Key takeaways
- Only end-user funds a PSP holds must be safeguarded: funds at rest, available for later withdrawal or transfer, that the PSP owes to the end user.
- Funds are in transit, and not held, from the moment the PSP receives an instruction for immediate transfer or withdrawal until it is completed.
- Funds reserved only to cover chargeback or fraud risk are not treated as held, according to the Bank of Canada guideline.
- The ledger must show each end user's balance at the end of each day, split into funds safeguarded and funds not yet placed, with totals.
- Insurance or guarantee cover must be at least the amount held, sized by a documented method that accounts for daily peaks.
What are the key facts on calculating end-user funds?
The amount a Canadian PSP must safeguard is the total of the end-user funds it holds at the end of each day.
| Item | Position |
|---|---|
| Rule | RPAA section 20(1); RPAR section 15(2)(b); Bank of Canada guideline (December 2024) |
| Regulator | Bank of Canada |
| Applies to | PSPs that perform the retail payment activity of holding end-user funds |
| Timing | Safeguard on receipt; by the end of the next Bank of Canada business day at the latest if processing prevents it |
| Last checked | 11 October 2026, against the RPAA, the RPAR and Bank of Canada guidance |
When are end-user funds held?
When the PSP keeps them at rest for later withdrawal or transfer and owes them to the end user.
The Bank of Canada's summary explains that holding starts when the PSP receives end-user funds in an account it owns, and ends when it receives an instruction for immediate withdrawal or transfer, or when a future-dated transfer's date arrives. Between receiving an immediate instruction and completing it, the funds are in transit and not held. The test is what the PSP owes and why it has the funds, not which account they sit in. A PSP that holds funds in several accounts, or for several products, applies the same test to each balance and adds the results.
| Situation | Held? | Why |
|---|---|---|
| Wallet balance with no instruction | Yes | At rest and owed to the end user |
| Payment received with an instruction for immediate onward transfer | No, in transit | Instruction for immediate transfer received |
| Scheduled transfer for a future date | Yes, until that date | Held until the transfer date arrives |
| Withdrawal requested and being processed | No, in transit | Immediate withdrawal instruction received |
| Reserve kept only to cover chargeback or fraud risk | No | Not treated as held under the guideline |
| PSP's own fee revenue already earned | No | Not owed to an end user |
How is the daily figure built?
From a ledger that records each end user's end-of-day balance and whether it is safeguarded yet.
Section 15(2)(b) of the RPAR requires the framework to include a ledger with each end user's name, contact details and balance at the end of each day. The Bank's guideline expects the ledger to split each balance into funds safeguarded and funds yet to be placed in a safeguarding account, and to show totals for funds held, safeguarded and not yet safeguarded. Summed, those balances give the amount the PSP must protect. Our guide to the RPAA safeguarding framework covers the rest of the framework.
How quickly must held funds be safeguarded?
On receipt, or by the end of the next Bank of Canada business day if processing constraints prevent that.
The Bank expects funds to be segregated on receipt. Where unavoidable processing constraints stop that, the latest expected placement in a safeguarding account is the next business day, and end users must be told of situations where their funds may not be immediately protected. Funds received but not yet placed are still held, so they appear in the ledger as funds yet to be safeguarded, and are part of the daily total. Treating them as outside the total until they are placed would understate the requirement on exactly the days when processing is under strain, which is when protection matters most.
How is insurance or guarantee cover sized?
At no less than the amount held, using a documented method that accounts for daily fluctuations.
Under section 20(1)(c) of the RPAA, cover must be equal to or greater than the amount held in the account. The Bank expects PSPs to consider historical daily balances, trends, peaks and growth, and says cover must never fall below the safeguarded amount. Sizing to an average leaves the PSP exposed on peak days, such as before payroll or around holidays. A PSP using both methods can cap the insured account and sweep any excess into the trust account each day. Our guide to trust accounts and insurance under the RPAA compares the methods.
What counts as a shortfall?
Funds in trust or covered by insurance or a guarantee that are less than the funds held.
Section 16 of the RPAR requires a PSP to identify, as soon as feasible, any instance in which funds would not have been payable to end users had an insolvency event occurred, to investigate its root cause immediately and to prevent recurrence. The Bank describes daily checks as best practice. In the annual report, section 19 also asks for daily end-of-day balances, averaged monthly, so the daily calculation feeds the Bank's reporting directly.
How does the daily figure feed the annual report?
The annual report to the Bank of Canada draws on the same daily balances and shortfall records.
Under sections 18 and 19 of the RPAR, a PSP files an annual report by 31 March of the following year through the Bank's electronic system. For safeguarding it includes information on account providers and any intermediary, on insurers or guarantors and their policy terms, a description of any trust arrangement, the instances identified under section 16, a description of record-keeping practices, and daily end-of-day balances averaged monthly. A PSP that already calculates the held figure every day only has to aggregate it; one that does not will have to rebuild twelve months of history. Our guide to RPAA reporting covers the wider reporting regime.
Which errors distort the held figure?
Most errors come from misclassifying balances or from timing, not from arithmetic.
- Treating funds with an immediate transfer instruction as held, which inflates the figure, or treating scheduled transfers as in transit, which understates it.
- Including the PSP's own earned fees, which overstates what is owed to end users.
