In a significant development for the financial landscape, Canada has unveiled the finalized regulations under the Retail Payment Activities Act (RPAA), marking a new era for payment service providers (PSPs).² This article explores the implications of the RPAA and its accompanying regulations, shedding light on how businesses can prepare for the changes ahead.
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Background: Canada’s New Retail Payment Supervisory
Framework
The RPAA establishes a federal retail payment supervisory framework overseen by the Bank of Canada. Its core objectives include addressing national security risks, mitigating operational risks, and building trust in Canada’s retail payment sector. The Regulations, integral to the RPAA, provide clarity on compliance obligations for over 2,500 PSPs. ¹
Who is Affected?
The RPAA applies to PSPs with a Canadian presence and those outside Canada serving end users in the country. The definition of a PSP encompasses entities involved in various payment functions. Notably, the RPAA excludes regulated financial institutions and activities involving closed-loop gift cards.
What are the Requirements?
The Regulations introduce key standards to be met by PSPs, including registration, operational risk management, safeguarding end-user funds, reporting to the Bank of Canada, and adherence to national security measures.² PSPs are subject to monetary penalties for serious violations, emphasizing the need for stringent compliance.
Changes from the Draft Regulations
While the published Regulations align with earlier drafts, there are notable relaxations, including extended timelines and reduced reporting requirements.³ This signals a positive shift for PSPs, allowing for a smoother transition into the new regulatory landscape.
Next Steps: Implementation and Readiness
As the Bank of Canada gears up to implement the RPAA, PSPs are encouraged to confirm their applicability, understand updated timelines, and establish internal frameworks aligned with regulatory requirements. The Bank of Canada will issue supervisory policies and guidelines, offering a registration pilot program for PSPs to test the registration process.¹
Recommended Actions
PSPs, both within Canada and those serving Canadian users, should take proactive steps to ensure compliance. This includes confirming applicability, noting registration timelines, establishing robust internal frameworks for risk management, incident response, and end-user fund safeguarding, and staying updated on guidance from the Bank of Canada.
Implications for Payments Canada Membership
The RPAA serves as a gateway for registered PSPs to obtain Payments Canada membership and access Canada’s Real-Time Rail payment system.³ Understanding these implications is crucial for PSPs aiming to enhance their participation in Canada’s payment ecosystem.
As the RPAA and its Regulations set the stage for a new era in Canadian payment regulation, PSPs must prioritize compliance and readiness. Adhering to the recommended actions and staying informed about further guidance from the Bank of Canada will position businesses for success in this evolving landscape.
Footnotes:
- Baker McKenzie. “Canada: Regulations under the Retail Payment Activities Act to apply to Payment Service Providers,” Global Compliance News, December 21, 2023. Link
- Government of Canada. “Retail Payment Activities Act Framework.” Department of Finance Canada, November 22, 2023. Link
- Payments Canada. “Real-Time Rail: Canada’s New Payment System.” Payments Canada, Link