Canadian Financial Firms Push For Wider Access To Payments Systems

December 21, 2022
A group of financial organisations has urged the Canadian government to expand access to the central payment infrastructure in next year’s budget bill.

A group of financial organisations has urged the Canadian government to expand access to the central payment infrastructure in next year’s budget bill.

Fourteen Canadian financial organisations, including Payments Canada, have signed a joint letter to the finance minister calling for changes to the Canadian Payments Act (CP Act).

The organisations are pushing for the government to expand Payments Canada’s membership eligibility to registered payment service providers (PSPs), local credit unions and financial market infrastructure entities.

“Canada is at an inflection point in the evolution of the global payment ecosystem,” the letter says, arguing that the Canadian regulatory framework “has not kept pace with global and domestic payment developments”.

Canada is currently undergoing an extensive modernisation programme, revamping all parts of its payment infrastructure in a phased approach.

Last June, the country’s legislature passed the Retail Payment Activities Act (RPAA) to create a new legislative framework to regulate retail payment activities in Canada.

Under the RPAA, PSPs will be required to register with the Bank of Canada and comply with operational risk management and end-user fund safeguarding requirements.

“We commend you for taking an important first step toward enabling modern payments regulation through the RPAA,” the organisations said.

However, they have asked the government to move forward and work with the ecosystem to define the important measures to manage risk, including market conduct, in retail payment activities.

Noting that although the various payments modernisation initiatives are contributing to the transformation of the country’s payment landscape, it is equally important to enable modernised, risk-based access to Payments Canada’s systems.

“The combination of RPAA and membership changes to the CP Act will enable broader access to the national payment system,” they write.

Commenting on the letter, the Canadian Bankers Association said its member banks strongly support responsible innovation and competition.

“Banks agree that the payments ecosystem should grow and evolve while ensuring measures are in place to protect end-users, their money and data, and ensure the resiliency of the broader financial system,” the association told VIXIO.

Opening up access to the central infrastructure will not only reduce costs but will also result in a safer and more secure payment system, according to Alexander Vronces, executive director at Fintechs Canada.

Fintechs that join Payments Canada and access the payment system will need to meet Payments Canada's rules, which make up a significant part of how the risks of moving money are managed in Canada, he explained.

“By keeping non-banks outside the formal system, especially the larger ones who have a credible path to access, we're failing to manage risk as effectively as we could,” Vronces pointed out.

There are more than 2,000 PSPs in Canada which could be affected by the legislative change, including PayPal, Apple Pay and Block/Square.

The letter was sent to the finance minister as part of the government’s consultations related to the 2023 budget bill.

Signatories of the letter include a diverse coalition of organisations, including Payments Canada, the Canadian Bankers Association, Fintechs Canada, the Consumers Council of Canada and others.

Although the proposal has widespread support, it is unclear whether the government will act on the request in next year’s budget bill.

However, modernising Canada’s payment system was included in the minister’s mandate letter, which means that the Liberal government already has the mandate to support improvements.

“This is really just about pushing something already in motion over the finish line,” according to Vronces.

Nonetheless, as reported by VIXIO, broader access may be against the interests of some banks which have paid large fees for building and operating the payment system and may be reluctant to open it up to competitors.

“As the letter's breadth of signatories shows, almost everyone wants these changes to happen,” Vronces said, pointing out that the only ones opposing these changes “are a very few loud and outspoken banks — the biggest in the country”.

Canada has been considering expanding access for five years during which period Payments Canada has called for action several times, most recently in mid-October.

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