May 13-14 • Fairmont Royal York • Toronto
Navigate Canada's Payments Compliance Landscape
From Fundamentals to Future
USD$899 ETA Members • USD$1049 Non-Members
How Canada's New Payments Law Will Transform Digital Finance
The Retail Payment Activities Act (RPAA) is expected to have a positive effect on the Canadian economy. It aims to foster competition and innovation in the payments sector by allowing more payment service providers to join Canada's national payments infrastructure, potentially leading to lower costs for businesses and consumers. Additionally, the RPAA is designed to enhance consumer protection and build additional confidence in digital payment services, which could contribute to overall economic growth and competitiveness in Canada's financial technology sector.
The advent of Real-Time Rail (RTR) in Canada also brings significant changes to the payments landscape, particularly in terms of compliance. The Bank of Canada estimates that more than 3,000 companies will be required to register under the RPAA.
Here are eleven key implications for payment service providers (PSPs), fintechs, and financial institutions who want to participate:
Registration Requirements
PSPs must have registered with the Bank of Canada by November 15, 2024. This registration process is a crucial first step in the new regulatory framework, ensuring that all entities involved in real-time payments are known and accountable to the regulator.
Risk Management Framework
Companies are required to establish and maintain a comprehensive risk management and incident response framework. This framework should address the unique challenges posed by real-time transactions, including fraud prevention and cybersecurity measures tailored to the instantaneous nature of these payments.
Incident Reporting Obligations
New obligations for incident report notifications have been introduced. PSPs must develop robust systems to detect, report, and respond to incidents promptly, given the potential for rapid escalation of issues in a real-time environment.
End-User Fund Safeguarding
PSPs must implement measures to safeguard end-user funds. This may include segregating client funds, obtaining insurance, or other protective measures to ensure the security of funds in transit or held by the PSP.
Regular Reporting to the Bank of Canada
Mandatory regular reporting to the Bank of Canada has been instituted. PSPs will need to develop systems and processes to collect, analyze, and report relevant data accurately and timely, providing transparency into their operations.
Operational Risk Management
Companies must implement frameworks to manage operational risks specific to real-time payments. This includes developing strategies to handle the increased transaction volumes, ensuring system uptime, and managing the complexities of 24/7 operations.
National Security Compliance
PSPs must adhere to national security requirements. This involves implementing robust Know Your Customer and Anti-Money Laundering procedures that can operate effectively in a real-time environment, potentially requiring advanced AI and machine learning technologies.
Bank of Canada Supervision
The Bank of Canada will supervise PSPs to ensure compliance with the Retail Payment Activities Act (RPAA). This ongoing supervision may require PSPs to be prepared for regular audits and to maintain comprehensive documentation of their compliance efforts.
Financial Requirements
PSPs may need to demonstrate sufficient funding for payment capacity accounts and comply with financial health requirements. This could involve maintaining certain capital ratios or liquidity levels to ensure the PSP can meet its obligations in the fast-paced real-time payments ecosystem.
Annual Assessment Fees
PSPs will be required to pay annual assessment fees to cover the Bank of Canada's supervisory costs. Companies will need to factor these fees into their financial planning and potentially adjust their pricing models to accommodate this new expense.
Enhanced Consumer Protection Measures
PSPs must implement robust consumer protection protocols as part of their compliance obligations under the RPAA. This includes clear disclosures on fees, dispute resolution mechanisms, and safeguards against unauthorized transactions. Real-time payments amplify the need for immediate consumer recourse, requiring PSPs to adopt advanced tools for fraud detection and resolution.
The advancement of real-time payments in Canada represents a significant shift in the payments landscape, bringing both opportunities and challenges for compliance professionals. To stay ahead of these changes and ensure your organization is prepared, attend ETA's Payments Compliance Conference on May 13-14 in Toronto. This event will feature regulators and policymakers speaking directly to the industry, providing invaluable insights into navigating the new compliance landscape of real-time payments and other pressing developments.