Pre-authorized debit payments in Canada

Stripe users in Canada and the United States can accept pre-authorized debit payments (PADs) from customers with a Canadian bank account using the Automated Clearing Settlement System (ACSS) provided by Payments Canada.

Before debiting a customer’s bank account, businesses must first collect a mandate from the customer defining a specific payment schedule or terms. The mandate includes the customer’s institution number, transit number, account number, name and email.

When you use Stripe.js, our foundational JavaScript library for building payment flows, Stripe provides a hosted solution for collecting mandates from customers using your preferred terms, as well as fully-hosted collection of bank account details and instant bank verification (and delayed verification using micro-deposits in rare cases). This verification process is a requirement to accept PADs, and can also help to reduce payment failures and fraudulent activities.

Canadian pre-authorised debits are a reusable, delayed notification payment method. This means that it can take up to 5 business days after initiating a payment to receive notification of success or failure. PADs are not a guaranteed payment method, there is a risk of failed payments and disputes.

Payment flow

Customer selects pre-authorized debit at checkout

Customer provides bank information and accepts mandate

Customer gets notification that the payment is complete

Get started

You don’t have to integrate Canadian pre-authorized debit and other payment methods individually. If you use our front-end products, Stripe automatically determines the most relevant payment methods to display. Go to the Stripe Dashboard and enable Canadian pre-authorized debit. To get started with one of our hosted UIs, follow a quickstart:

• Checkout: Our pre-built, hosted checkout page.
• Elements: Our drop-in UI components.

Other payment products

The following Stripe products also let you add Canadian pre-authorized debit from the Dashboard:

• Invoicing
• Subscriptions

If you prefer to manually list payment methods or want to save Canadian pre-authorized debit details for future payments, see the following guides:

• Manually configure Canadian pre-authorised debit as a payment
• Save Canadian pre-authorised debit details for future payments

Mandates

During the payment flow, Stripe helps you collect a mandate which gives your business authorization to debit the customer’s account. In Canada, these are called pre-authorized debit agreements or PAD agreements. The mandate collection, confirmation and pre-debit notification requirements for pre-authorized debits are governed by Payments Canada’s Rule H1 for pre-authorized debits (PADs).

Instructions for collecting mandate acceptance can be found on the Accept a payment page. In the unlikely event that your business requires a custom agreement, information on how to create a mandate that meets Payments Canada requirements can be found on the Custom PAD mandate agreements page.

Stripe will initiate the first debit immediately after mandate acceptance. Your customers must receive confirmation of a new mandate within 5 days after they have accepted the mandate (see Mandate and debit notification emails).

Customers can request the cancellation of a mandate at any time, including by properly giving oral notice of cancellation. To cancel a mandate, a customer must either contact the business they established the mandate with, or their bank. Cancelling a mandate invalidates any further debit requests that you issue using this mandate. If you wish to accept additional payments from the customer, a new mandate must be established with them.

Payment Schedule

Each PAD mandate must specify a payment schedule that defines when and how debits can be automatically charged to a customer.

Mandate and debit notification emails

The Payments Canada network rules require that you notify your customer:

• When a mandate is established
• Each time a debit is made on their account

In addition, should your customer’s bank account need to be verified using micro-deposits, Stripe will send reminder emails linking to a hosted verification page.

By default, Stripe automatically sends emails to the customer for these cases. You can customize the colors and logo for these emails to fit the design and branding of your business.

To send custom notifications:

• Turn off Stripe emails in the Stripe Dashboard email settings
• Send a mandate confirmation email when you have collected your customer’s bank account and mandate authorization.
  • Mandate confirmation emails must be sent no later than 5 calendar days after your customer has accepted the mandate. Stripe will initiate the first debit immediately after mandate acceptance.
  • The email must include the mandate you created for the debit (see Custom PAD mandate agreements) and the bank account information collected from your customer, including the institution number, transit number and last four digits of the account number.
• Use the charge.pending event to trigger debit notification emails.
  • Debit notification emails must include: your contact information, the last 4 digits of your customer’s bank account, and the amount to be debited.

