RPOF Part 2: The other side of the coin

By: Kyle Drewnowsky, nanopay Corporation

In part 1 of this series discussing Canada’s proposed Retail Payments Oversight Framework (RPOF), Fintechs Canada Executive Director, Doug Kreviazuk, outlined the need for this legislation and its potential to guide Canada into an era of payments modernization. In part 2, Fintechs Canada Board Chair, Laurence Cooke, looks to provide insight into the concerns surrounding and potential shortcomings of the proposed RPOF legislation. 

  1. What intended benefits does the RPOF provide to the audience for this legislation (i.e. Payment Service Providers- PSPs)? 

Laurence: The RPOF is designed, primarily, to accomplish two things: 1) To regulate PSPs and their business activities (to ensure that it is safe for end users), and 2) to give trust and confidence to the broader ecosystem (and consumers) to partner with PSPs (to ensure that it is safe). Assuming both of these goals are achieved, then there is a clearer path to providing PSPs with access to the national payment infrastructure. However, there is a fundamental issue, in that the RPOF is decoupled from access. This makes the RPOF a necessary but insufficient condition for access, and I think it should be the other way around. There should be no further regulation of PSPs without access. PSPs would generally be happy to be regulated in return for access. RPOF on its own provides little to no benefit for PSPs. 

The ‘rubber stamp’ that comes with being a regulated entity will not help PSPs attract new customers. PSPs attract customers because we provide enhanced services, better experiences and more innovation than the incumbents. Canada is now years behind all of our contemporaries on payments, so the expressed intention of PSPs saying “go ahead and regulate us” is the expectation that we would gain direct access to the rails. Fair to say that regulation without access is a poor outcome for Canada, for PSPs, for innovation and competition. 

       2. On the point of ‘access’, will PSPs be able to access Canada’s payment system to originate payments following the RPOF’s passage? If not, what else is required and how long might that take? 

Laurence: No. Again, it is a necessary, but insufficient condition for access. This is being described as ‘the onion of access’, in which the RPOF would be just one layer. But the regulators have not yet come up with the other rules governing access, so we don’t know what those would entail and neither do they. We know there will be some rules to determine whether PSPs can establish a Bank of Canada account, or become an indirect participant of the system. Unfortunately, we still don’t know how long this process may take, but we could be waiting several more years for clarity on these issues. Today, all members of Payments Canada have access, with no additional requirements, it is not clear if this will be true for PSPs even if/when they can become members of Payments Canada.

     3. Will all PSPs seek access to the payments system? For those that do not, what is the benefit of RPOF regulation being applied to them? 

Laurence: No, I don’t think all PSPs will want direct access; some desire only indirect clearing or better pricing. For PSPs that do not seek direct access, RPOF offers no benefit to them. If we look at other countries in the world, where there is more innovation and more competition, most PSPs have opted for indirect or even sponsored access. This makes sense because payments are a scale business. Having said this, when PSPs can choose to have access, this will drive down the currently sky high access fees and also create a competitive market for innovative connection service providers.  

    4. Will this legislation level the payments-related playing field for PSPs? 

Laurence: Certainly not. Firstly, the RPOF will take existing PSPs and layer on regulations that make it more difficult to continue doing what they’ve already been doing, which potentially decreases competition and increases barriers to entry. Secondly, there is a real first mover advantage for incumbents. The big banks will gain access to the new real-time rail at least a year ahead of their competitors, providing them a distinct advantage. Thirdly, even for a PSP to be an indirect participant, it requires an existing institution to become their settling agent. However, history has shown that it is unlikely that willing institutions will provide that service at a reasonable price. So the long-standing issue of encouraging competition in payments is once again not being addressed by this proposed regulation. Finally, there is concern around foreign entities (i.e. Libra) being able to skirt the rules, potentially giving them a further competitive advantage over Canadian PSPs. 

    5. Canada continues to lag behind many other countries when it comes to payments, so how does the RPOF compare to other similar regulations in Europe, Australia or Asia? 

Laurence: This is a really good question because in comparable countries, (such as the UK, Australia, Singapore, Hong Kong, and Brazil) everything has been designed around broadened access to specifically encourage innovation, and to create a level playing field for competition. Unfortunately, it looks like the RPOF legislation will be designed to focus on reliability and safety at the expense of innovation, creating additional hurdles for PSPs to compete with the large banks and their large corporate clients. Small-to-medium sized businesses continue to be the backbone of the Canadian economy, employing the majority of Canadians; part of our mission needs to be enabling these businesses to gain access to better, cheaper products and services so that they can flourish moving forward. 

The one benefit to Canada lagging behind these other countries is that we’ve been given an opportunity to borrow the best of what has already been implemented (i.e., learn from their mistakes). In order to create real and sustainable value for the economy, the focus moving forward must be to provide greater access to the payment infrastructure, foster competition and build Canada into the next great hub for innovation. These principles must form the foundation of the RPOF and all other future legislation/regulation concerning the payments ecosystem.

Explore more resources


With unbalanced representation in Ottawa, the unified voice Fintechs Canada will bring has never been more important.


Fintechs Canada made a submission to the House of Commons Standing Committee on Finance (FINA) in advance of the 2023...


Canada’s banking sector is more concentrated and shows some signs of being less competitive than that of its peers, according...