- Leaving reserves for chargebacks inside end-user balances without recording their purpose.
- Taking balances from the ledger at one time and bank balances at another, so timing differences look like shortfalls.
- Ignoring funds received after the safeguarding account cut-off, which are still held even though not yet placed.
- Comparing insured balances with cover only at policy renewal, not daily.
Each of these errors is avoided by classifying balances from the instruction status recorded in the payment system, at one cut-off time, and reconciling the result to bank statements every business day.
What does a daily calculation look like?
The example builds one day's total from the ledger and compares it with what is protected.
Worked example. A Canadian PSP uses a trust account for most funds and insurance for one separate account. At the end of a business day its ledger shows the following.
| Ledger line | CAD | Treatment |
|---|---|---|
| Wallet balances of 48,210 end users | 41,862,300 | Held |
| Scheduled supplier payments due in 3 days | 3,140,000 | Held until the transfer date |
| Payments received with immediate onward instructions, not yet settled | 2,410,500 | In transit, not held |
| Chargeback reserve kept for card risk | 600,000 | Not held |
| Total end-user funds held | 45,002,300 | |
| In trust account at end of day | 38,500,000 | Safeguarded |
| In insured separate account; insurance cover CAD 7,000,000 | 6,100,000 | Safeguarded up to cover |
| Received after the trust account cut-off, to be placed next business day | 402,300 | Held, not yet safeguarded |
Protected funds are CAD 38,500,000 plus CAD 6,100,000, or CAD 44,600,000. With CAD 402,300 received late and still to be placed, the ledger reconciles to CAD 45,002,300 held. The late receipts are within the next-business-day window, so this is not a shortfall, provided they reach the trust account the next day. The insured account holds CAD 6.1 million against CAD 7.0 million of cover, so a day's growth of more than CAD 0.9 million in that account would need more cover or a transfer to the trust account.
Sizing that cover is a separate calculation. The PSP's documented method looks back over twelve months of end-of-day balances in the insured account.
| Twelve-month measure for the insured account | CAD m |
|---|---|
| Average end-of-day balance | 4.8 |
| 95th percentile day | 6.2 |
| Highest day, the night before a payroll run | 6.9 |
| Projected highest day next year at 10% growth | 7.6 |
| Cover in place | 7.0 |
Cover of CAD 7.0 million exceeds the highest day so far but not the projected peak, so the method calls for either more cover at renewal or a daily sweep of any balance above CAD 6.5 million into the trust account. Writing the method down, and showing the data behind it, is what the Bank's guideline asks for.
What should a PSP check each day?
These checks keep the daily figure right.
- Classify every balance as held, in transit or not end-user funds, using the instruction status.
- Keep scheduled future-dated transfers in held funds until their date.
- Exclude reserves kept only for chargeback or fraud risk.
- Split held funds between safeguarded and not yet placed, by account.
- Compare insured balances with cover every day, not only at renewal.
- Place late receipts by the end of the next business day.
- Record and investigate any day on which protected funds were below funds held.
How does Safeheld help?
Safeheld reconciles the end-user ledger to trust and insured accounts every day for each entity and currency, and shows funds held, safeguarded and not yet placed.
It produces the report pack for the Bank of Canada RPAA annual report, which the PSP reviews and completes. See daily reconciliation and RPAA safeguarding in Canada.
Frequently asked questions
Which end-user funds must be safeguarded under the RPAA?
Funds the PSP holds: funds at rest, available for later withdrawal or transfer, that it owes to end users. Funds in transit after an immediate transfer or withdrawal instruction are not held.
Are chargeback reserves end-user funds?
Funds reserved only to mitigate chargeback or fraud risk are not treated as held under the Bank of Canada guideline.
Are future-dated transfers held funds?
Yes. Funds for a scheduled transfer remain held until the transfer date arrives.
How quickly must held funds be safeguarded?
On receipt. If unavoidable processing constraints prevent that, the Bank expects placement by the end of the next Bank of Canada business day.
How much insurance cover is needed?
Cover equal to or greater than the amount held in the insured account, under section 20(1)(c) of the RPAA, sized by a documented method that reflects daily peaks.
Are funds received after the daily cut-off held?
Yes. They are held from receipt and appear in the ledger as funds not yet safeguarded, and the Bank expects them to be placed in a safeguarding account by the end of the next business day at the latest.
What records support the calculation?
A daily ledger with each end user's name, contact details and end-of-day balance, split between funds safeguarded and funds not yet placed, as required by section 15(2)(b) of the RPAR and the Bank's guideline.
References
- Retail Payment Activities Act (S.C. 2021, c. 23, s. 177), section 20
- Retail Payment Activities Regulations (SOR/2023-229), sections 13 to 15
- Retail Payment Activities Regulations (SOR/2023-229), sections 16 to 20
- Bank of Canada, Safeguarding end-user funds guideline (December 2024)
- Bank of Canada, Safeguarding of end-user funds: at a glance (February 2025, PDF)
About Safeheld
Safeheld is reconciliation and regulatory financial control software for regulated firms that hold client money. For Canadian PSPs it reconciles the end-user ledger to safeguarding accounts every day and separates held, in-transit and non-customer balances. To discuss your safeguarding operations, contact us at safeheld.com/contact.
This article is general information on Canadian retail payment rules and is not legal or regulatory advice.