This is how it works in Australia, which means it's a pain for tourists as you need to provide a passport for ID and get it activated, as opposed to just grabbing one at an airport kiosk and being ready to go on your way to the taxi or train like most other places.
Somewhat recently, tried to activate a SIM for a guest here in Canada, and while you could fill in anything you want for personal info, the only way to hook up (prepaid) billing was with a Canadian credit card number. Whoops. This was only for a month, so I put in mine and he reimbursed me in cash. Other carriers may still let you buy one-time payment cards for cash at retail; this one didn't.
Canada isn't the only country in which foreign cards don't work everywhere, and it seems like it's rarely tested