Canada: The Final Report Of The Task Force For The Payments System Review Arrives

The formation of the Task Force for the Payments System Review (the Task Force) was announced by the federal Minister of Finance on June 18, 2010. The Task Force was given the mandate to make concrete, actionable recommendations to the Minister to help guide the future of the Canadian payments system.

The final report of the Task Force, Moving Canada into the Digital Age, together with four policy papers and two additional discussion papers, was published on Friday, March 23, 2012.

Approach and General Themes

The Task Force took a collaborative approach to reviewing the payments system, engaging and consulting with consumers, retail and small business groups, federal and provincial governments, small and large businesses, and new entrants to the payments system. Consultations took a number of forms, including interviews, roundtable discussions, town-hall meetings and discussion papers, all in an effort to spark dialogue across the range of payments system stakeholders. A number of working and advisory groups were also formed to advance specific elements of the Task Force's work.

The following general themes emerge from the final report of the Task Force and the accompanying papers:

  • users of the Canadian payments system, including consumers, merchants, small and medium enterprises, and large corporate and government organizations, are discontented with the existing system;
  • transitioning to a digital economy is critical for Canada and will require collaboration and co-operation among all stakeholders;
  • given the nature of the payments industry, which will be characterized by rapid, discontinuous change, a flexible, adaptable approach is essential;
  • the transition to a digital economy will require a new governance model supported by new, principles-based legislation; and
  • the payments system itself as well as the new governance model and legislation should be based on the fundamental principles of trust, access and good value.

Transitioning to Digital Payments

The Task Force makes it clear in its final report that transitioning to a digital economy is essential if Canada is not to be left behind in the global economy. In its discussion paper, Going Digital: Transitioning to Digital Payments, the Task Force sets out its views on how to best advance the transition to digital payments and highlights the three key elements of a successful evolution as:

  • the implementation of electronic invoicing and payments;
  • the creation of a mobile ecosystem; and
  • the building of a digital identification and authentication regime to underpin a modernized payments system and protect Canadians' privacy.

In its final report, the Task Force calls on the government to lead the industry by example by implementing electronic invoicing and payments for all government suppliers and benefit recipients. The Task Force states that it is a reasonable goal to reduce cheques by 80% by 2020. With respect to the mobile ecosystem and digital identification and authentication regime, the Task Force acknowledges that advancements are underway across the country and has encouraged the government to work with the private sector to make progress in these areas but does not go on to make more specific recommendations.

The building of a digital identification and authentication regime will be of critical importance in the further refinement of Canada's anti-money laundering laws. Digital identification and authentication would provide an effective mechanism to allow regulated entities to verify and authenticate client identity in a non-face-to-face environment in a more pragmatic manner than the current legislation allows.

Specific Recommendations

The Task Force has been more specific in its proposals to overhaul the governance structure of Canada's payments system and the legislation required to support such a structure. The Task Force recommends a new governance model with the following three key elements:

  1. a self-governing organization (SGO);
  2. a public oversight body (POB); and
  3. a core infrastructure entity, being the Canadian Payments Association (CPA).

The new legislation required to support this model would be focused on function rather than type of institution and would:

  • define a discrete payments industry, separate from the banking and financial services industry;
  • create the new POB for the payments industry;
  • encourage the industry to create a broad-based, collaborative SGO, in which membership would be mandatory for payments system providers and voluntary for users; and
  • reinvent the objects, governance, powers, business model and funding of the CPA to enable the CPA to function as the core infrastructure entity that will better serve the payments system.

The most significant of these recommendations is that payment industry participants such as processors, software and hardware manufacturers, acquirers, loyalty points program operators and ATM operators that were not previously subject to specific payments legislation would now be swept up in the definition of "payments system providers" and would be subject to the new proposed payments governance regime.

