Canada’s imminent regulatory changes require PSPs to register
The Bank of Canada explains the new regulations for Payment Services Providers (PSPs).
Preparing for a new regulatory landscape
Click on the image to access the Bank of Canada’s step-by-step guide for PSPs to register
New regulations for PSPs are imminent in Canada. Most PSPs in Canada and elsewhere in the world serving Canadian end-users must soon register with the regulator, the Bank of Canada. With November’s registration window fast approaching, we speak with Carol Brigham, Managing Director of the Supervision Department at the Bank of Canada, who emphasises the imperative for PSPs to register, shares steps they need to take to be compliant, and explains how the Bank is helping PSPs navigate the registration process.
What is the background to these changes?
The Retail Payment Activities Act (RPAA) was introduced by the Canadian Government to ensure confidence in the PSP sector. Brigham explains that the primary intention of the Act is for Canadian end-users to feel safe using payment service providers as a means of transferring and holding funds. The RPAA mirrors the shifting landscape of PSP regulation seen across other jurisdictions and is intended to transform a previously unregulated sector into a more trusted payments ecosystem.
When are the changes occurring?
The Act requires the majority of PSPs to register with the Bank of Canada between the 1st and 15th of November. Many PSPs will already know about the imperative to register, but there is a risk, as Brigham highlights, that the fast-approaching registration window may not be on some businesses’ radar.
Following the registration period, the Bank will spend several months reviewing applications and performing checks, alongside a wider national security review conducted by the Department of Finance.
The go-live date for the new regulations will be in September 2025, which is when PSPs will know if their registrations have been approved.
How is the Bank of Canada helping?
As Brigham explains, the main objective of the Bank, as the regulator, is to encourage compliance. “While we will take a serious approach to enforcement, what we want during this registration period is to give PSPs the tools they need to check if they’re in scope and build a solid approach to operational risk,” says Brigham. To that end, the Bank has provided a four-step application test that PSPs can use to check if they are in scope.
There is also a step-by-step guide available on the Bank’s website for PSPs to refer to, along with a webinar explaining the process in further detail, and general information about retail payments supervision.
Not all cases are black and white
Also provided is a list of scenarios that capture more nuanced situations, to help PSPs determine if they are in scope. “We realise that it is not always black and white, and there will be providers who operate in a bit of a grey area,” Brigham suggests. “The scenarios help PSPs, or the lawyers of PSPs, better understand what side of the fence they’re on. We’ve had really positive feedback on those scenarios, so I encourage people to take a look at them if they’re unsure.”
What steps do PSPs need to take?
As part of the registration process, PSPs will need to demonstrate a solid approach to operational risk, which includes safeguarding user funds, including in the event of the company folding. Between registration in November and the go-live date in September 2025, PSPs may be asked for more information. If needed, they will be required to enhance their documentation and implement further operational risk processes. There will be reporting requirements after the go-live date in 2025, but these will be proportional to operational size and risk.
What is the Bank’s approach to enforcement?
Brigham emphasises that, as the regulator, the Bank of Canada will issue penalties for non-compliance, but the initial approach to enforcement will not be punitive.
“Our primary goal,” Brigham explains, “is to encourage PSPs to take the necessary steps by providing them with the tools and information they need. We want to support a confident and safe payments sector and really invite PSPs to see that registering is a vital step to being part of that ecosystem,” Brigham says. “While we do have enforcement tools to identify businesses that don’t register, and we will make contact, our enforcement response will be proportional to operational size and risk,” she continues.
Compliance is critical (but the benefits are clear)
Although registration under the RPAA is not a licensing scheme – it is required by law – it nevertheless supports business benefits for PSPs. Beyond compliance, registering indicates that PSPs are serious about meeting the standards set by the RPAA and can ensure a baseline of security for end-users. In this sense, it serves as a benchmark and, with that, comes credibility.
Additionally, registration is a first step towards participating in Canada’s upcoming instant payments system.
The future of the Canadian PSP space
After the go-live date in September 2025, registered PSPs will have some reporting responsibilities. Like other aspects of the regulations, these will also be proportional to operational size and risk. Brigham highlights again the purpose of the RPAA, which is to create a safe payments experience for Canadian end-users and bolster confidence in the sector.
Another step towards a confident and modernised payments ecosystem will come by way of the Real-Time Rail instant payments system, expected to launch in 2026. This will transform how Canadians send and receive payments, providing instantaneous access to payments and delivering even greater safety and security to end-users.
If you’re an international PSP facilitating payments to Canada
It’s imperative, under Canada’s new payments regulations, that PSPs outside of Canada who facilitate payments to Canadian end-users also register with the Bank of Canada. Brigham highlights that the Bank’s enforcement tools extend to international PSPs, and there will be cross-border cooperation with regulators in other jurisdictions.
“We realise that there may be PSPs out there, outside of Canada, who aren’t aware of our new legal requirements. It’s really important that they become aware because this law applies to them as well. That’s why we’re doing our best to get the word out,” says Brigham.
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