Canada is a market many suppliers can’t afford to ignore. One big reason: its purchasing power. The U.S. and Canada share one of the world’s largest trade relationships, with over $1 trillion CAD in annual trading. Unlike emerging markets, Canada is considered a low-risk environment with clear compliance frameworks. But while “The Great White North” deserves a spot on your growth plan, here’s the real question:
Are you ready for the expectations and Canadian payment compliance rules that come with it?
If you think your U.S. payment strategy will work North of the border, think again. Canada is a different market. Buyers demand local payment rails — domestic payment options like Pre-Authorized Debit (PAD) and Electronic Funds Transfer (EFT). Rest assured, they’ll notice if you don’t offer them. Plus, regulators enforce strict PAD compliance requirements. Even small payment missteps — like misapplying surcharges — can create unnecessary financial risk.
“Canada is a high-value, low-risk market for growth — if you respect its payment norms.”
Kunal Patel, SVP of Payments, Billtrust
So, what does it take for accounts receivable to succeed in Canada?
This guide breaks down what CFOs and finance leaders need to know before doing business in Canada. It also explores how AR automation can support international growth strategies, helping you enhance your market appeal, stay compliant, and reduce complexity – all while accelerating your cash flow.
How are Payments in Canada Different?
Do This and You’ll Frustrate Canandian Buyers
In Canada, EFT is the “backbone of Canada’s payment infrastructure,” and PAD is the standard for recurring transactions. If you only offer cards or cross-border wire transfers, you’ll increase payment acceptance costs, delay payment settlement, and frustrate Canadian customers.
For this reason, new Canadian suppliers may need to expand their payment modalities – preferably without increasing their workload or cost. This is where PAD can create a new set of challenges.
PAD Compliance Under Rule H1
In Canada, PAD allows the supplier to withdraw money from the buyer’s bank account every time a new recurring payment is due. However, PAD introduces compliance implications, including:
- Authorization: Must meet strict identity verification standards
- Notification: 10-day written notice before the first debit (or a documented waiver)
- Audit trail: Recordkeeping mandates require confirmations to be kept on file
Handling PAD requirements using manual processes is time-consuming and error prone. The solution? Digitize PAD workflows so agreements, notifications, and recordkeeping happen automatically, reducing compliance risk and accelerating the speed to payment settlement.
5 Benefits of PAD Automation
- Efficiency: No paperwork, no manual notifications
- Accuracy: Built-in validations reduce errors and disputes
- Simplified compliance: Fully aligned with Payments Canada rules
- Seamless integration: Direct bank connectivity, no third-party tools
- Flexibility: EFT and card payments in Canadian or US dollars
Surcharging is Legal but Comes with Stringent Rules
Since 2022, Canadian suppliers can surcharge credit card transactions to lower their payment acceptance costs, but the rules are strict:
- Surcharging cap: 2.4% or your actual cost of acceptance, whichever is lower
- Credit only: Debit and prepaid cards are excluded
- Province matters: Quebec prohibits surcharging entirely
- Disclosure: You must notify buyers and display clear signage
But here’s the reality: Surcharging is a rare occurrence.
Industry data suggests that only around 10% of suppliers apply surcharging fees. Why? Because the savings don’t justify the added operational complexity. The good news? Automation can eliminate this problem. With the right payment processing services, compliant surcharging becomes far easier.
How Surcharging Automation Works
Built-in logic can administer rules for each buyer group, including provincial restrictions. Moreover, disclosure requirements can be handled automatically.
In fact, Billtrust has surcharging solutions. See how one heavy equipment company saved $2M by surcharging.
How Billtrust’s Automated Payment Processing Changes the Game
The key is to automate payment processing with AR automation software. AR managers and CFOs enjoy these benefits:
- Compliance is built in: PAD workflows, surcharging logic, and provincial rules are handled automatically
- Faster cash: Local payment rails, like EFT and PAD, accelerate settlement. Billtrust’s customers see up to 50%+ improvement in DSO.
- Visibility across borders: One platform for U.S. and Canadian entities, with real-time reporting
Explore Billtrust’s solution for Canadian payments here.
Ready to simplify Canadian payments?
Book a personalized demo and see how Billtrust helps you stay PAD compliant and accelerate cash flow — without adding headcount.
