The Competition Bureau, part of the Canadian government, has published a wide ranging report on Fintech. The Bureau opens the report by acknowledging that “despite the attention that Fintech is generating, Canada lags behind its international peers when it comes to Fintech adoption.”
To compile the information, the authors conducted 130 stakeholder interviews and 10 information sessions. Additionally, the Bureau participated in 13 outreach events and hosted a Fintech workshop.
So what does the report uncover?
A litany of regulatory barriers and entrenched norms that slow adoption of innovative finance that may improve the plight of both consumers and businesses. Many Fintech participants bluntly stated that other jurisdictions “have more welcoming and innovation-conducive regulatory environments than Canada.” The harsh assessment is due, in part, to the strength of provincial regulatory opinion when a national regulatory regime would be more beneficial to the populace.
Based on the findings, the Bureau developed 11 recommendations for both policy makers and regulators to improve innovation and embrace change.
Below are the common sense recommendations provided by the Competition Bureau. So the question remains, can the Canadian government execute on these goals?
- Regulation should be technology-neutral and device-agnostic. Rules that can accommodate and encourage new and yet-to-be developed technologies open the door to more innovative offers today and down the road.
- To the extent possible, regulation should be principles-based. Instead of prescribing exactly how a service must be carried out, a principles-based approach will allow regulators to be more exible in their approach to enforcement as technology changes.
- Regulation should be based on the function an entity carries out. This will ensure that all entities that perform the same function carry the same regulatory burden and con- sumers have the same protections when dealing with competing service providers.
- Regulation should be proportional to risk. This requires a tiered approach: functions whose failure poses lower risks to the nan- cial system should not necessarily face the same strict oversight as those whose failure poses higher risks. This will give smaller players a level playing eld to innovate.
- Regulators should continue their efforts to harmonize regulation across geographic boundaries. Differences in regulations across provinces can lead to increased compliance burden. Consistency, on the other hand, can facilitate entry and expansion of FinTech across Canada and abroad.
- Policymakers should encourage collaboration throughout the sector. Mechanisms for doing so include the use of regulatory sandboxes and innovation hubs. Greater collaboration will enable a clear and uni ed approach to risk, innovation and competition.
Policymakers should identify a Fintech policy lead for Canada to facilitate FinTech development. This would give Fintech rms a one-stop resource for information and encourage greater investment in innovative businesses.
- Regulators should promote greater access to core infrastructure and services. This includes access to the payments system (under the appropriate risk-management framework) and banking services to facilitate the development of innovative new FinTech services.
- Policymakers should embrace broader “open” access to systems and data through application programming interfaces. With better access to consumer data (obtained through informed consent), FinTech can help Canadians overcome their inability or unwillingness to shop around and switch between service providers.
- Industry participants and regulators should explore the potential of digital identi cation veri cation. This would reduce customer- acquisition costs for service providers, ultimately reducing the costs of switching for consumers and facilitating regulatory compliance where identity veri cation is needed.
- Policymakers should continue to review their regulatory frameworks frequently. Doing so will ensure that these frameworks remain relevant in the context of future innovation and can achieve their object- ives in a way that does not unnecessarily inhibit competition.