New Governance Model

The Task Force proposes that the SGO would be composed of two groups of members:

  1. payments system providers, whose membership would be mandatory, including banks, other financial institutions, other payments service providers (including newer entrants and acquirers), payment card networks (including credit, debit, prepaid and open-loop gift card issuers) and others in the payments value chain such as payments software suppliers, processors and acquirers; and
  2. payments system users, whose membership would be voluntary, including consumers, merchants, merchant associations, small and medium enterprises, not-for-profit organizations, large corporations and governments.

The SGO would have the ability to set policies, standards and voluntary codes within the framework of the proposed principles-based payments legislation. It would also set the strategic direction of the payment industry in Canada.

Interestingly, the Task Force proposes that the cost of the SGO and POB be passed onto users in the form of a "very small" fee applied to users for each transaction.

The POB would recognize and oversee the SGO and would also maintain oversight of the CPA, which would be overhauled to allow for wider access to more participants. The Task Force proposes that the POB would have the statutory authority to:

  • regulate and oversee the payment system and its participants;
  • compel payments service providers to join the SGO; and
  • offer a recourse mechanism for issues that cannot be resolved within the SGO.

Under the proposed governance model, the Minister of Finance would continue to hold residual power for payments matters and would retain directive power over the POB.

One of the more significant recommendations of the Task Force is to change the mandate of the Financial Consumer Agency of Canada so that it no longer has responsibility for monitoring the Code of Conduct for the Credit and Debit Card Industry in Canada. Rather, the Task Force recommends that this monitoring function be delegated to the SGO.

The governance model proposed in the final report is similar to the governance framework first proposed by the Task Force in its discussion paper The Way We Pay, published in July 2011. In reaction to the discussion paper, a number of stakeholders voiced concern regarding the governance framework, including that it was too prescriptive and added additional layers of regulatory governance rather than reducing regulation in favour of an open industry where competition and innovation can flourish in accordance with market forces. Therefore, support from the industry for the governance model proposed in the final report – and the collaboration and co-operation that the Task Force is seeking from stakeholders – may be lacking.

New Legislation – Defining the Payments Industry

On a review of the existing legislative landscape governing the payments system, the Task Force concluded that it was relatively complete with only a few gaps, the most important one being the lack of oversight of certain new entrants into the industry.

Therefore, the Task Force recommended new federal legislation that will define the payments industry and have authority over all payments service providers, not just over financial institutions or payment networks. It should be principles-based and should reflect the core policy objectives identified by the Task Force of trust, access and good value. It should provide for oversight and regulation, allowing the government to issue regulations on the advice of the POB, also to be used if the SGO was unable to resolve a policy issue. Lastly, the legislation would facilitate the overhaul of the CPA.

The Task Force does not recommend the changing of any existing legislation governing the payments system participants. As such, for regulated entities that are already subject to legislation relating to payments, this proposed governance represents a further layer of regulation.

In terms of legislation, the Task Force recommends that the payments legislation set out criteria for an entity to be subject to the regime based on the functions it performs in the payments system. In this regard, the Task Force has proposed that a "payments service provider" would be defined in the legislation as one that facilitates the transfer of monetary value from one party to another. How directly an entity's activities relate to facilitating the transfer of value should thus be determinative in whether it is a payments service provider for the purpose of the legislation.

The Task Force also recommends that the legislation should provide for a licensing regime administered by the POB, which would compel entities that fell within the legal definition of payments service provider to register as a member of the SGO. The POB would also have the authority to determine whether an entity falls within such definition.

The Regulatory Advisory Group of the Task Force considered the types of organizations that should be included within the scope of the legislation and produced a chart identifying, in its view, which entities should be required to register as licensed members of the SGO, including the following:

  • payment card networks;
  • balance holders, including banks and other financial institutions, providers of online prepaid/account-based services, prepaid debit cards and potentially open-loop gift cards;
  • providers of virtual money and loyalty points programs;
  • online payment processors;
  • money transfer agents;
  • card-processing acquirers;
  • bill presentment and payment companies;
  • payroll processing companies; and
  • ATM operators.

