Government of Canada introduces payments code of conduct addendum that anticipates smart phone apps, but potentially at the cost of less product innovation

The Government of Canada is being quite proactive in consideration of payment regulation.  The code of conduct released in 2010 has been overtaken by introduction of apps that incorporate payments into smart phones, and the government have issued this addendum in that light.  However the approach risks being to product centric versus focussing on their mandate which is consumer protection.

CONSULTATION PAPER: ADDENDUM TO THE CODE OF CONDUCT FOR THE CREDIT AND DEBIT CARD INDUSTRY IN CANADA TO ADDRESS MOBILE PAYMENTS | 

Department of Finance Canada

The Code of Conduct for the Credit and Debit Card Industry in Canada (the Code) came into effect in August 2010 and covers several methods for making payments, including point-of-sale, internet and telephone. The Code does not explicitly address mobile payments transactions.

One situation in particular is dealt with in Element 8 but also seems to apply broadly throughout, requires that debit and credit cannot reside on the same card.  The addendum recognises this makes no sense for smart phones with a debit app and a credit app on the same device, albeit separate apps.  Protection is provided in the addendum to ensure consumers are still able to make choices about what they accept and what they pay for, notwithstanding the apps are on the same device.

However the original intent to keep debit and credit separate is unclear.  The original code of conduct, Element 8 states (emphasis mine); 8.  Payment card network rules will ensure that debit and credit card functions shall not co-reside on the same payment card.

Debit and credit cards have very distinct characteristics, such as providing access to a deposit account or a credit card account.  These accounts have specific provisions and fees attached to them.  Given the specific features associated with debit and credit cards, and their corresponding accounts, such cards shall be issued as separate payment cards.  

Consumer confusion would be minimized by not allowing debit and credit card functions to co-reside on the same payment card.

Read the rest here!