Are you a payment service provider? You may be subject to the new Retail Payment Activities Act

Apr 16, 2024 1 MIN READ
Elizabeth Sale

Partner, Financial Services, Toronto

The Retail Payment Activities Act (RPAA) establishes a general supervisory framework for the regulation of payment service providers (PSPs). Under the new legislation, PSPs are required to register with the Bank of Canada prior to engaging in any retail payment activities.

The Bank has published guidance to help individuals and entities understand their obligations under the RPAA and if they need to register as a PSP starting on November 1, 2024. In the video below, Osler Financial Services Group partner Elizabeth Sale outlines the Bank’s qualifying questions to help you determine if you need to register as a PSP.

ELIZABETH: Hello, I am Elizabeth Sale, and I am a partner in the Financial Services Group at Osler. My practice touches on all aspects of financial services regulation.

Are you a payment service provider? If so, you may want to determine if you are subject to the Retail Payment Activities Act.

Under the new law, Payment Service Providers or PSPs, must register with the Bank of Canada before performing any retail payment activities. The Bank published guidance to help individuals and entities determine if they actually are PSPs that must get registered.

To do this, the bank created a series of qualifying questions. If you answer yes to all of them, then you need to register as a PSP starting on November 1st, 2024.

The first question seems pretty obvious: Are you a payment service provider? But to help you decide, here is what the bank says. You are a PSP if you do one of the five following things.  Each one of these things is called a payment function under the law.

The first thing is if you provide or maintain an account that is held on behalf of at least one end user. You do not need to hold funds to maintain an account, but you also qualify if you do hold funds on behalf of an end user. Or, if you initiate an electronic transfer of funds or EFT at the request of an end user. If you authorize an EFT, or if you transmit, receive or facilitate an instruction related to an EFT you qualify as a PSP.

You are also a PSP if you offer clearing or settlement services.

The guidance sets out detailed information about each of the five payment functions and explains how the Bank of Canada interprets each one.

You might perform one of these payment functions but only incidentally to another activity. If you perform a payment function only to directly support a non-payment activity, you might not have to register. But if the payment function is a distinct service, you are likely a PSP.

Question two asks if you perform retail payment activities. This includes moving money between a payer and a payee using debit cards, credit cards, direct deposits, electronic peer-to-peer payments or other electronic systems.

The third question is: where is your place of business? If your business is based in Canada, you need to register. You also need to register if you plan to expand into the Canadian market.

If your business is located outside of Canada but you perform retail payment activities for an end user in Canada and direct these activities at individuals or entities in Canada, you may need to register.

The final question deals with exemptions. Are you a bank, an insurance company, or an agent of the provincial Crown? If so, you’re excluded. Some organizations, such as the Canadian Payments Association, are also excluded.

Certain activities also qualify for exclusion. Payment functions that are made using store gift cards is one example, but there are others as well.

To find out more about how the Retail Payment Activities Act affects you and your business, please get in touch with us. And remember, if you are a PSP, registration opens on November first. If you need some assistance with that process, Osler would be happy to help.