Payments Canada makes submission to Competition Bureau study

Payments Canada made a submission to the Competition Bureau’s market study that will look at technology-led innovation and new services in the Canadian financial sector.

The study, titled Technology-led Innovation and Emerging Services in the Canadian Financial Sector, will help the Competition Bureau guide financial sector regulators on how to ensure that regulation doesn’t unnecessarily impede innovation and competition in the sector.

Payments Canada welcomed the opportunity to provide input to the Competition Bureau and submitted a response on Aug. 25. We outlined for the bureau the work Payments Canada has been doing on access and market competitiveness. We also updated the Competition Bureau about the efforts of Payments Canada to modernize our systems and future-proof where possible.

“As we modernize, it is important to us that we facilitate innovation and competition in this burgeoning space as we promote the safety and soundness of our systems,” the submission to the Competition Bureau says.

The changes to the Canadian Payments Act and the Payment Clearing and Settlement Act in December 2014 led to changes in Payments Canada oversight and governance to support the modernization of our core payments infrastructure. Payments Canada now has a majority independent board and has stronger oversight from Finance Canada and the Bank of Canada.

Since the payments ecosystem and the needs of participants are evolving, Payments Canada consulted with stakeholders and users to better understand how the payments landscape is changing. What emerged from that consultation was our shared vision for the future of payments that outlined the needs of a modernized ecosystem.

A driver of the change is technology-led innovation – one of the main areas the bureau is examining in their study. The introduction of digital wallets, in-app payment services and app-based virtual banks have been introduced by large digital companies. As we facilitate innovation, we need to keep in mind that the new risks that come with innovation. 

Innovation is happening so quickly that it has significantly outpaced the regulatory paradigm. Some oversight frameworks have become outdated and don’t consider the diversity of entities in the payments ecosystem. The payment infrastructure itself is also outdated. While the ACSS and LTVS have served the needs of our economy and payments ecosystem for decades, they pose operational challenges while struggling to evolve at the speed now required by the industry and end users.

“Recognizing that aging payment infrastructure makes the introduction of new payment products and services challenging, jurisdictions the world over have embarked upon their own modernization initiatives,” the submission to the Competition Bureau said.

One of the needs of a modernized ecosystem is that our systems are open, fair and subject to risk-based access-criteria. As part of the modernization initiative, we are working to understand how our rules on access relate to market competitiveness and how to minimize any issues in that area.

Read the full submission: PDF icon Payments Canada Response to Competition Bureau Consultation