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With the clock ticking down to the Nov. 15, 2024 deadline for
payment service providers (PSPs) to register with the Bank of
Canada, Canada’s financial services landscape is on the cusp of
a major transformation. At the heart of this shift is the
Retail Payments Activities Act (RPAA), a key pillar in
Canada’s drive to modernize payments and create a more
competitive, secure ecosystem.
In a recent discussion with Parna Sabet-Stephenson,
leader of Gowling WLG’s FSxT Group, Ron Morrow, Executive
Director of Payments, Supervision and Oversight at the Bank of
Canada, pulled back the curtain on what the RPAA means for PSPs and
the broader financial industry. His message was clear: payments
regulation is entering a bold new era, and PSPs must be ready to
meet the challenge—or face the consequences.
Transforming the competitive landscape
Morrow described the RPAA as key to propelling Canadian
financial services toward a brighter, more inclusive
future—one that will allow PSPs to participate directly in
the country’s payments infrastructure without requiring a bank
to act on their behalves. “We believe this will bring new
entrants to the payments space, creating a more competitive
financial landscape,” he said, emphasizing the growing
potential for innovation.
To be sure, the RPAA isn’t the only development
fueling ingenuity in financial services. Industry watchers are
waiting anxiously for Ottawa to release its open banking
regulations later this year, as well as for the introduction of
Canada’s first real-time payment system, the Real Time Rail (RTR). When launched, the RTR
will enable faster and more efficient payments. Together, these
changes signal a major overhaul of Canada’s financial
infrastructure.
A “firm but fair” regulatory approach
When asked about the Bank’s stance toward regulation, Morrow
was unambiguous: compliance is non-negotiable. “We’re
aiming for a firm but fair approach,” he stated, signalling
flexibility would be afforded to those PSPs who have
identified, and are actively working to plug, compliance gaps.
“The ‘firm’ aspect applies to people who don’t
think they’re subject to the act or people who believe their
approach to business is fine, even if there are gaps with the
legislation,” he said. “That’s where we have a suite
of enforcement tools that we won’t hesitate to use when and if
required.”
According to Morrow, the Nov. 15, 2024 registration deadline
stands as a critical milestone for PSPs operating in Canada.
“If you don’t register, we’ll find you. We know who
you are,” he cautioned, noting that non-registrants could face
penalties upwards of $10 million.
Looking ahead: Supervisory regime in focus
Once the registration period concludes, Morrow said the Bank of
Canada is ready to pivot its focus and communications toward the
implementation of the RPAA’s supervisory regime. The Bank just
recently published its final supervisory guidelines on operational risk and incident
response, with the final guidelines on the safeguarding of end-user funds expected to
follow shortly.
With the requirements to establish risk management and funds
safeguarding frameworks coming into force on Sept. 8, 2025, the
Bank will be working diligently over the coming months to ensure
that PSPs have the information they need to carefully
audit their current compliance protocols against the coming
requirements.
As Canada’s payments landscape evolves, Morrow’s remarks
made it clear that while innovation and competition are critical to
Canada’s future, they must be balanced with strong regulatory
oversight to ensure safety and trust across the entire ecosystem.
For more information on the RPAA regime, see our
article “Canada’s Retail Payment Activities Act
launches Nov. 1: What Payment Service Providers need to
prepare.”
Watch the in-depth Q&A with Ron Morrow
Read the original article on GowlingWLG.com
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