More consumer protection is needed as new entrants in the fast-growing payments space get ahead of regulation, the head of the Canadian Bankers Association said.

Speaking at a Canadian Club Toronto event Thursday, association president Anthony Ostler said there are now more than 2,000 non-bank payment services providers with more expected amid initiatives like the push for open banking.

The payments space has grown with numerous technology companies such as Shopify, Square and PayPal offering options, while more recently there's been tremendous growth in services like buy now, pay later.

Ostler said that while competition is good, the payments marketplace is running in front of the regulatory environment and consumers aren't being adequately protected.

“Let’s be clear, we don’t want the next FTX or Celsius coming from Canada’s payments ecosystem.”

He said the federal government should add consumer protections to the Retail Payments Oversight Framework as they consider next steps.

Ostler also said the government should do more to boost productivity, and raised concerns about propsed federal taxes that specifically targets the banking sector.

The taxes include a one-time 15 per cent windfall tax on large banks and life insurers profits made during the pandemic, plus a permanent raise of the tax rate for the two from 15 per cent to 16.5 per cent. 

The taxes would not only raise the cost of capital for the banking sector, but for companies across the country since they add another variable for potential investors in the country. A technology company might choose to look elsewhere, he said as an example, where they wouldn't be "randomly attacked."

“So we actually increase the cost of capital for all Canadian corporations by creating uncertainty over who could be next.”

In September, the parliamentary budget officer estimated the two taxes could generate $5.3 billion over the next five years.

This report by The Canadian Press was first published Nov. 24, 2022.