Is a payment facilitator holding funds under the RPAA? Next-day and weekly settlement

A payment facilitator that pays sub-merchants as soon as it receives settlement funds is generally not holding funds under the Retail Payment Activities Act (RPAA). One that keeps those funds until a later payout date, such as the next business day or the end of the week, is typically holding them and must safeguard them. Bank of Canada staff gave that answer at the Bank's 2 November 2026 supervision update, and it matches the Bank's published registration criteria and case scenarios.

Is a payment facilitator between a merchant and acquirer subject to holding funds requirements if it settles to the merchant immediately?

Generally no. Funds a payment facilitator receives with an instruction to transfer them immediately are in transit, and the safeguarding requirements do not apply to them.

The question came from the audience poll at the 2 November 2026 session. Staff first cautioned that whether a PSP is holding funds "can often be very case and fact specific." They then gave the general rule. Funds received with an immediate transfer instruction would generally not be considered held. Funds at rest awaiting a future withdrawal or transfer instruction would typically be considered held.

The Bank's criteria for registering payment service providers say the same: funds received with concurrent instructions for immediate transfer are not at rest and are not held. The safeguarding end-user funds guideline repeats this at paragraph 1.3.2 and calls such funds "in transit" until the transfer is complete (paragraph 1.3.3).

The Bank's case scenarios about acquirers include a payment facilitator that uses an acquirer's merchant account to offer sub-merchant accounts. It immediately pays each sub-merchant the sum of its approved transactions, minus a fee. Because the funds are passed on as soon as they arrive, the Bank concludes that neither the facilitator nor the acquirer holds funds in that scenario. The facilitator still performs other payment functions, including maintaining an account, transmitting payment instructions and providing clearing or settlement services.

What if settlement occurs the next business day or once a week?

A payment facilitator that settles on a predetermined future date is typically holding funds, Bank staff said at the 2 November 2026 session. They added that this applies even when the funds are already subject to a future instruction and cannot be freely withdrawn or transferred.

The registration criteria back this up. A PSP begins holding funds when it receives an end user's funds in an account it owns. It stops on receipt of an instruction for immediate withdrawal or transfer or, for a future-dated transfer, when the transfer date arrives. In the second acquirer scenario, merchants choose payouts on a fixed day, weekly or monthly. The acquirer holds those funds for days or weeks, stops holding them on payout day, and must comply with the safeguarding requirements.

Next-business-day settlement turns on why the money arrives a day later. The criteria exclude immediate transfers that experience processing delays, including overnight or interday delays.

Paragraph 1.7 of the guideline says a PSP is not holding funds before it receives them, even if it advances its own money to the merchant first. Paragraph 1.8 says funds reserved specifically to mitigate chargeback or fraud risk are not held, because the merchant cannot withdraw or transfer them. A general holdback the merchant can later draw on should be tested against the criteria.

How does the Bank's holding funds test work?

The registration criteria set two assessment questions, and if you answer yes to both, you are likely holding funds:

A facilitator that receives acquirer settlement into its own account owes that money to its sub-merchants, so the first answer is usually yes. The second depends on payout design. The case scenarios about holding funds show the same split for money transfer businesses: immediate transfers that take 48 to 72 hours to arrive are not held, and future-dated transfers are.

A payment gateway on its own is different. In the Bank's case scenarios about e-commerce web building tools and payment gateways, the gateway captures and relays payment data and is a PSP, but it does not handle end-user funds directly. Our RPAA registration guide explains how the payment functions fit together.

What must a payment facilitator do once it is holding funds?

It must meet section 20 of the RPAA and sections 13 to 17 of the Retail Payment Activities Regulations (RPAR). That means holding the funds in trust in a trust account, or in an account backed by insurance or a guarantee, under a written safeguarding-of-funds framework. Staff said PSPs should already have been in compliance since September 2025, and named the areas where the Bank most often needs clarification.

Set-off evidence for each account

Subsection 20(3) of the RPAA bars any right of set-off or compensation against funds in a safeguarding account, and guideline paragraph 2.16 says the PSP should get written acknowledgement of this from the account provider. Staff said a PSP with multiple safeguarding accounts should have set-off evidence for each one.

