Wealthsimple, Venn, Brim, and others are now subject to new rules and payment rail access.
A handful of Canadian FinTech firms are among the first batch of registered payment service providers (PSPs) revealed by the Bank of Canada this week.
“For payments nerds, this is huge.”
Abraham Tachjian,
Brim Financial
The designation means these companies are now subject to new rules and reporting regulations under the Retail Payments Activities Act (RPAA). It also opens the door to accessing payment rails, the infrastructure that allows money transfers, without having to go through banks. Industry leaders say this is a key step toward leveling the playing field for non-banks to compete.
“I’m pretty pumped about it,” said Saud Aziz, co-founder of business banking platform Venn (formerly Vault), one of the approved registrants.
In the past, Aziz explained, FinTech companies have had to partner with existing financial institutions to use their infrastructure and payment rails, and sometimes pay fees to do so. “It meant we effectively had to work with banks to compete against the banks,” he said.
The RPAA came into effect Sept. 8, creating a new legal framework for all payment service providers, including those with pending applications. A PSP is an entity that holds funds for an end user, performs electronic fund transfers for users, or provides clearing and settlement services—like the vast majority of FinTech companies.
This week, the Bank of Canada published a list of the first 300 entities fully registered as PSPs, including FinTech companies Wealthsimple, Koho, Brim, Venn, Helcim, Trolley, ZayZoon, Zum Rails, and Shopify’s payments division. There are more than 1,500 pending applicants under the Bank’s supervision, including Clio, Manzil, and Float.
“PSPs are expected to comply with obligations for operational risk and safeguarding of end-user funds,” a Bank of Canada spokesperson said in a statement to BetaKit. “This is how we are maintaining the integrity and the stability of Canada’s retail payments system.”
Abraham Tachjian, Canada’s former open banking lead and chief regulatory affairs officer at Brim Financial, another registered PSP, said “for payments nerds, this is huge.”
Tachjian said registration with the Bank is like a “badge” that allows payment service providers to access membership with Payments Canada, thus paving the way to directly use Real-Time Rail (RTR) payment infrastructure when it rolls out. The long-awaited payment system, which would allow payments to be sent and received within seconds, has been built and is still undergoing testing ahead of a planned 2026 launch, according to Payments Canada’s last quarterly update.
Another way PSP registration may open doors for FinTech is through Interac e-transfer. Last month, Interac announced it was broadening participation criteria to RPAA-certified PSPs to gain access to e-transfer. Aziz said this comes at an opportune time for FinTech firms, as Interac is updating its pricing model on Nov. 1 for financial institutions. The new model will charge smaller firms, including now-eligible PSPs, a flat rate instead of offering lower rates to firms processing more transactions.
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For Brim, which sells credit card infrastructure to financial institutions, Tachjian said the designation is “another seal of approval” from a risk management perspective. Under the law, PSPs now have annual reporting obligations and must report incidents to the Bank.
The Bank of Canada spokesperson added that PSPs are legally required to comply with RPAA obligations and safeguarding consumer funds, but only registered PSPs need to follow all reporting requirements. PSPs must also notify the Bank before changing how they perform a retail payment activity. If PSPs aren’t meeting their obligations, the Bank said it can use enforcement tools, such as court enforcement or revocation of the entity’s registration.
The RPAA “provides a solid framework for protecting consumers’ funds,” Ron Morrow, the Bank of Canada’s executive director of payments, supervision and oversight, said at a conference in September. “It brings PSPs into the regulatory sphere so that Canadians can access cheaper payment options and a broader array of services.”
The news comes as the FinTech community anticipates changes in Canada’s payment space, including hope for progress on open banking in the upcoming federal budget. Comments from Bank of Canada senior deputy governor Carolyn Rogers bolstered that hope earlier this month, when she called the Canadian financial system an “oligopoly” and argued for increased competition to increase productivity.
Both Aziz and Tachjian were satisfied with the Bank of Canada’s approach to industry consultations. “They did such a good job of engaging the industry and getting their feedback,” Tachjian said.
Before the RPAA was introduced in the 2021 federal budget, FinTech firms handling low-value electronic payments were not overseen by a dedicated centralized regulator in Canada. In 2022, BoC started developing the framework to register these PSPs and encouraged FinTech companies to ready themselves for increased regulation.
The Bank of Canada opened up the regulations for public consultations in 2023. Payment companies were invited to submit their application to become a registrant during a two-week period last November.
According to the Department of Finance, PSPs that missed the two-week period had a 10-month transition period to apply for registration, but had to do so 60 days before conducting retail payment activities.
Disclosure: Wealthsimple vice-president of payments strategy and chief compliance officer, Hanna Zaidi, sits on BetaKit’s board of directors.
Feature image courtesy Wikimedia Commons under license CC BY-SA 3.0.