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With Great Power Comes Great Responsibility: Ron Morrow on Changes to Payments Regulation in Canada

The Bank of Canada is taking bold steps to reshape the way it supervises and regulates the payment industry. These changes are set to bolster consumer protection, promote competition, and drive innovation in the Canadian payments ecosystem.

Ron Morrow, executive director, Bank of Canada
Ron Morrow, executive director, Bank of Canada

Ron Morrow, responsible for overseeing retail payment service providers (PSPs) and financial market infrastructures at the Bank of Canada, recently delivered a speech at the Central 1 Momentum Summit outlining forthcoming changes.

He began his speech by thanking everyone for attending and bringing to light the importance of payments in our daily lives. Turning back the years, Morrow discussed the impact of the Herstatt Bank failure in 1974 and the 2008-9 financial crisis and how they have shaped the financial world as we know it. Relating these lessons learned back to our current time, Morrow described the role of the Bank of Canada in ensuring everything financial is compliant.

“Beyond the important payment systems that are already regulated, thousands of other companies are now offering payment services. Some of these payment service providers (PSPs) are large and familiar, but some are much smaller and less well-known. Until now, many of these PSPs have not been subject to supervision beyond being required to comply with anti-money laundering regulations. That is about to change.

“The Bank’s traditional oversight role is expanding to meet today’s new reality. This afternoon I’ll talk about these changes. More specifically, I’ll look at some of the details of the new retail payments regime that will soon be coming into force.”

The crucial role of PSPs in our society 

Following an excellent Spiderman analogy, Morrow explains the role the Canadian central bank plays in ensuring trust in the financial ecosystem.

“It’s worth pointing out that our retail payments ecosystem is currently working well. Maybe the greatest testament to the confidence Canadians have in PSPs is that they mostly take PSPs for granted when making a purchase or transferring funds.

“The job of the new regime I’m discussing today is to make sure this trust is well founded, to reassure people that operational risks are being well managed and that their funds are being protected.”

In 2021, the Government of Canada passed the Retail Payment Activities act to ensure PSPs met certain standards for risk management and that they effectively safeguarded any funds they held for end users. However, Morrow highlights that with the ever-growing number of PSP players, the government has had to respond and alter the Canadian Payments Act. This will in turn allow PSPs to join the forthcoming real-time rail (RTR) and participate in a national payments infrastructure.

“Like others, we wanted to strike the right balance between protecting the interests of end users and being as efficient and as frictionless as possible when it comes to the burden placed on PSPs.” – Ron Morrow

Learning from the past 

Morrow also reflects on how the Bank of Canada took inspiration from other regions including the UK, Singapore and the European Union and how common themes were implemented into the new Canadian regime.

“Generally, we found no need to create a unique, made-in-Canada approach. Since many PSPs operate in several jurisdictions globally, we saw the benefit of aligning with other supervisory regimes wherever possible. Like others, we wanted to strike the right balance between protecting the interests of end users and being as efficient and as frictionless as possible when it comes to the burden placed on PSPs.”


Looking to the future at what is going to be expected from PSPs in the new regime, Morrow highlighted three main points.

“The first is that, in just under a year, the legislation will come into force, and entities that are considered PSPs will have to apply to register with the Bank of Canada.

“At the outset, we’ll be asking for some basic questions:

  • who they are
  • the nature of their business
  • the volumes and values of the payments they process

“But registration is just the starting point. In 2025, the other requirements kick in. We will begin to hold PSPs to minimum standards for managing operational risk. PSPs will also need to demonstrate what they are doing to safeguard end-user funds.

“To meet these requirements, PSPs will need to take a number of actions. I won’t go into all those details right now, but, basically, PSPs will have to:

  • identify and manage risks
  • respond to incidents
  • periodically review their plans

“And PSPs that hold end-user funds will be required under the new regime to show that they have measures in place to safeguard these funds until the funds are withdrawn or transferred. This means that PSPs must keep end-user funds separate from their operating funds and either hold them in trust or have insurance or a guarantee that covers end-user funds.

“The goal here is twofold: to ensure that end users have reliable and timely access to their funds and to protect end users should a PSP go bankrupt.”

In his speech, he then further explained what constituted a PSP, in addition to breaking down in further detail what steps would need to be taken by participants to take part, in addition to how the new regime would be rolled out.

Let’s not disappoint Uncle Ben

Morrow concluded his speech by saying: “In the time that remains before the act comes into force, we are doing everything we can to make our expectations known. By sharing information early and often, and by continuing to engage with the industry, we hope we are preventing the need for enforcement actions later.

“If you retain one thing from this speech, it should be this: change is coming. Without question, now is the time for PSPs that do business in Canada to start preparing.

“Remember, with great power comes great responsibility. Let’s not disappoint Uncle Ben.”


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