The 2018 Federal Budget included a commitment to review the benefits and risks associated with Open Banking, advance the Retail Payments Oversight Framework, review rules which allow financial institutions to engage fintechs, and review the Canadian Payments Act.
Moreover, key strategic discussions have been initiated on critical industry matters including:
- Payments system modernization
- Requirements and conditions for payment services providers to gain access and permitted to participate in Canada’s national payments system
- Identifying and considering opportunities to enhance the role of PayTech firms in the current retail payments system
- The need to respond to the rapid and ever-changing needs of Canadians and businesses
Despite these positive signs, delays are expected with modernizing the payments infrastructure and underlying legislative changes that must be given careful attention.
Key industry issues
Outcomes desired by PayTechs are not part of the government’s policy review until after 2022. PayTechs are only considered to provide an exchange function in the real-time rail, with limited ability to initiate payments for their customers.
Pace of change
Payments Canada has not been able to meet target dates for either the real-time rail or settle optimization engine (SOE), formerly the ACSS. Extended completion dates create significant opportunity costs for PayTechs as incumbents continue to expand and capture the majority of this emerging market.
Interac has been chosen by Payments Canada as the sole provider of the new real-time rail. The commonality of interest may well give rise to control issues and concerns over impartiality to enhanced levels of access and introduction of competing financial service offerings.
Lack of framework
While policymakers are promoting the development of a comprehensive regulatory framework to support payment service providers (i.e., RPOF), serious delays are anticipated, further disadvantaging this emerging sector.
Short – Medium term (6-18 months)
- Government relations: Establish credibility and trust of PayTechs of Canada, so the association can constructively contribute to the dialogue
- Policy advancement: Enhance the role of PayTech firms and champion their ability to initiate payments on behalf of clients and promote the achievement of an equal status to other participants in the payments system.
- Infrastructure timing: Push the timetable for the deployment of the overall payments modernization program, with a focus on the real-time rail (RTR)
- Common cause: Complete a stakeholder analysis in order to identify and gain support from all common-cause stakeholders
- Association growth: Concentrate on growing the PayTechs of Canada association, thereby attaining financial stability and an enhanced level of influence.