On February 27, 2019, the Department of Finance (Department) released its summary Report on the Review of the Canadian Payments Act (Report). As we summarized in our June 2018 insight, the 2018 review of the Canadian Payments Act (Review) focused on two general themes:

  • The impact of governance changes made in 2015, which were implemented to enable Payments Canada to more effectively achieve its public policy objectives (safety, soundness, efficiency, and taking into account the interests of its payments-system users); and
  • The creation of an associate member class of membership, to better reflect the changing make-up of the payments ecosystem and support Payments Canada's ongoing modernization initiatives.

The Report summarizes respondent feedback and provides some indication of the Department's next steps in the process of amending the Canadian Payments Act.1



With respect to governance, the Report notes that, while respondents found the 2015 changes to be beneficial overall (for both the payments ecosystem, as well as Payments Canada), they indicated that there is room for improvement moving forward.

The prominent governance themes covered in the Report are:

a) Payments Canada board structure

The Report notes that views on the shift to a majority-independent-board, and a move away from member-volume-based voting were largely positive. More independent decision-making is thought to have driven the board to consider a wider range of information and opinions, and given additional momentum to Payments Canada's ambitious modernization effort. On the other hand, some respondents were concerned that the governance changes have misaligned member and Payments Canada interests. By definition, an independent board means that members are no longer able to exercise significant oversight of Payments Canada initiatives or manage the development of the organization itself.

The disparity in responses is understandable given the wide-range of participants in Canada's payments ecosystem. This disparity has likely been magnified, as Payments Canada has undertaken large-scale changes to the Canadian payments infrastructure, which is funded by its members.

While the diverging views are unsurprising, they do mean that the Department has work to do to find common ground between the respondents, whose responses appeared supportive of either increased board independence or increased member input.

b) Transparency of board decision-making

Responses that addressed transparency recognized Payments Canada for fostering a collaborative environment and engaging in dialogue with the payments industry. However, the Report highlights that some respondents felt there was a lack of transparency around the board's consideration, and use of the advice it receives from the Member and Stakeholder Advisory Councils (MAC and SAC, respectively). Suggestions for improvement included publishing the board's decision-making process, and requesting the board provide more thorough explanations of its decision-making process to MAC and SAC.

c) Advisory Councils

The appropriate role of Advisory Councils proved to be quite polarizing for respondents. The Report described the relevant comments as "present[ing] contrasting perspectives and provid[ing] the view that the [C]ouncils have either too little or too much influence on the board..." Once again, these divergent industry views highlight the tension between taking into account the interests of users, while recognizing members' valid concerns around decision-making processes and overall governance of the organization.

In contrast, the Report notes convergence around the need to improve communication with, and the proper alignment between, the board and the Councils. It seems that while respondents don't agree on the appropriate role of each Council, they do agree that their current roles, and the weight given by the board to their input, aren't clearly defined.

This discomfort is unsurprising, given the more complex dynamic created by the interaction between a newly-independent board, a newly-created MAC and the longstanding SAC. Less formal lines of communication may have been sufficient before the 2015 governance changes took effect, when members made up the majority of the board and SAC input could be considered on its own. For the new governance structure to function effectively, the roles, responsibilities and expected deliverables for each of the three bodies, may have to be more prescriptively delineated.

d) Achievement of public policy objectives

Finally, while the Department requested feedback on whether the new governance structure has positively impacted Payments Canada's ability to achieve its policy objectives, respondents indicated that it was too soon to say. They also highlighted the organization's modernization efforts "as a litmus test for assessing the success of changes..."2


The Review also solicited feedback on amending the Canadian Payments Act3to add a new associate membership class. In its Report, the Department describes the new class as follows:

The proposed associate membership would create a separate and distinct class of members in Payments Canada. This would permit non-traditional payment service providers, regulated under the proposed Retail Payments Oversight Framework,4 to participate directly on the real-time rail.5

There was widespread respondent support for broadening Payments Canada membership. However, because membership is a proxy for access to Payments Canada's systems, it is closely related to the concept of system access; the Department's Review proposed an open, risk-based access model.

"Risk-based access" means that the more impactful the disruption of a given system would be to the financial system and economy, the more critical the safety and soundness considerations are to assessing participant access to that system. As mentioned above, there was widespread respondent support for this concept. However, membership also comes with obligations and other responsibilities. Expectedly, respondents agreed that oversight of associate members could be accomplished through regulation under the yet-to-be-released Retail Payments Oversight Framework, and compliance with applicable Payments Canada by-laws and rules.

In keeping with this risk-based access model, respondents supported different degrees of "open" access to the Real-time rail ("RTR") and the retail payments system (currently, the Automated Clearing and Settlement System "ACSS"). The Report notes most respondents that addressed the issue were in favour of broad access to the RTR, including extending access to non-traditional payment service providers (PSP) and the proposed associate membership class.

In contrast, respondents supported more limited ACSS participation. There was support for associate-member access solelyto the exchange of payments, providing that those members meet the same requirements of "full" members. This limited access to the retail payments system could be possible because Payments Canada has proposed "decoupling" the exchange of payments from their clearing and settlement.6 Because the exchange of payments is a lower-risk function than either clearing or settlement, "decoupling" it allows for access options to be matched with participant functions, ultimately broadening access to the payment system overall.

Notably, in its Review, the Department did not propose a particular access model for the retail payments system (either the ACSS or the new proposed model, the SOE). It is interesting that respondents appeared largely to agree on a limited access model, absent a specific proposal.


The Report is largely a summary document, taking a "wait-and-see" approach. Noting general support for the concept of an associate membership class, the ongoing development of the RTR and the overall lack of consensus on issues from respondents, the Department seems to suggest that amending the Canadian Payments Act would be premature, and that amendments would only follow the implementation of the Retail Oversight Framework in any event. Moreover, the diverse views received in response to the Review mean that additional consultation will be required, particularly with respect to the integration of associate members into Payments Canada's governance structures and liability model.

While further consultation is understandable, the payments ecosystem is undergoing rapid transformation, both in Canada and abroad. Legislative delays will not only increasingly hamper innovation in this space, but may result in the emergence of PSPs that deliver risky payment products in a regulatory vacuum, exposing end users to risks they otherwise wouldn't have to consider in an appropriately-regulated ecosystem.


  1. R.S.C., 1985, c. C-21.
  2. The Report at page 8.
  3. Membership is set out at section 4 of the Canadian Payments Act.
  4. For a detailed discussion of the proposed Retail Payments Oversight Framework, please see our earlier article here.
  5. The Report at page 9.
  6. For additional context, see https://www.payments.ca/sites/default/files/21-Dec-17/modernization_target_state_companion_reader_en_final.pdf at page 10.

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