Money transfer service Wise closed a Canadian customer's account ...

Joe Baradziej was surprised to discover, at the beginning of April, that low-fee money transfer platform Wise had closed a multicurrency account he’d been using for travelling and for some one-off expenses in Canada.

But what soon became far more concerning was that the company did not automatically refund his leftover balance, which amounted to more than $6,500. It took until early November for Mr. Baradziej, a Toronto-based cybersecurity sales professional, to get his money back, according to correspondence reviewed by The Globe and Mail.

“I felt powerless that an organization without any live touch points can just take $6,500 from me,” Mr. Baradziej said, referencing the fact that, for months, Wise only responded to his requests to have the funds returned with automated or unsigned e-mails, without providing a customer-service phone number.

Mr. Baradziej’s case shows the need for more oversight of fintech startups that are increasingly offering services similar to those traditionally performed by the banks, such as holding clients’ funds, without being subject to the strict customer protection rules that apply to deposit-taking institutions, some consumer advocates warn.

Wise, a U.K.-based fintech previously known as TransferWise, is well-known among savvy customers around the world as a convenient, secure way to send and receive money internationally with no exchange rate markups.

Canada is among several countries where Wise customers can also hold a balance in several currencies through the platform as well as access the funds through an international reloadable prepaid card.

Mr. Baradziej set up a Wise account and prepaid card for a trip to Southeast Asia he took last year and came back a happy customer, he said. He was impressed with the company’s account security, the low fees, its user-friendly interface and the fact the card was widely accepted across the three countries he visited during his travels.

Back in Canada, he kept the account open, and in early April used it to pay some expenses for a party he was hosting, with one vendor requesting to receive euros instead of Canadian dollars. Shortly after, Mr. Baradziej received notice that Wise had deactivated his account.

In its Canadian customer agreement, Wise says it can shut down accounts at its discretion for a variety of reasons, including breaches of its terms of service and when the company suspects a user may be involved in fraud, money laundering or other illegal acts.

Wise declined to comment on why it shuttered Mr. Baradziej’s account.

“For legal and privacy obligations, we’re unable to provide details on individual cases, but we never take the decision to deactivate an account lightly and this is always the result of a thorough review by our team,” Wise spokesperson Dulcie Everitt said in a statement via e-mail last week.

That kind of secrecy around account closings is common at the banks as well. Traditional financial institutions can also unilaterally end their relationship with a customer for violations of their customer agreements or if they suspect illegal activity. And when banks kick out their clients, they rarely say why. In some instances they are prohibited by law from doing so.

Financial institutions don’t have to prove whether a client actually and knowingly engaged in illegal activity in order to de-bank them.

But banks typically give customers whose accounts are being closed a window of time to withdraw their funds. Wise, by contrast, required Mr. Baradziej to file a claim for any money left with the company after his account was deactivated, according to an e-mail from the company viewed by The Globe.

On its website, the firm says if an account is closed, a user must submit a refund request to have their remaining balances returned.

When Mr. Baradziej ran into technical issues when submitting his claim online, a Wise customer support agent advised him to do so via e-mail instead.

Mr. Baradziej sent in a request twice, once on April 8 and once on May 30, and received automatic replies confirming the company had received his petitions. Yet nothing else followed.

Eventually, in early November, he was finally able to talk to a Wise employee after finding a U.K. customer-service phone number for the company, he said. After the call, the company said via e-mail that it had missed his claim requests because they’d been filed via e-mail, rather than online through their website. It returned the funds shortly thereafter, although it decided to keep Mr. Baradziej’s account closed.

Wise told The Globe it recently enabled 24/7 phone customer support in English worldwide.

Mr. Baradziej’s experience points to the dearth of consumer-protection rules in Canada for payment platforms such as Wise, said Geoff White, executive director and general counsel at the Public Interest Advocacy Centre.

Ottawa is in the process of establishing stricter rules for payment service providers – a group that includes a range of fintech companies serving consumers, such as Wise – with the Bank of Canada in charge of supervising the sector.

Among other requirements, the regime is expected to mandate that companies that hold clients’ funds must keep them separate from money used to run their business, something Wise previously told The Globe it already does. But the framework doesn’t cover consumer protection or regulate how firms should interact with their customers.

Ottawa urgently needs to add binding standards that clearly set out user rights, Mr. White said.

“Otherwise, it’s going to be a Wild West.”