Revolutionizing Payments in Canada

The Bank of Canada is effecting noteworthy modifications to its supervision and regulation of the payments area. Consequently, the Canadian payments domain is foreseen to be impacted by freshness, rivalry, and amplified consumer safeguarding. Ron Morrow, the Bank of Canada's supervisor of retail payment service providers (PSPs) and financial market infrastructures, spoke at the Central 1 Momentum Summit recently about upcoming reforms. Morrow began by expressing his appreciation to those present and illustrating the importance of payments in everyday living. He reflected on the consequences of the 2008-2009 financial crisis and the collapse of the Herstatt Bank in 1974 for the current financial atmosphere. Morrow showed how the Bank of Canada is essential in maintaining a regulated financial environment by applying lessons from the past to the present. In addition to the payment systems that are already regulated, thousands of other companies offer payment services. These payment service providers (PSPs) vary in size from big, established players to smaller ones. Until recently, PSPs haven't had to be subject to oversight outside of the anti-money laundering laws. However, that's about to change.” This afternoon, I plan to detail the Bank's adjustments to deal with the current circumstances, specifically concerning the soon-to-be-implemented new retail payments system, and go over some of its specific features. Morrow portrays the Canadian central bank as analogous to Spiderman by stressing its role in preserving trust in the financial framework. It is worth noting that the retail payments system is running without any issues right now. Canadians are confident in the payment system providers (PSPs), which can be seen by how they use them automatically in their daily purchases and money transfers. The new governance I am referring to now must guarantee that this faith placed in it is justified, guaranteeing that the public knows that the risks of operation are being managed correctly and their funds are secure. In 2021, the Canadian government passed the Retail Payment Activities Act in order to ensure PSPs (Payment Service Providers) abided by risk management protocols and safeguarded any money they handled for end customers. To account for the rising PSP industry, the Canadian Payments Act was amended according to Morrow. This will grant PSPs access to the national payments infrastructure and the forthcoming real-time rail (RTR) system. Morrow talks about how the Bank of Canada incorporated concepts from other nations, including the UK, Singapore, and the European Union, into their new system. Generally, there was no requirement to come up with a distinct, Canadian-made approach. As a number of PSPs operate in numerous jurisdictions across the globe, it is beneficial to work with other regulatory systems whenever possible. Just like other parties, we desired a balance between protecting the end user's interests and optimally streamlining process procedures while reducing the PSPs' load. Morrow identified three essential components upon considering what the new system will necessitate from PSPs. It is less than a year until the Act will come into force and organizations that fall into the category of PSPs must register with the Bank of Canada. We will begin by asking for the basic information required. Registering is just the first step. From 2025, PSPs (payment service providers) should be operating in accordance with minimum requirements in order to manage operational risk. Moreover, PSPs must show what measures they are taking to guarantee end-user funds. In order for PSPs to satisfy these conditions, they will have to pursue a few procedural steps. At this point, I won't be able to detail all the steps necessary, but, in general, PSPs must: Moreover, Payment Service Providers (PSPs) who possess customer funds must show to the new regulations that they have created procedures to protect such monies until they are moved or withdrawn. As a result, PSPs must separate end-user funds from their functioning resources and must either put them in trust or insure or secure them. The aim of this is to guarantee that end users have dependable and prompt access to their cash, and to protect them if a PSP goes into insolvency. In his speech he expanded upon what defines a PSP, the steps which individuals must take to take part, and the details of how the updated scheme will be enacted. Morrow concluded with, “We are working to maximize awareness of the imminent legislation and to ensure that everyone is informed of the changes.” Morrow noted that they are doing all they can to make clear their expectations in the remaining period prior to the act taking effect. To reduce the likelihood of needing to take enforcement actions, they are maintaining communication with the industry and supplying data frequently and promptly. He stressed their effort to maximize understanding of the impending law and to guarantee everyone is informed of the alterations. The main takeaway from this presentation is that transformation is imminent. Undoubtedly, PSPs conducting commerce in Canada should begin to prepare immediately. huge responsibility. Bear in mind that great power comes with tremendous responsibility.

Source: https://medium.com/@markelitics2022/canadas-payment-revolution-aced45788a51?source=rss------fintech-5