The expanded scope of the types of providers who would be covered by the new federal legislation represents a significant shift from the existing regulatory regime and brings many new payment participants into the regulatory framework.

Credit and Debit Markets

The Task Force, in considering debit and credit card markets, paid particular attention to the Code of Conduct for the Credit and Debit Card Industry and noted that it is successfully providing merchants with more power in their relationships with networks, issuers and acquirers. In this respect, the Task Force recommended that the Code of Conduct be reviewed on a regular basis (every two years, by way of example) to take into account new policy issues and emerging technological changes, such as debit applications residing in cell phones and mobile wallets.

The Task Force recommended four specific amendments to the Code of Conduct, which in its view would provide enhanced disclosure and transparency in credit and debit markets. These four recommendations are as follows:

  • payment card networks should ensure that merchants and cardholders are able to identify premium cards and their associated interchange fee or merchant service fee prior to a transaction;
  • spending and income levels required to obtain premium cards should be declared by the card networks;
  • differential discounts should be allowed among different types in categories of cards from the same network; and
  • the Code of Conduct should clarify the merchant's ability to steer customers towards a particular form of payment.

The Task Force also noted that the government should closely monitor developments in the credit and debit card markets and take timely action, if necessary, to ensure the market operates efficiently and that innovation is fostered. Of notable interest, the Task Force expressly recognized that the regulation of interchange fees is problematic and can have unintended adverse consequence.

Jurisdictional Issues

With respect to its proposal for a federal payments act, in recommending legislation that would simply define the industry and establish governing bodies, the Task Force seemed to implicitly understand the constitutional challenges that would be involved with a recommendation for federal legislation that would govern non-federally regulated entities.

The Task Force makes only brief mention of the issue of the federal government's jurisdiction, in one of the policy papers accompanying the final report. In this regard, the Task Force noted that to achieve full implementation, the governance model and federal legislation may need to be tailored to interact constructively with provincial (and international) legislation. The Task Force then goes on to express "its confidence" that all levels of government in Canada will find it in their respective interests to support the governance model as required and that jurisdictional issues should not be a barrier to implementing the governance model as envisaged.

It remains to be seen whether the Task Force has been too optimistic in anticipating the co-operation of the provincial governments. This is particularly relevant in the wake of the strong opposition of certain provinces to a national securities regulator, which has resulted in the defeat of the federal government's initiative to establish a single national securities regulator on the basis of constitutional issues. It will be interesting to see if some provinces similarly oppose the broad regulation of the payments industry by the federal government.

Next Steps

The Task Force has called on the government to lead the way in transitioning Canada into the digital economy by implementing the necessary legislation to facilitate the new governance model and by collaborating with the private sector to advance the movement to digital payments. The Task Force recognizes that legislation will take time to implement and so it also strongly encourages the industry to begin the collaborative effort that will be necessary to form the SGO. However, in the absence of legislation and a mandatory licensing regime, it is questionable whether currently unregulated payments system providers will be agreeable to collaboration when they may view it as lessening their competitive edge.

The Task Force has said that the transition to a digital economy is critical for Canada, yet it has left the onus on the government to progress the transition without making many specific recommendations, particularly in the areas of creating a mobile ecosystem and building a digital identification and authentication regime. Therefore, the impact of the Task Force and its final report depends heavily on the action of the government.

In response to the final report, the Minister of Finance announced that the government will establish a senior-level advisory committee made up of public- and private-sector stakeholders to meet regularly with Department of Finance officials to discuss emerging payments system issues. The Minister of Finance also announced that the Department of Finance will review the application of the Code of Conduct for the Credit and Debit Card Industry in Canada to emerging mobile payment products and the governance framework for the payments sector, including the CPA, to ensure the continued safety and soundness of the payments system, spur innovation and promote the consideration of user interests. This is a positive response but falls short of a concrete action plan for moving Canada towards a digital economy. We will have to wait to see what steps, if any, the government takes to implement the recommendations of the Task Force and, in particular, whether it moves forward with federal payments legislation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions