New Payments Canada rule enables wider use of digital debit payments

Merchants can now more easily offer debit option as an alternative to cash for small purchases like transit

OTTAWA, January 30, 2020 – Though Canada is a global leader in debit card use, Canadian consumers have not been able to use their debit cards for certain everyday purchases, such as transit payments. To offer more flexibility in payment methods for Canadian consumers and merchants, Payments Canada today announced a new rule to enable broader point-of-sale (POS) debit card acceptance. Current debit acceptance requirements, as defined by Payments Canada’s existing rules, require merchants to have consistent online connectivity to accept debit payments making debit impractical for some high-volume, time-sensitive transactions, such as paying bus fare. 

The new Payments Canada rule, Rule E5, titled Exchange of Point-of-Service Delayed Authorization Debit Payment Items for the Purpose of Clearing and Settlement offers flexibility through delayed authorization, which removes the requirement for immediate online connectivity. Public transit operators, whose business models require quick authorization, were a key reason behind the development of Rule E5. 

With delayed authorization, a merchant can now opt to provide a service before a payment transaction is authorized. In the example of a transit operator, this will support a passenger being able to pay and ride without having to wait for payments authorization. Beyond transit, Rule E5 is designed to enable other possible use cases, for example payment at parking meters, payment for on-board purchases (airline/train/ferry) and payment for vending machine purchases. As with other Canadian debit transactions, debit payments in these new scenarios will still be cleared and settled via Payments Canada’s systems.

“We know Canadians want easy, fast, digital payment options and fewer and fewer are carrying cash,” says Andrew McCormack, Chief Information Officer of Payments Canada. “Modernizing the rules framework for payments in Canada will enable merchants and service providers to deliver on these evolving consumer needs.”

Data from Payments Canada’s annual Canadian Payments Methods and Trends Report reveals that debit card use continued to outpace cash in 2018, where Canadians used debit cards for nearly 35 per cent more transactions than cash. Canadians are also now using their debit cards more frequently for their everyday lower value purchases and this trend will only continue with changes to the underlying rule framework.

“Interac welcomes the adoption of this new rule which will support acceptance of debit in a broader range of settings including transit fare payments,” Kirkland Morris, Vice-President, Enterprise Initiatives & External Affairs, Interac Corp.“Millions of Canadians already use Interac Debit to securely and conveniently pay everyday; by expanding the ability to pay with debit, Interac is focused on ensuring Canadians can pay how they want, where they want and with their own money.”

“Rule E5 benefits consumers as it enables the ability to offer debit card use to pay for transit and other services where rapid payment is needed,” said Don Mercer, President, Consumers Council of Canada. “Canadians stand to benefit from new secure ways to pay. However, as with all payments choices, consumers should become informed on the terms and conditions before choosing any method of payment.”

Visit ACSS Rules and Standards 

The announcement of Payments Canada’s new rule comes in follow up to public consultation


About Payments Canada

Payments Canada ensures that financial transactions in Canada are carried out safely and securely each day. The organization underpins the Canadian financial system and economy by owning and operating Canada’s payment clearing and settlement infrastructure, including associated systems, bylaws, rules and standards. The value of payments cleared and settled by Payments Canada in 2019 was over $55 trillion or $218 billion each business day. These encompass a wide range of payments made by Canadians and businesses involving inter-bank transactions, including those made with debit cards, pre-authorized debits, direct deposits, bill payments, wire payments and cheques. Payments Canada is a proud supporter of the Catalyst Accord and the 30% Club.

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