The Bank of Canada has ordered Toronto-based FinTech company XTM and its affiliated entities to immediately cease payments activities, as customers of the company’s Edmonton-based subsidiary Everyday Payments allege their money is missing.
In a statement, the Bank of Canada said the order prohibits XTM or its affiliates from conducting any transactions or withdrawals from accounts associated with its payments platform.
The order prohibits XTM or its affiliates from conducting any transactions or withdrawals from accounts associated with its payments platform.
“The Bank has serious concerns that XTM failed to safeguard client funds in its possession and has reason to believe that allowing XTM to continue to perform retail payment activities could be prejudicial to the public’s interest,” the bank said in a statement. The order adds that financial statements indicate that XTM has caused users harm by accruing a “significant shortfall” in their funds, and that the company may be continuing to represent itself and perform the roles of a payment provider despite those issues.
The news follows the Canadian Investment Regulatory Organization (CIRO) issuing an order for all trading of XTM’s stock, $PAID, on the Canadian Securities Exchange to be halted at 9:22 a.m. EST on Tuesday morning.
The regulatory orders follow the penny stock falling from its year-to-date high of five cents per share to less than a penny per share after Global News first reported on issues with the company earlier this month. Clients of Edmonton-based Everyday Payments alleged that money from the digital wallets that the platform used to store tips or staff wages has disappeared from their accounts, or has not been released.
Everyday Payments is a division of Everyday People Payments, a joint subsidiary of Canada-UK firm Everyday People Financial (EPF) and Toronto FinTech XTM. EPF trades on the Toronto Venture Stock Exchange, where its stock price has dropped from its year-to-date high of 70 cents per share to 51 cents per share on Tuesday.
BetaKit has repeatedly reached out to XTM for comment.
Global reported that restaurants across Canada were experiencing issues accessing funds through Everyday Payments, ranging from a few thousand to nearly $1 million missing from digital wallets. Tony Elenis, the president and CEO of the Ontario Restaurant, Hotel and Motel Association (ORHMA), told BetaKit last Monday that some of his members (whom he did not name) were also impacted by the disruption.
“I can’t name names, but we have heard,” he said. “I know one restaurant did receive funding back to them already, which is good, but it’s sort of like, why did it happen in the first place?”
RELATED: Everyday Payments customers allege their money is missing
Elenis confirmed that ORHMA issued an advisory on Feb. 5, urging members experiencing issues to document any discrepancies and recommending alternative platforms vetted by the association. The advisory also noted the impact that delays can have on the razor-thin margins many in the hospitality industry operate on. A similar advisory was issued that same day by the Restaurant Association of Nova Scotia (RANS).
The Bank of Canada, which oversees payment service providers (PSPs) under the Retail Payment Activities Act (RPAA), said last week that it is aware of the reports. RCMP has told BetaKit that it generally will only comment if an investigation results in criminal charges, but that it would encourage anyone who believes they have been a victim of fraud to report it to local police.
A Feb. 2 press release had stated that XTM had started the Retail Payment Activities Act compliance process for Everyday People Payments. That release added that, in January, additional “risk mitigation measures” had been implemented to address some legacy operational practices with Everyday People Payments.
But, just two days later, XTM stated in another release that Everyday People is not registered or required to be registered under the RPAA, but that XTM is and has at all times been a registered money services business.
“All cardholder funds associated with the platform are held in trust in accordance with applicable legal and safeguarding requirements and are segregated from operating funds,” XTM stated.
Early last month, XTM announced that it had moved more than 100,000 customers over to Everyday Payments’ Google and Apple wallets.
With files from Jesse Cole.
BetaKit’s Prairies reporting is funded in part by YEGAF, a not-for-profit dedicated to amplifying business stories in Alberta.
Feature image courtesy Unsplash. Photo by Maxim Hopman.