Publication date: December 12, 2023
The following fictional case scenarios provide examples of how to apply the geographic scope criteria under the Retail Payment Activities Act when a foreign payment service provider is involved.
The examples provided are not a replacement for the Criteria for registering payment service providers supervisory policy, but rather they are meant to complement the policy. They should be read in conjunction with the policy.
These examples build off each other. We recommend reading them in the order they appear.
Case scenario: Foreign payment service provider has a subsidiary in Canada
Parent Co. is a foreign mobile payment application that allows users from foreign Country B to make payments for various goods and services through their smartphones or online platforms. It offers a range of payment options, including QR code scanning, in-app payments and online transfers.
Subsidiary Canada Inc. is a subsidiary of Parent Co. that operates in Canada. It facilitates payment transactions for Country B nationals visiting Canada by allowing them to use their account with Parent Co. to make purchases at participating merchants in Canada.
Subsidiary Canada Inc. achieves this through partnerships with Canadian businesses, particularly in the retail and hospitality sectors. In doing so, Subsidiary Canada Inc. leverages Parent Co.’s user base and technological infrastructure to offer payment solutions to Country B consumers when they are in Canada.
Subsidiary Canada Inc. performs the following functions:
- maintenance of an account
- holding funds
- initiation of an electronic funds transfer (EFT)
- the authorization, transmission, reception or facilitation of an instruction in relation to an EFT
By having a place of business in Canada, Subsidiary Canada Inc. meets the geographic scope criterion set out in section 4 of the Retail Payment Activities Act (RPAA).
As a payment service provider (PSP) with a place of business in Canada, Subsidiary Canada Inc. is required to register with the Bank of Canada. When registering, it needs to provide prescribed information in relation to its affiliated entities, including Parent Co.
Case scenario: Foreign payment service provider partners with Canadian payment service provider
Assume now that Parent Co. does not have a subsidiary in Canada but still provides the same payment services for Country B visitors to Canada by entering into an agreement with a Canadian PSP. By operating through the Canadian PSP, Parent Co. can provide its payment solutions to Canadian businesses and consumers while also integrating its technology and expanding its user base in Canada.
Under section 5 of the RPAA, if a PSP that does not have a place of business in Canada performs retail payment activities for end users in Canada and directs retail payment activities at individuals or entities that are in Canada, it is subject to the RPAA.
In this scenario, Parent Co. is directing its retail payment activities at and performing them for individuals or entities in Canada. It is therefore required to register with the Bank of Canada, even if it does not have a place of business in Canada.
Disclaimer
The case scenarios are illustrative examples reflecting the Bank of Canada’s interpretation of certain requirements set out in the Retail Payment Activities Act (RPAA). All names, facts and descriptions in these scenarios are entirely fictitious and do not reflect any real or actual individuals or entities.
Additionally, they do not represent legal advice and should not be used as a replacement for seeking such advice if an individual or entity is unsure about whether they are required to register with the Bank of Canada as a payment service provider. The nature of the products and services offered by each individual or entity will vary, as will the circumstances around offering these products and services. Therefore, any individual or entity that may be subject to the RPAA should assess their own situation on a case-by-case basis according to their own facts and circumstances. Any entity or individual that may be subject to the RPAA is ultimately responsible for determining whether they are required to register with the Bank.
The examples provided are not a replacement for the Criteria for registering payment service providers supervisory policy, but rather they are meant to complement the policy. They should be read in conjunction with the policy.