OTTAWA (Reuters) - The Bank of Canada (BoC) will bring payment service providers under more supervision and launch a real-time payments system over the next two to three years, it said on Thursday, in efforts to modernize the country's financial architecture.
Critics complain the current payments system, which relies heavily on cash, debit and credit cards for transactions, is archaic when compared to the United Kingdom and Australia and some emerging countries.
"It's no exaggeration to say that if we didn't take steps to continuously improve our payments systems, our economy would suffer," said Ron Morrow, executive director of payments, supervision and oversight at the Bank of Canada.
Morrow, while acknowledging the payments system would be cash-driven for a long time, said the BoC would start supervision of largely unregulated payments system providers (PSPs), primarily fintech companies, by September 2025.
A PSP is any company that helps people store or move their money electronically. This encompasses businesses that offer digital wallets, provide point-of-sale terminals or facilitate cross-border money transfers.
"The Bank's supervision of payment service providers will give Canadians further confidence in the safety and reliability of PSPs' services," he told a summit organized by Payments Canada, a government organization that provides payment clearing and settlement systems.
The central bank is also working with Payments Canada to introduce a round-the-clock service to allow businesses and consumers to send and receive payments. This should be ready for a test phase by 2026, he said.
Canada's payment systems are mainly controlled by the big five banks, an arrangement that critics say has led to high fees and delays.
Real-time transactions, Morrow said, would "open up a world of possibilities" and also facilitate faster settlements with the U.S., Canada's biggest trading partner.
The bank is also exploring ways to create and roll out a digital dollar, a Central Bank Digital Currency. The decision to implement it lies with the federal government.
(Reporting by Promit Mukherjee; Editing by David Ljunggren)
By Promit Mukherjee
