2022 CPPO Prepaid Symposium — Regulatory Recap: Payments Modernization, Open Banking and the Real-Time Rail

Canadian government stakeholders have pledged to maintain momentum on their RFI for alternative payment methods in the push for payments modernization. Where prepaid fits into this equation is a major initiative the CPPO has been actively following – and advocating for on behalf of the prepaid community.

Payments modernization, the real-time rail and open banking have been hot discussion items in the Canadian payments ecosystem. At this year’s 2022 CPPO Prepaid Symposium, two government leaders —  Julien Brazeau, Associate Assistant Deputy Minister for Finance Canada, and Member of Parliament Hon. Michelle Rempel Garner — provided some insights about how government and financial industry leaders can work together to navigate regulatory issues.

Gaining Greater Access to Payment Rails

Julien Brazeau, Associate Assistant Deputy Minister for Finance Canada and CPPO Legal Advisor Jacqueline Shinfield at the 2022 CPPO Prepaid Symposium.

In a fireside chat with CPPO Legal Advisor Jacqueline Shinfield at the Symposium, Brazeau discussed changes across the regulatory environment and potential issues on the horizon that are impacting the future of the Canadian prepaid market. They discussed the government’s push toward payments modernization and how prepaid leaders can play a role.

Brazeau shared his thoughts on the value that exists in the push for payments modernization and the real-time rail aimed at driving efficiencies in the financial sector.

“It will allow the introductions of new competitors and allow access to payment rails that have been traditionally reserved for banks. It will also ensure there is operational risk oversight and financial risk oversight of patent providers that are having access to those rails. It presents a great opportunity,” Brazeau said.

He also touched on the regulatory sensitivities, saying that his goal is to understand the business models of those impacted by potential regulations in play— such as the Retail Payment Activities Act (RPAA) —  so the regulations don’t inadvertently hinder a particular industry. Driving efficiency and avoiding over regulation that leads to confusion is a key goal, he noted.

“We want to avoid regulatory duplication where we can. The goals are twofold: to allow competition by allowing entities access to the rails that they couldn’t access in the past. And ensure there is some operational and financial oversight to protect the integrity and stability of the market,” Brazeau said.

Encouraging Collaboration Across Industry Stakeholders

Shinfield and Brazeau both highlighted the fact that the government isn’t always fully aware of the intricacies of complex industries, such as prepaid. They both emphasized the need for greater collaboration that creates an open line of communication between government leaders and industry stakeholder to find solutions that work for everyone.

Shinfield, in particular, emphasizes why it’s important for prepaid leaders to remain advocates with government leaders about how prepaid provides the “rails” for innovation to drive financial access — including secure, equitable government payments for all Canadians.

“Prepaid is not just a prepaid card. Prepaid is a method of accessing funds wherever they are. When you think about a typical GPR prepaid card, they open similar to bank accounts. The [regulatory] burden does not match the risk with prepaid. It is not a high-risk product,” Shinfield emphasized.

Brazeau agreed that whatever direction the Canadian government embraces, it must be universal and expand financial access to everyone in Canada. Though government action has taken longer than desired, he said the push toward payment modernization is making progress.

He urged leaders across the payments ecosystem to connect about how any potential changes to the regulatory landscape will impact their business — or their customers.

Brazeau emphasized the need for leaders to keep pushing for meetings, and connecting with government leaders about what their businesses need to succeed and innovate. He also said the government must take a look at the proposed regulations and see what potential burdens they might be putting on organizations.

“Let’s understand what the business models are and what the proposed regulatory frameworks are going to do for your business,” he told the crowd at the Symposium. “There is an open invitation to speak to us. ..You understand your business better than we do. We don’t always understand how it is operationalized in your business.”

What’s Next for Open Banking and the Real-Time Rail Discussions

Speaking toward the real-time rail discussions, Brazeau said “the real-time rail will help us look at real-time flow of money,” which will involve evaluating how technology innovation can be balanced against regulatory compliance challenges. 

Similar to payments modernization, Brazeau recognized that the Canadian government has not be a “rapid follower” of the open banking trend. He shared that there at least have been positive developments, including an advisory committee that recently published their second report on the subject. The government also recently appointed a new open banking lead, Abraham Tachjian.

“I see [open banking] as a tremendous opportunity to increase competition,” Brazeau said. He noted that the regulatory structure around open banking is aimed at the larger FIs. Until recently, open banking discussions hadn’t made their way to the mainstream political discussions. But the last election brought open banking into the platform discussions, which helped the topic gain speed.

“My hope is that there is some momentum. I think within the government and the bureaucracy there is a keen desire to move. I was heartened to hear that aspects of open banking are already live,” Brazeau said. “The government must play a role in ensuring there is universal access to everyone in Canada. …”The solution has to work for everyone — not just the few.”

‘The Politics Of Cross Jurisdictional Financial Regulations’

Member of Parliament Hon. Michelle Rempel Garner

Member of Parliament Hon. Michelle Rempel Garner shared how payments leaders can advocate better, and how greater collaboration can exist between organizations and the Canadian government when it comes to addressing financial regulation.

During her presentation titled “The Politics Of Cross Jurisdictional Financial Regulations”, Rempel Garner  highlighted the need for the Canadian government to make greater investments in innovative payments solutions that can push the Canadian financial sector forward — such as crypto and Web3.

Rempel Garner said there isn’t a consensus on what the government’s role should be in these discussions, but she urged against over regulating the industry before its full potential is explored. As a result, she has put forward a bill that she hopes will encourage growth of this sector, and establishes a path toward what a regulatory framework could look like.

As it relates to prepaid innovation, she took a similar tone to Brazeau and suggested that industry leaders “need to educate regulators and government officials on what these industries are in a very colloquial way.” She emphasized the need for leaders to be their own advocates, and help those who work in government gain a better understanding of where opportunties (not just risk) exist in the industry.

“We can walk that path to growth and embrace collaboration,” Rempel Garner said. “We must get industry input to avoid over-regulation. We need to avoid a patchwork of regulations would discourage investment.”