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Proposed Changes to Mobile Payment Legislation


As mobile payment transactions through smart phone applications become commonplace in the consumer sphere, the Canadian government is making moves to enact consumer and merchant protection legislation and provide industry guidance promoting fair practice.

A consultation paper, released today in the wake of the final report of the Task Force for the Payments System Review, is seeking to bring mobile payment legislation under the umbrella of The Code of Conduct for the Credit and Debit Card Industry in Canada (“the Code”) which currently covers several existing payment methods, including point-of-sale, internet and telephone payment transactions.

Enacting regulations around the use of mobile payments is a signal from the government to the private sector that this type of transaction will have public support as the technology advances – stimulating innovation and improving the public’s perception of the sector.

The proposed additions to the Code will see mobile payment applications (“payment apps”) regulated along the same lines as credit and debit account cards. The proposed changes will focus on four elements:

Addendum to Element 4 - Ensure merchants have a choice in the payment types they accept

The Addendum clarifies that merchants who accept credit and debit card payments through a mobile device from a particular network will not be obligated to accept all products in that payment network’s mobile wallet.

Addendum to Element 6 - That competing apps from different networks be represented as separate mobile payment apps

The Addendum clarifies that services provided by different networks are permitted on the same device; however, they must each be clearly differentiated as separate apps.

Addendum to Element 7 - Equal branding to apply to all virtual or electronic representations of payment apps

The Addendum requires that the establishing of default preferences for payment should be done by consumers based on a clear and transparent process and users should be able to easily change default settings.

Addendum to Element 8 - That credit and debit card functions not reside in the same card

The Addendum clarifies that debit and credit functions may be reside on the same mobile device provided they are represented as separate mobile payment apps.

Stakeholder comments are requested on whether:

  • The Addendum should apply to other entities enabling mobile payments; and
  • Whether express consent should be required from merchants to accept debit or credit payment applications through a mobile device, where fees to merchants remain unchanged and no new infrastructure purchases are required.

The Code should certainly apply to all possible modes of access into the mobile payments domain.

Stakeholders should also consider that to accommodate the speed of evolving technological solutions, it is advisable to facilitate the ease of technological updates where there is no negative impact to the consumer or merchant by network service providers.

"As before, we will consult closely with small businesses, retailers and others to ensure the Code of Conduct continues to allow all parties to understand and manage the costs associated with various payment options," said Minister of State (Finance), Ted Menzies in the Department of Finance’s news release. The news release goes on to note that “The proposed Addendum is being circulated for a 60-day comment period (ending Friday, November 16th). During this period, all Canadians are invited and encouraged to submit their views. Comments can be submitted to [email protected]

This timely statement underpins the Canadian Government’s commitments to consumer protection in emerging technologies and simultaneously signals to technology developers that Canada is ready to be at the forefront of mobile payment innovation.