Learn about the Bank of Canada’s role in supervising payment service providers, next steps and how you can get involved.
Under the Retail Payment Activities Act (RPAA), the Bank will be responsible for supervising payment service providers (PSPs). The aim is to build confidence in the safety and reliability of their services while protecting end users from specific risks.
The Department of Finance Canada is leading the development of regulations for the supervisory framework with support from the Bank.
About payment service providers
According to the RPAA, PSPs include a variety of entities that perform electronic payment functions, such as payment processors, digital wallets, money transfer services and other payment technology companies that offer retail payment services.
We are interpreting the payment functions outlined in the RPAA to determine which entities or individuals will be considered a PSP.
Providing or maintaining a payment account
Individuals or entities:
- provide or maintain a payment account if they store personal or financial information about end users to make it easier to carry out future transactions
- do not provide or maintain a payment account if they store personal or financial information:
- for purposes other than making an electronic funds transfer (EFT)
- for making it easier to conduct a one-time transaction but not for future EFTs
Information about how we interpret this function will be released when it becomes available.
Initiating an electronic funds transfer
An EFT is initiated when a payer or a payee sends the first instruction to start a transaction, either as a push or pull payment.
- A push payment is when the payer sends an instruction to move funds to the payee’s account. This type of payment is commonly used for a one-time online purchase or a transfer of funds that occurs only once.
- A pull payment is when the payee sends an instruction sent to move funds from the payer’s account. This type of payment is commonly used for recurring bills and subscriptions.
Both push and pull payments require the payer’s consent.
Authorizing or transmitting instructions about an electronic funds transfer
A PSP authorizes an EFT if it:
- requests that the end user confirm whether they sent or received an EFT
- confirms that the end user has enough funds to make the requested EFT
- has an arrangement with its end user to send or receive an EFT without an action taken by the end user (i.e., pre-authorized)
- debits or credits an end user’s account as directed by the payment instruction associated with an EFT
A PSP transmits, receives or facilitates an instruction about an EFT if it:
- sends payment instructions
- receives payment instructions
- provides the infrastructure that enables payment instructions to be sent or received
Clearing or settling
The clearing process involves transmitting, reconciling and, in some cases, confirming transactions before they are settled. It includes:
- preparing and calculating final balances for settlement
- exchanging the necessary information
The settlement process releases the payment obligations between two or more PSPs according to the terms of the transaction. The transaction is considered complete once settlement takes place.
Money service businesses
Individuals or entities registered with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) as a money service business must register with us as a PSP if they perform retail payment activities covered by the RPAA.
Our role is to supervise registered PSPs in relation to operational and financial risks to ensure the safety and the reliability of PSPs.
FINTRAC will continue to regulate money service businesses in relation to:
- anti-money laundering
- anti-terrorist financing
About cost recovery
Under the RPAA, we are required to recover the costs of supervising PSPs through two types of fees.
As part of their application, all applicants will need to pay a fee when registering with us. We will only review an application once we have received this fee.
Annual assessment fee
Registered PSPs will need to pay an annual assessment fee.
This fee will recover the cost of the Bank’s supervisory activities under the RPAA that have not been recovered through the registration fee, using a set formula.
The cost of implementing the retail payments supervision (RPS) mandate depends on several factors, including the number of PSPs in scope of the RPAA and the efforts that will be required to assess whether PSPs are adequately meeting their regulatory requirements.
What we won’t do
We will not supervise financial businesses or payment systems that are prudentially regulated by federal or provincial laws, such as commercial banks and credit unions.
We will not offer broader consumer protection, such as:
- dispute resolution between a PSP and its end users
- concerns about fees charged by PSPs
- privacy complaints
Our role is not geared toward preventing PSPs from failure or insolvency.
Unlike a licensing program, this supervisory framework will not enable us to authorize firms to operate as a particular type of entity.
Canada’s Minister of Finance will be responsible for conducting a national security review of PSPs.
Here is what to expect as we prepare for the implementation of the RPAA.
The RPAA establishes the legal framework for us to supervise PSPs, including its scope and powers. It was approved by Parliament on June 29, 2021, and is expected to come into force in stages, as described below.
Regulations to help clarify the details of the legislation will support the RPAA. Regulations, like legislation, have the force of law.
- Drafting: While the Department of Finance Canada drafts regulations, we are engaging with stakeholders and providing technical expertise and advice as required.
- Approving: The Department of Finance Canada will submit the regulations to the Treasury Board—the committee of ministers that oversees the Government of Canada’s spending and operations—for approval.
- Publishing: Regulations will be published for public comment in Part I of the Canada Gazette.
- Reviewing and republishing: The Government of Canada will review comments and consider changes to the regulations, if needed. A final version of the regulations will then be published in Part II of the Canada Gazette.
Once regulations are published in Part II of the Canada Gazette, we will issue guidance on specific topics related to the RPAA to further clarify our supervisory expectations. These documents will:
- explain how we interpret the RPAA
- provide transparency around our supervisory role
Coming into force
PSPs will be required to register with us before they have to comply with requirements for operational risk management and safeguarding end-user funds.
The federal Cabinet will decide how and when each provision of the RPAA will come into force.
How to get involved
Here is how we are engaging with industry and stakeholders to better understand the retail payment landscape.
We are consulting with stakeholders to get their feedback on various aspects of our supervisory role and to understand how this new regulatory work will affect PSPs.
For information about our next consultation and how to participate, subscribe to the retail payments supervision newsletter.
The Retail Payments Advisory Committee (RPAC) was established in 2020 to provide industry expertise to the Bank.
RPAC members meet as required to discuss issues related to retail payments. Agendas and any discussion material are published before each meeting.
Retail payments supervision and access to Real-Time Rail
Consumers and businesses benefit from innovation in the payment system when the right precautions are in place. Our retail payments supervisory framework will complement work led by Payments Canada to modernize Canada’s core payment systems. A new payment system, Real-Time Rail (RTR), is an important part of this modernization.
When launched, the RTR will allow Canadian consumers and businesses to exchange funds in real time. PSPs may have access to the RTR system if they:
- are eligible for membership with Payments Canada
- meet specific requirements
Under the Canadian Payments Act, entities eligible for Payments Canada membership include:
- domestic and authorized foreign banks
- other deposit-taking institutions, such as trust and loan companies
The Department of Finance Canada is working to expand the eligibility criteria to include PSPs supervised under the RPAA. When Finance Canada expands the eligibility requirements, PSPs who wish to connect to the RTR must register with us before they can apply to become a member of Payments Canada.
Within the RTR system, PSPs will be able to:
- exchange payments in real time
- settle and clear their own transactions
- rely on other participants to provide settlement service
Once registered, PSPs that wish to settle transactions will be required to apply to open a settlement account with us.