Consent Order Canadian Payments Association Code of Conduct for the Credit and Debit Card Industry in Canada
The Payments Landscape
Canada has a highly competitive payments environment and additional competition is constantly emerging.
Interac Association and Acxsys Corporation compete with other players in this dynamic and changing market. The traditional notions of the payments system, which revolve around payment networks, financial institutions and payment processors, are evolving. The range of non-traditional players involved in the payments system continues to expand, as do the array of business and technology models through which payment services are delivered to consumers, merchants, small and large businesses. In today’s marketplace, telecommunications companies, mobile handset manufacturers, social media outlets and a long list of technology start-ups are also vying for market share.
In general, Canada is well positioned in the global payments arena. In fact, Canada has long been looked to from across the globe as home to a mature, modern, efficient and well functioning payments system.
As such, Canada is poised for progress on other technology fronts, such as mobile payments. Already well along with adoption of chip and PIN, and with the growing presence of contactless payments, key building blocks are already in place. In this setting, mobile payments will form a natural extension of this secure and proven infrastructure, to provide increased speed and convenience for users.
As the market continues to transform, however, it will be important to continue to encourage more effective and fair competition so that Canada’s payments system can deliver value, transparent choice and innovative product offerings for all stakeholders.
Since 1996, Interac Association has operated under a Consent Order issued by the Competition Tribunal.
The Order prescribes how Interac Association is structured, how it is governed and by whom, how it sets and collects fees, and even the voting levels required by the board to approve many initiatives. It requires Interac Association to operate on a not-for-profit basis. Essential business concepts, such as multi-year financial plans, retained earnings and organic capital pools, are not available to the Association. The result is a significant constraint on our organization’s financial flexibility in responding to changing market dynamics.
While the Consent Order had a purpose in 1996 to expand debit market access and competition, that job is now complete. Comprised of 27 member financial institutions at the time the Order was implemented, Interac Association today boasts a diverse group of nearly 60 members who span the payments landscape. Today, the Consent Order is an unnecessary and unwarranted constraint, and needs to be rescinded. The Order can only be amended or terminated by a further order of the Competition Tribunal. In fact, it is one of only two consent orders ever issued without a sunset provision, and the only one remaining.
While we try to move forward with our cumbersome structure and its limitations, the competition is unhampered by such constraints. Within these constraints, we have moved forward with key advances, such as the adoption of chip and the launch of contactless functionality, but must be able to generate the capital necessary to continue a steady stream of product innovations for our constituents. Within the context of leveling the competitive playing field in Canada and the need to preserve a strong domestic countervailing force to US multi-national competitors, we believe that we should be allowed to have the business flexibility needed to compete. Removing the constraints imposed by the Consent Order, particularly the funding, structural and governance barriers that our competitors do not face, would significantly improve our ability to effectively compete.
Canadian Payments Association
The federal financial services legislative framework acts as the means by which the federal government regulates and provides oversight to the payments system. Within this framework, the Canadian Payments Association (CPA) plays a key role. The CPA has a legislated duty to promote the efficiency, safety and soundness of its clearing and settlement systems and take into account the interests of users.
This is an important role, as the payments system represents a key component of national infrastructure, facilitating the transfer of value throughout the financial system and the broader economy.
As the primary rule-setting body in the payments system, the CPA is a key vehicle for the administration of public policy in the space. Indeed, its rules are subject to broad public consultation and ultimately review by the Minister of Finance.
However, the CPA’s rules – and thus their public policy effect – does not apply to all payments system providers. Rather, only those entities that choose to clear and settle using the CPA’s facilities are covered. The Interac network is the only payment network in Canada that clears and settles transactions through the CPA.
Code of Conduct for the Credit and Debit Card Industry in Canada
The Code of Conduct for the Credit and Debit Card Industry in Canada (Code of Conduct) was introduced by the federal Minister of Finance in April 2010. It contains ten provisions that direct the market conduct of payment card networks, and their issuers and acquirers and is intended to foster healthy competition by increasing transparency and by empowering payments system users – in this case, merchants and consumers – with the information needed to make effective decisions. Interac Association and Acxsys Corporation endorse and adhere to the Code of Conduct.