Trudeau’s Liberal government is proposing with its new federal budget to bring more order to the rapidly changing world of payments. The recently delivered federal budget included three paragraphs on “Supporting an Innovative and Well-Functioning Canadian Payments System.”
With those three paragraphs the Liberal’s are proposing to bring in a new framework under which certain payment providers would have to establish “sound operational risk management practices” and ensure users’ funds are protected against losses.
This new framework would apply to firms providing retail payment activities such as holding onto funds for their users or transmitting payment messages. This would extend to payment card networks and various “non-traditional players,” including financial-technology companies (or fintechs) offering such services.
These changes come with little surprise as Canada’s $53 trillion payment sector becomes more crowded as tech giants such as Facebook and other FANG companies set up payment services for customers along with a slue of start-up and international companies wanting in on the Canada payment market.
“Certain retail payment service providers (PSPs) are currently not subject to oversight, which can raise issues related to risk, efficiency, and protection for payment service providers and end-users,” noted a recent report from the federal government on a review of the Canadian Payments Act. “The proposed oversight framework would serve to close this gap by establishing a number of requirements.”
With the Liberal’s proposal, the Bank of Canada would ensure payment providers comply with the financial and operation requirements and also keep a public registry of regulated payment providers.
Currently, Payments Canada (formerly the Canadian Payments Association) which is an organization that operates a payment clearing and settlement system in Canada says there are around 110 financial institutions participating in one or more of its systems all of which are traditional financial firms, such as banks and credit unions.
By Jamie Barrie