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Keeping up with changes in how Canadians pay

Executive Director of Retail Payments Supervision Ron Morrow discusses how the Bank of Canada is taking on new responsibilities to help protect consumers when they pay for things.

Watch Executive Director of Retail Payments Supervision Ron Morrow speak at the Canadian Innovation Exchange Summit. Read the full speech.

New technology means new payment options—and new rules

In recent years, we’ve seen a sharp rise in the use of mobile and digital payments. It’s clear that the way Canadians pay for goods and services is rapidly evolving.

Canadians place their trust in payment service providers (PSPs) every day. When money changes hands electronically in new and different ways, we at the Bank need to make sure that we protect both consumers and the payments system.

The federal government passed the Retail Payment Activities Act last summer, making the Bank responsible for supervising PSPs.

Who will be affected

Our new supervisory framework could apply to anyone in the business of helping people and companies make financial transactions (or transfer and store their money through electronic means). This includes:

  • payment processers
  • digital wallets
  • money transferers

Under the new rules, PSPs will be required to register with the Bank of Canada. Banks and credit unions aren’t part of this new framework because they are already supervised at the federal and provincial levels.

To better monitor compliance with the Act, we will maintain public lists of all PSPs that have:

  • signed up
  • had their registration refused or revoked

We have the power to take action if a PSP does not comply with the Act or its regulations.

Our goal is to support the innovation we see in the payments ecosystem while ensuring PSPs are managing their operational risks and ensuring their consumers’ funds are protected.”

How we will approach our new role

The new rules will apply to many entities, but we won’t adopt a one-size-fits-all approach because we recognize that not all PSPs are set up or operate in the same way.

This means that the actions we take in our supervisory role will be guided by the level of risk each PSP may pose to consumers and the payments system.

We will require PSPs to ensure that they return funds to end users if the PSP becomes bankrupt, but we won’t prevent that bankruptcy from happening in the first place. We also won’t handle customer complaints about fees or other issues they may have with the treatment they receive from a PSP.

We will establish clear requirements and expectations so that PSPs can adjust their operations in line with the rules.

PSPs can meet our expectations using many approaches. Our job is to make the objective very clear. And then PSPs can focus on reaching the destination, not necessarily following a prescriptive journey to get there.”

Where we go from here

We are busy raising awareness of the new rules with industry groups, individual PSPs and associations that represent them.

The Department of Finance Canada will publish the draft regulations online in the near future so PSPs can provide comments. Once the regulations are finalized, we will publish our guidance and asking for more feedback.

For regular updates on the supervisory framework, subscribe to the retail payments supervision newsletter.

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