September 9, 2021
On September 1, Payments Canada officially launched the first iteration of Lynx - Canada’s newest payment technologies system designed to facilitate high value money transfers. Designed by the Bank of Canada in collaboration with IBM, Lynx aims to provide financial institutions with a safe, reliable, and modern system to facilitate wire transfers of large sums of money to other financial institutions.
Lynx will be replacing the previous system known as the “Large Value Transfer System” which was used to facilitate high value wire transfers for the past 20 years. Lynx is one part of a larger effort to modernize various aspects of banking technology in Canada. The new payment system aims to provide a system that “makes payments easier, smarter, and safer for all Canadians”. On an average day, Lynx will facilitate the transfer of approximately 28,000 transfers worth a total of over $150 Billion.
The initial conceptualization and subsequent development of Lynx aimed to respond to a number of new trends in the payments technology space. Specifically, Payments Canada and the Bank of Canada recognized that consumers required faster transfers of funds, enhanced security and privacy, better data reporting, and less financial risk. The new system addresses these concerns in a number of ways.
Payments made through Lynx are made in real time and will only be settled if the payor holds sufficient funds to make the payments. This is in contrast to the previous system which featured payment netting at the end of each day and the sharing of default risk between payor and payee. Additionally, Lynx will allow for financial data transfer through ISO 20022 – an ISO standard for exchange of data between financial institutions. This will allow for more seamless integration with financial institutions around the world and provide greater certainty for institutions looking to exchange information relating to large value transfers.
In addition to the modernization of the high value money transfer system, the Bank of Canada continues to pursue a number of other initiatives designed to modernize the Canadian banking landscape. These include preliminary research into a potential “digital currency” to replace traditional cash based systems, and upgrades to retail money transfer infrastructure in order to allow for real-time, instantaneous money transfers between individuals on a 24/7 365 day basis.
Author: Aryan Pour-Bahreini