Canada’s Retail Payment Activities Act and Real-Time Payment Rails: New Rules and Competition

In Sum

• Canada’s 2025 Budget reinforces innovation and competitiveness with support for the long-awaited launch of the Real-Time Rail, a real-time payments system designed to modernize Canada’s payment infrastructure.
• The Retail Payment Activities Act fundamentally reshapes the payments landscape by regulating Payment Service Providers, expanding Payments Canada membership to fintechs and enabling direct access to national payment systems such as Lynx and the forthcoming RTR.
• The Real-Time Rail, built on ISO 20022 messaging standards and supported by Interac, promises instant, 24/7 payments with richer data and improved efficiency, while also raising fraud and security challenges that regulators and Payments Canada aim to address before launch.
• By reducing reliance on intermediaries and allowing PSPs to hold settlement accounts with the Bank of Canada, the RPAA and RTR are expected to intensify competition, benefit fintechs like EZO, and deliver faster, fairer and more transparent payments for consumers and businesses.

Canada’s 2025 Budget presents supporting innovation and global competitiveness as a guiding principle for what’s coming next, reaffirming support for fiat-backed stablecoin legislation as well as the launch of the long awaited Real-Time Rail (RTR).

The Real-Time Rail has been a decade into the making, and while some critics point out the project is both years overdue and structurally compromised, others believe the launch has the potential to revolutionize the Canadian payment system. With the RTR in place, Canada could compete with systems like the UK’s Faster Payments, in place since 2008, or India’s United Payments Interface in the realm of instantaneous payments.

Canada’s project does not only aim to position the country as a major player on the global scene, it also seeks to even out the playing field in the financial sector, notably by allowing fintechs to join Payments Canada, the country’s payment clearing and settlement system, as members. Fintechs will thus be able to use the RTR. It all starts with the new Retail Payment Activities Act.

New Rules: Retail Payment Activities Act (RPAA)

The Retail Payment Activities Act (RPAA) is administered by the Bank of Canada and regulates Payment Services Providers (PSP) in order to protect Canadian consumers. It came into effect late in 2025, with a first cohort of supervised PSPs—of which EZO was part of!—registered and listed on the public registry.

Payment Service Providers

Businesses which are subject and required to register with the Bank of Canada as Payment Service Providers (PSPs) either provide and maintain an account, hold funds on behalf of an end user, initiate, authorize and give instruction in relation to electronic funds transfer or offer clearing or settlement services.

RPAA entering into effect was accompanied by a change of rules as to Payments Canada’s membership. The criteria for Payments Canada membership have extended to include registered PSPs. PSPs having joined the network will be able to enjoy direct access to national payment systems, instead of relying on member intermediaries. 

New Rails: Real-Time Payment Rail So Far

The upcoming Real-Time Payment Rail promises instant payments around the clock, 365 days a year. It will improve upon the current Interac payment system, with Interac being a major player and partner in the development of the project.

The Real-Time Payment has two main components: it constitutes an exchange network supported by ISO 20022 payment messaging standards and a clearing and settlement mechanism.

Exchange Network

The Real-Time Payment Rail’s exchange network has been developed with ISO 20022 messaging capacities built-in, aligning the project with worldwide SWIFT institutions and even some blockchain initiatives. ISO 20022 enables the exchange of richer payment details, with the potential to facilitate compliance work, something, as we will see in a later section, that will be particularly important for our upcoming Real-Time Payment Rail.

The ISO 20022 standard, already implemented in Payment’s Canada’s high-value electronic payment system, Lynx, also facilitates faster reconciliation of transactions due to the use of standardized payment data across network members.

Interac completed work on the exchange network in 2023.

Clearing and Settlement Mechanism

The Real-Time Payment Rail’s clearing and settlement mechanism will enable instant transfers between members of the Payments Canada network—which can now include Payment Service Providers like EZO.

Work on the clearing and settlement component is progressing with firms like CGI and IBM Canada joining their expertise  with Interac’s.

Interac’s own payment system will settle on the RTR once the project is completed and live, empowering faster e-transfers for the general population.

