Moneris Sale Threatens Canadian Data Sovereignty, Leaders Warn
Canada’s payments leaders are warning that the sale of Canadian payment processor Moneris Solutions Corp. to a foreign owner could bolster a growing trend that threatens the country’s data sovereignty and compromise the infrastructure used to move money.
Royal Bank of Canada and RY-T Bank of Montreal BMO-T said Tuesday night they have agreed to jointly sell Moneris to California-based Francisco Partners for about $2-billion in cash, with the lenders each receiving a 50-per-cent share.
The sale has prompted concerns over whether Canadian businesses’ data and financial security could be at greater risk as Ottawa grapples with its increasingly volatile and uncertain relationship with Washington.
“Payments is a crucial part of banking because it’s an important part of how companies run their businesses every day, and it’s their cash flow,” Nic Beique, chief executive and founder of Calgary-based processor and financial technology company Helcim, said in an interview.
“It erodes sovereignty because it’s outsourcing a really important part of the financial services landscape to non-Canadian entities.”
Broadly, data sovereignty means Canada controls the financial services infrastructure and the data generated in the country.
The topic has become a major focus for Ottawa. In September, AI Minister Evan Solomon said at a conference in Montreal that Canada needs to create a sovereign digital economy that is “free from coercion” and that someone “can’t decide to turn off.”
Governments around the world are also grappling with the issue. In April, the European Union’s Financial Services Commissioner Maria Luís Albuquerque told The Globe and Mail that governments will need to increase control over key technologies that underpin the economy, particularly in financial services. Similar to the Canadian financial sector, Europe depends heavily on U.S. technology giants, such as Visa Inc. and Mastercard Inc., for payments infrastructure, and the region is attempting to reduce that reliance.
In a worst-case scenario, a foreign entity or government could opt to influence or cease the flow of payments in Canada, Mr. Beique said. There is also concern over foreign firms owning and accessing data and analytics from Canadian businesses.
“When you think about payment data, it’s hugely valuable and sensitive. It is your everyday purchase between consumers. It can be important trade information between businesses,” Mr. Beique said. “There’s a lot of intellectual value to payments data.”
Thousands of businesses in Canada use Moneris’ point-of-sale machines and other services that allow businesses to accept and manage payments. The processor services more than 325,000 points of commerce, processes more than $5-billion in transactions every year and represents one-third of transactions across the country.
The sale of Moneris requires regulatory approvals, including clearance under the Competition Act, and is expected to close by the end of the banks’ fiscal first quarter in 2027.
The department of finance said foreign investments may be subject to review under the Investment Canada Act, which allows the government to review such investments to ensure they are not harmful to Canada’s national security.
Moneris, RBC and BMO declined a request for comment from The Globe. The Canadian Bankers Association also declined to comment, saying it cannot speak on operational matters at the banks. Francisco Partners did not respond to The Globe’s request.
Ottawa has been focused on reducing the country’s reliance on the U.S. in critical areas, including defence and resources, and those efforts should extend to financial services as well, Boris Wertz, founding partner of Vancouver-based Version One Ventures, said in an interview.
“It’s important to have Canadian players run core elements of the industry,” Mr. Wertz said. “That doesn’t hold true for every single aspect; we’re still living in a global economy. But payments and the flow of money is one of the key pieces that our economy is built on.”
To prevent foreign takeovers of Canada’s biggest banks, the federal government caps ownership at no more than 10 per cent. It also ensures that a single investor cannot take a dominant ownership stake and wield significant influence over a financial institution.
Ottawa could consider extending similar restrictions to critical financial services infrastructure, including payments, Colin Deacon, Senator and member of the Senate’s banking, commerce and economy committee, said in an interview.
Mr. Deacon said he hopes the government will review the Moneris deal with a higher level of scrutiny, even though Ottawa may want to avoid disrupting its relationship with or investment from the U.S.
