdictions that have broadened access to payment infrastructure?
Enabling broader access to Canada’s payment infrastructure would be directly in line with global momentum toward expanded access to payment systems. Governments in Australia, Brazil, Hungary, Singapore, and the UK have already moved in this direction and the European Union introduced a similar proposal in its recent review of the Payment Services Directive 2. The Bank for International Settlements (BIS) has also embraced expanded access as a means to improve cross-border payments.
Wise was the first non-bank to directly connect with the Bank of England’s Faster Payments Service (FPS) in 2018. Once connected, we immediately passed the savings onto customers, lowering fees by 20%. It allowed Wise to improve our average payment speed from 15 minutes to less than 20 seconds by taking direct control of origination. The UK’s FPS is a great example of instant payments and non-bank access working together in practice. When access was granted more broadly, the total number of FPS participants went from primarily banks (18) to several fintechs (33). It resulted in increased competition, consumer adoption, and lower costs.
Wise’s mission is building money without borders — eventually for free. Can you tell us about the current state of cross-border payments and how you foresee the way we pay internationally changing in the coming years?
The UK has already demonstrated the benefits of modernized payment infrastructure by implementing instant payments, a modern licensing framework, expanded access, and open banking.
Canada can act now to advance each of these four policy initiatives to enable widespread fintech innovation and adoption. By embracing modernized payments and enabling open banking, Canada can replicate the success of the UK and others in fostering innovation, growth, and competition in the market. Canada must go from a laggard to a leader.
What role do you see the global ISO 20022 financial messaging standard playing to support this change?
Canadians deserve faster payments. More than 60 countries already have instant payment systems, which allow payments to be processed within seconds rather than several hours or days. Canada is inching closer to launching the Real-Time Rail payment system, which will use the ISO 20022 financial messaging standard, as it has become the global standard for payment messaging and a common language for financial institutions around the world.