Disputes

Canadian pre-authorised debits provide a dispute process for bank account holders to dispute payments. Customers can dispute a debit payment through their bank on a “no questions asked” basis for up to 90 calendar days after a debit on a personal account or up to 10 business days for a business account. The customer’s bank can honour any dispute within this period.

When a dispute is created, Stripe sends both the charge.dispute.created and charge.dispute.closed webhook events, and deducts the amount of the dispute and associated dispute fee from your Stripe balance.

Unlike credit card disputes, all PAD disputes are final and there is no process for appeal. If a customer successfully disputes a payment, you must contact them if you want to resolve the situation. If you’re able to come to an arrangement and your customer is willing to return the funds to you, they must make a new payment.

PADs transaction failures

PADs transactions can fail any time after the payment is initiated through payment confirmation. These failures can occur for a number of reasons, such as:

• Insufficient funds
• An invalid account number
• A customer disabling debits from their bank account

If a payment fails after funds have been made available in your Stripe balance, Stripe immediately removes funds from your Stripe account.

In rare situations, Stripe might receive a PADs failure from the bank after a PaymentIntent has transitioned to succeeded. If this happens, Stripe creates a dispute with a reason of:

• insufficient_funds
• incorrect_account_details
• bank_cannot_process

Stripe charges a failure fee in this situation.

Payouts

Pre-authorised debit payments are subject to a minimum 5 business day payout timing from charge creation. If your payout timing is longer than 5 business days, payouts from PAD payments will be unified with card payouts.

Presentment currency Optional

Most bank accounts in Canada hold Canadian dollars (CAD), with a small number of accounts in other currencies, including US dollars (USD). It is possible to accept PAD payments in either CAD or USD, but choosing the correct currency for your customer is important to avoid payment failures.

Unlike many card-based payment methods, you might not be able to successfully debit a CAD account in USD or debit a USD account in CAD. Most often, attempting to do so will result in a delayed payment failure that will take up to 5 business days.

To avoid these failures, it is safest to take PAD payments in CAD unless you are confident your customer’s account will accept USD debits.

Refunds

Refunds for PADs must be submitted within 180 days from the date of the original payment. Refunds require additional time to process (typically 3 business days). If you accidentally debit your customer, please contact them immediately to avoid a payment dispute.

Refunds are processed only after the payment process is complete. If you create a full or partial refund on a payment that hasn’t yet completed, the refund is actioned when the Charge object’s status transitions to succeeded. If the Charge object’s status transitions to failed, the full or partial refund is marked as cancelled because the money was never debited from the customer’s bank account.

PAD refunds are not explicitly labeled as refunds when the funds are deposited back to a customer’s bank account. Instead, refunds are processed as a credit and include a reference to the original payment’s statement descriptor.

Due to longer settlement time periods and how banks process PAD transactions, there is potential for confusion between you, your customer, your customer’s bank, and Stripe. For example, your customer might contact both you and their bank to dispute a payment. If you proactively issue your customer a refund while the customer’s bank also initiates the dispute process, your customer might receive two credits for the same transaction.

When issuing a refund, you should inform your customer immediately that the refund typically takes 3 business days to arrive in their bank account.

Statement descriptors

Every PAD payment shows up on customers’ bank statements with the name of the merchant. For PAD payments created with Stripe, the name of the merchant is your Stripe account’s statement descriptor. You can override this default behaviour for every transaction independently by using a dynamic statement descriptor. To do so, you can specify the statement_descriptor parameter when creating the PaymentIntent.

The table below illustrates the merchant name behavior you can expect on the customer’s bank statement:

Each bank in Canada formats these fields differently. Depending on your customer’s bank, some fields might appear in all lowercase or uppercase.

Statement descriptors and Connect

The charge type of Connect payments changes the statement descriptor and the merchant name, which appears on the customer’s bank statement.

A mandate collected for a PaymentIntent on_behalf_of a Connected Account cannot be used with a different Connected Account.