The federal government is currently focused on tense trade negotiations with the U.S. and on attracting foreign investment with its inaugural Canada Investment Summit in September.
“But I look at them and say we are not good at protecting our intangible assets,” Mr. Deacon said.
“This is not about critical minerals, railways, ports, lumber or oil and gas. This is about something that’s purely intangible, but it’s central economically to the lives of every Canadian, and it’s central to our control over our economy.”
In recent years, competition among payments providers and e-commerce platforms, such as Shopify Inc. SHOP-T has mounted in the Canadian market. Companies have been luring merchants with new products and software to process credit and debit card payments, putting pressure on Moneris’ foothold, according Marcus Dagenais, former president of Canada and corporate development at Chicago-based Payroc WorldAccess, LLC.
Canadian payment processor Helcim launched in 2020 and now has 200 staff and more than 22,000 active merchants. Most of its growth has come from merchants switching providers rather than first-time sign-ups. About 70 per cent of new merchants that join Helcim are leaving a legacy acquirer, such as Moneris.
U.S. payments providers Stripe Inc. and Square, as well as Dutch fintech giant Adyen N.V. have also been investing in growing in the Canadian market.
Mr. Dagenais said that Francisco Partners – a top private equity firm in payments with a reputation for growing these types of companies – could inject more innovation into Moneris to better compete with fintechs.
“I would expect some very big changes at Moneris fairly quickly,” Mr. Dagenais, who is also a founding member of Fintechs Canada, said.
But the sale also means that more Canadian businesses will rely on a U.S. company to move their money, and offers an opportunity for the country’s other payments providers to attract more clients.
“This cannot be painted as good news for Canadian businesses whatsoever. Full stop. Moneris was the last real business of scale that was Canadian owned and focused on Canada.”
RBC and BMO created Moneris as a joint venture in 2000. Headquartered in Toronto with offices in Sackville, N.B.; Montreal; Quebec City; Calgary and Burnaby, B.C., the company employs 2,000 people.
Moneris said in a statement Tuesday night announcing the sale that “its commitment to serving Canadian businesses will remain unchanged.” It said it will maintain operations in Canada and committed its “dedication” to local communities.
The rest of Canada’s six biggest banks use U.S. payment providers for merchant payments. Bank of Nova Scotia uses Chase Payment Solutions, which is owned by JPMorgan Chase & Co., the largest bank in the United States. Canadian Imperial Bank of Commerce uses Georgia-based Global Payments Inc. And National Bank of Canada uses Clover, which is owned by Milwaukee-based payments and financial services technology company Fiserv, Inc.
Last year, Toronto-Dominion Bank sold a part of its merchant processing business – which included a select portfolio of about 3,400 merchant group contracts with 30,000 merchant locations – to Fiserv.
Shortly after, Helcim received an influx of interest from businesses, trade associations and credit unions looking for a Canadian payments partner, Helcim’s Mr. Beique said.
With the news of the Moneris sale, “we expect another huge influx,” Mr. Beique said.
“Ultimately Canadians are feeling very proudly Canadian right now, and they’re looking for a great modern solution that also happens to be Canadian.”
RBC and BMO will enter into an exclusive, long-term arrangement to refer customers to Moneris. Former CEO of Global Payments Jeff Sloan will join the Moneris board as chairman.
Upon closing the deal, RBC said it expects to post an after-tax gain of $475-million, adding that the impact on its regulatory capital ratio will be “marginally positive.” BMO expects to record an after-tax gain of about $600-million and its regulatory capital ratio should improve by about 15 basis points. (A basis point is one-100th of a percentage point.)
“It fits the broader sector trend of banks simplifying their balance sheets and monetizing non-core holdings to redeploy capital,” Canaccord Genuity analyst Matthew Lee said in a note to clients.
Editor’s note: This story has been updated to correct the spelling of Toronto-Dominion Bank
This article was first reported by The Globe and Mail
