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Payment service providers (PSPs) in Canada must register with the central bank to continue operating, as the Bank of Canada takes on a new supervisory role of the country’s payment system.
In 2021, Canada’s federal government adopted the Retail Payment Activities Act (RPAA), an extensive piece of legislation that aims to tighten supervision of PSPs and ensure safeguarding of end-user funds.
The registration provisions of the RPAA will take effect on November 1, 2024, and existing PSPs must apply for registration by November 15, 2024.
The Bank of Canada is therefore urging firms to find out whether they meet the definition of a PSP under the new regulation, and prepare accordingly.
To help firms understand their obligations, the bank has published a supervisory policy on registration criteria, outlining in-scope activities, as well as exclusions. It has also released a self-assessment tool.
Firms are required to register if they hold funds on behalf of end-users; initiate electronic funds transfers at the request of end-users; or if they provide or maintain accounts on behalf of one or more end-users.
Authorising an electronic funds transfer instruction, transmission or receipt are also in-scope activities, as is the provision of clearing or settlement activities.
However, banks, authorised foreign banks and provincially-regulated trust companies are excluded from the application of the RPAA, even if they provide these same services.
Incidental activities, securities-related transactions, and internal and closed loop transactions, are also excluded.
Geographically, for payment activities to be in scope under the RPAA, the PSP must either have a place of business in Canada or must serve individuals or entities in Canada.
PSPs cannot operate without registration
Beginning on November 1, 2024, PSPs that operate without applying to register with the central bank will be in violation of the RPAA and may be subject to enforcement action.
When submissions close on November 15, 2024, a transition period will follow. During this period, the central bank will review applications and share information with the Department of Finance and FINTRAC, Canada’s anti-money laundering (AML) regulator, as required by the RPAA.
The Bank of Canada or the Department of Finance may also reach out to applicants if additional information is required.
On September 8, 2025, the transition period will end and applicants will be notified whether their application was successful.
The Bank of Canada will also publish a list of PSPs that have successfully registered, alongside a list of applicants whose applications were refused, and the reasons for their refusal.
All of this information will be publicly available on the Bank of Canada website.
If an application was refused, the applicant is entitled to request a review of the decision by the governor of the Bank of Canada.
Payments activities pose national security risks
The RPAA begins by stating that “safe and efficient movement of funds is essential to the health and strength of the national economy”.
“Evolving technologies permit retail payment activities to be performed in new and increasingly complex ways by a larger variety of PSPs across Canada,” the act states.
“Parliament considers that it is desirable and in the national interest to address risks related to national security that could be posed by payment service providers.”
By supervising PSPs more directly, the RPAA also aims to promote competition and innovation within the payments sector, and to increase consumer confidence in payment services.
The RPAA is particularly concerned that PSPs have in place policies and procedures to mitigate operational risk and to safeguard end-user funds.
