Retail Payments Supervision - Coming Soon to Canada

Retail Payments Supervision - Coming Soon to Canada

PART 1:  Diving into the RPAA: Exploring What, Who, and When

The Canadian Parliament passed the Retail Payments Activities Act (RPAA) on 29 June 2021 and the RPAA will begin coming into effect soon. The RPAA may impact Payment Service Providers (PSPs) that operate in Canada, whether located in Canada or elsewhere globally. A number of businesses will be excluded from this regime where already regulated under existing federal or provincial laws, such as commercial banks, credit unions, trust companies, loan companies, and insurance companies. 

The Bank of Canada (The Bank) has consulted with industry representatives and provided advice to the Department of Finance as they were developing the regulations that will support the coming into force of the RPAA. The Department of Finance published the proposed regulations  in the Canada Gazette Part 1 on 11 February 2023. 

The Bank is responsible for supervising entities and individuals who are subject to the RPAA and ensuring they are meeting the requirements outlined in the RPAA. 

The Bank is developing guidance which will be published in two forms: supervisory policies and guidelines to help PSPs understand what is expected of them under the RPAA. Their supervisory policy on the scope of the RPAA will help individuals and entities determine if they are subject to the RPAA. The Bank is also preparing to release a self-assessment questionnaire (SAQ) to help individuals and entities determine if they will need to register with the Bank.  

Who will be supervised by the Bank?

It is currently estimated that over 2500 individuals and entities will be subject to Bank supervision under the RPAA. Under the RPAA, a payment service provider performs one of the following payment functions in a manner that is not incidental to another service or business activity. 

• Providing and maintaining a payment account

• Holding funds until the end user withdraws or transfers funds

• Initiating an electronic funds transfer (EFT) as requested by an end user

• Authorizing an electronic funds transfer or transmitting receiving or facilitating instructions about an electronic funds transfer (EFT)

• Providing clearing or settlement services

Bank registration and supervision will apply to a variety of individuals and entities, including payment processors, digital wallets, currency transfer services, and other payment technology companies that provide these payment services.  Payment service providers located in Canada or those that  are located outside of Canada but perform retail payment activities for an end-user in Canada and direct services to individuals and entities located in Canada may be subject to the RPAA.  

The path ahead

Current planning projects that the final regulations will be published this fall.  After the regulations are finalized, the Bank will start to publish industry guidance on registration, risk monitoring, and enforcement activities within their purview. The SAQ is expected to be available this fll.  

The RPAA includes a transition period for individuals or entities to apply for registration and for the Bank to review registration applications. Under the proposed regulations, during the transition period (anticipated to begin in late 2024) PSPs will have 15 calendar days to apply for registration, following which the Bank will assess applications. The Bank will publish and maintain a website list of all applicants during the transition period. The Bank expects to start registering entities in the second half of 2024, after the end of the transition period.  Supervision will come into effect in 2025.

The registration process includes a one-time, non-refundable fee (prescribed in the regulations) that must be paid in full using a credit card or an electronic funds transfer.  

Visit the Bank’s website to learn more about this upcoming regime and subscribe to the retail payments supervision newsletter to receive updates on the Bank’s guidance, consultation and to learn when registration opens.  APP will be hosting a webinar on this topic later this year.  

NOTE:  Thanks to The Bank of Canada for collaborating with the Association of Payment Professionals (APP) www.paymentpros.org , Consulting Resource Group (CRG) www.consultingresourcegroup.com and author to prepare this 2-part series.  

Author:  Martha Rhine Marthar@consultingresourcegroup.com