Placing funds "on receipt" and paragraphs 2.7 to 2.9

The Bank expects funds to go into the safeguarding account on receipt (paragraph 2.6). Where processing constraints cannot be avoided despite best efforts, paragraph 2.7 requires the PSP to:

Placement should happen at the latest on the business day after receipt (paragraph 2.8). For funds held in trust, paragraph 2.9 warns that a delay may breach the PSP's duties as trustee. A facilitator whose acquirer settles into an operating account before funds move to the safeguarding account should check whether these paragraphs apply and document why.

A ledger that traces funds to specific accounts

RPAR paragraph 15(2)(b) requires a ledger with each end user's name, contact information and end-of-day balance. The guideline asks it to show whether funds are in the safeguarding account or another account and to be updated each day, ideally in real time (paragraphs 3.6 to 3.9). Staff called the ledger the anchor of the safeguarding requirements and said the Bank expects PSPs to trace end-user funds to the specific safeguarding account where they sit.

Daily shortfall checks as best practice

RPAR subsection 16(1) requires you to identify, as soon as feasible, any instance where funds would not have been payable to end users in your insolvency. Guideline paragraph 4.4 says that, as a best practice, a PSP should take daily measures to identify shortfalls. Staff listed common causes: processing and settlement, the ledger or reconciliation, system failures, third parties, unauthorized transactions and returns. Shortfalls must be investigated and reported in the annual report (paragraphs 4.6 and 4.7).

The legal opinion for trust accounts

The Bank's retail payments supervision FAQ says it will ask for a written legal opinion during an assessment. The opinion must describe how a valid express trust was established under common law or the Civil Code of Québec and assess risks to its validity. The Bank's self-assessment tool adds that it should address the PSP's receipt of any interest, dividends or capital gains on trust assets. Staff said the opinion should be prepared for the express purpose of sharing with the Bank. Our article on the XTM Inc. order shows what can follow when the Bank doubts that end-user funds are protected.

Insurance or a guarantee still needs a segregated account

Paragraph 20(1)(c) of the RPAA requires insured or guaranteed funds to sit in an account not used for any other purpose, with cover equal to or greater than the amount in it. Staff stressed this at the session, and the FAQ says coverage should account for daily changes in balances. Our guide to banking for Canadian MSBs and PSPs covers safeguarding accounts.

How should you use the Bank's self-assessment tool?

Use it to find gaps before an assessment does. The safeguarding end-user funds self-assessment tool (version October 2026) lists statements drawn from the guideline and asks you to rate each as met, partially met or not met, with evidence and remedial actions. It is voluntary and not exhaustive. As staff put it, "Completing it does not itself demonstrate compliance."

Its first section asks whether funds are held at all, so it is a natural place to record your analysis for each settlement model. Our PSP application documents checklist lists the end-user funds evidence the Bank asks about at registration.

What should a payment facilitator do now?

For help mapping settlement flows or preparing an application, see our PSP registration service.

Frequently asked questions

Do funds count as held if they cannot be withdrawn freely because the merchant has already issued a settlement instruction?

Typically yes, if the instruction is for a future date. Bank staff said at the 2 November 2026 session that a PSP settling on a predetermined future date is typically holding funds even if the funds may not be freely withdrawn or transferred. The criteria say holding ends only on an immediate instruction or when the future transfer date arrives.

Does a payment facilitator need to register if it does not hold funds?

It may. In the Bank's scenario, the facilitator holds no funds but performs other payment functions. Registration depends on the four-step test in the registration criteria.

Are chargeback reserves safeguarded funds?

Not if they are reserved specifically to mitigate chargeback or fraud risk. Guideline paragraph 1.8 says such funds are not held because the merchant cannot withdraw or transfer them.

Can funds go into the safeguarding account the day after receipt?

Only where processing constraints cannot be avoided despite best efforts, and at the latest on the next business day. Until then, they are recorded in the ledger and treated as a shortfall (paragraphs 2.7, 2.8 and 4.8).

Does completing the self-assessment tool show that we comply?

No. The tool says completing it does not constitute the PSP demonstrating compliance, and the Bank still expects evidence that controls work in practice.