The Retail Payment Activities Act (RPAA) in Canada has ushered in a new era of regulations, impacting payment service providers (PSPs) and their operations. In this article, we will explore how these regulations shape the landscape for businesses involved in credit card processing, merchant accounts, and payment gateways. Understanding the nuances of the RPAA is crucial for PSPs, especially those dealing with high-risk merchant accounts, credit repair, and CBD transactions.
DOWNLOAD THE MERCHANT PROCESSING INFOGRAPHIC HERE
Overview of Retail Payment Activities Act
The RPAA, along with its accompanying regulations, establishes a federal framework supervised by the Bank of Canada. Geared toward addressing national security risks and enhancing the reliability of Canada’s retail payment sector, the RPAA sets the stage for regulatory compliance for over 2,500 PSPs . ¹ Retail payment activities refer to payment functions performed in relation to an electronic funds transfer that is made in the currency of Canada or another country or using a unit that meets prescribed criteria. The Act outlines eligibility criteria, emphasizing the importance of a secure and trustworthy retail payment environment.
Applicability to Payment Service Providers
The RPAA and Regulations extend their purview to both Canadian-based PSPs and those operating outside Canada but offering services to end users within the country. Defined payment functions include maintaining end-user payment accounts, initiating electronic fund transfers, and providing clearing or settlement services. Virtual currencies fall outside the RPAA’s scope, but electronic payment functions involving digital wallets are covered.
Requirements and Standards
The finalized Regulations introduce several standards, effective from September 8, 2025. These include mandatory registration with the Bank of Canada, operational risk management frameworks, safeguarding end-user funds, and stringent reporting obligations. The Regulations aim to strike a balance between regulatory compliance and easing the burden on PSPs, showcasing adjustments from earlier draft regulations. ²
Enforcement and Penalties
PSPs must adhere to the RPAA’s enforcement mechanisms, with penalties ranging up to CAD 10 million for very serious violations. ³ The Act empowers the Minister of Finance to conduct national security reviews upon initial registration, ensuring a robust regulatory framework. The Regulations provide a clear roadmap for PSPs to navigate compliance challenges and avoid hefty penalties.
Transition and Preparation for PSPs
As the RPAA implementation looms, the Bank of Canada plans to issue supervisory policies, initiate a registration pilot program, and set a registration deadline of November 15, 2024. PSPs are advised to assess their activities, internal frameworks, and stay tuned for further guidance from the Bank of Canada.
Navigating the RPAA landscape demands a proactive approach from Payment Service Providers. As they prepare for the regulatory changes, entities like NextGen Payment Solutions Canada (NPS Canada) can play a pivotal role in ensuring seamless transitions and compliance within the evolving Canadian payment ecosystem.
Footnotes:
- “The future of payments regulation has arrived: final regulations to the Retail Payment Activities Act released”, Victoria Graham et. al, Dec 11, 2023. Osler
- “Canada: Publication of Regulations under the Retail Payment Activities Act to apply to Payment Service Providers”, Michael Garellek et. al, Dec 21, 2023. Global Compliance News
- “Canada: Regulations under the Retail Payment Activities Act to apply to Payment Service Providers published”, Baker Mckenzie, Dec 11, 2023. Baker Mckenzie