Security Concerns

With all the efficiency the RTR promises comes some security concerns. Instant clearing and settlement raise a critical question: when does preventing, investigating and responding to fraud come into play?

Among the countries having already implemented similar real-time payment systems, a noticeable increase in fraud using tactics like identity theft, social engineering and phishing rightfully raises alarm.

Fraud control measures leveraging ISO 20022 are being developed by Payments Canada. In collaboration with regulators, identity verification and reimbursement methods have been explored, though no further details have been publicized ahead of the launch of RTR. As a main priority for Payments Canada, fraud risks are expected to be fully addressed before deployment.

New Competition: What Does This Mean for Fintechs?

With the Retail Payment Activities Act acting as a regulatory foundation, a new era of competition is on the verge of commencing. This constitutes a major change for Canadian fintechs. Prior to RPAA, Payments Canada membership was reserved for financial institutions such as banks and the like, thus gatekeeping its payment networks.

Now that Payment Service Providers are eligible to apply for Payments Canada membership, the need for intermediaries to operate in the financial sector is reduced. While previously, fintechs had to rely on member partners, member Payment Service Providers can now directly access Lynx, the high-value Canadian payment system, as well as the Real-Time Rail once the project is live.

Additionally, many types of fintechs will be able to hold direct settlement accounts with the Bank of Canada, again fostering competition and fintech growth, with the Real-Time Rail providing Payments Canada member PSPs with faster and more efficient payments than ever before.

Not only does the RPAA and the RTR unlock new opportunities for fintechs to step up to legacy institutions, it allows for greater competitiveness in the Canadian market, with the RTR being key to support this next step in the evolution of the Canadian payments system, marked by interoperability, transparency and fostering competition while maintaining customer protection.

Interestingly, some cite the increased competition the RTR brings as the reason why there has been so much delay in development and launch over the last decade. Interac, co-owned by Canadian financial institutions and highly involved in the development of the Real-Time Rail has “little incentive [...] to create more favourable conditions for prospective future competitors.”

New Breakthroughs: What Does This Mean for Payment Users?

Canada’s Real-Time Payment Rail does not only benefit those in the financial sector—individuals and businesses alike stand to gain from faster, more efficient and more transparent payments the RTR and its ISO 20022 payment messages will bring.

Instead of resorting to predatory cash checking services, low-income workers could instantly receive their wages via the RTR at no extra cost. This will allow them to avoid payday loans or overdraft fees, as well as sustaining when living paycheck to paycheck.

On the other hand, small businesses can benefit from improved cash flow, which is often essential for day-to-day operations and growth.

Future Timeline

While the RTR project has been in the works for a decade now, with the original delivery date set in 2019, much of the development is now complete. Early 2026 will see payments industry-facing testing while the Real-Time Payment Rail is reported to launch at the end of 2026 or in early 2027, bringing about a new era with new rules for fintechs, more competition for banks and most importantly, better payments for consumers.

EZO

EZO is a registered Payment Service Provider under the Retail Payment Activities Act and was part of the first cohort of PSPs listed on the Bank of Canada’s public registry. This regulatory status positions EZO at the forefront of Canada’s evolving payments ecosystem, enabling it to participate directly in the next generation of payments.

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Frequently Asked Questions

What is the Retail Payment Activities Act (RPAA)?

The Retail Payment Activities Act is a federal regulatory framework administered by the Bank of Canada that oversees payment service providers operating in Canada. Its purpose is to protect consumers, strengthen operational risk management and enable greater competition in the payments sector.

What is Canada’s Real-Time Rail (RTR)?

The Real-Time Rail is a new national payment infrastructure that will enable instant, 24/7 payments with real-time clearing and settlement. It is designed to modernize Canada’s payment system and align it with global real-time payment networks.

How does ISO 20022 relate to the Real-Time Rail?

The RTR is built using ISO 20022 messaging standards, which allow richer and more standardized payment data. This supports faster reconciliation, improved compliance, and enhanced fraud detection capabilities across the network.