.svg)
“It is long past time for Canada to embrace open banking,” a key technology group has said, launching a new campaign as momentum for open banking reform continues to grow.
“Dozens of business and public policy leaders have signed their name to our open letter to Finance Minister Chrystia Freeland, calling on her to reaffirm her government's promise to enact open banking, and lay out a clear path forward,” said the Council of Canadian Innovators as it launched its campaign, Canadians for Open Banking.
The letter says that co-signatories were excited to see the Liberal Party of Canada platform promise to enact open banking in Canada by the end of 2022.
“Ten months after that deadline has come and gone, we are still waiting,” the letter says
“Today, we are calling on you to reaffirm your promise to enact open banking, and release a clear roadmap for when we can expect to see it implemented,” the letter says. “Many of us made business investments and built strategies around your election promise; we need assurance that you’re going to keep your word.”
The campaign is being backed by key fintech players in the country, such as Borrowell, as well as associations and campaign groups such as the National Crowdfunding & Fintech Association of Canada and the Canadian Anti-Monopoly Project.
The campaign warns that Canada’s global peers are delivering new products to make financial services more convenient, more widely available to unbanked citizens, and driving down costs.
“It’s time for Canada to catch up with the European Union, the United States and the UK to ensure we have affordable and innovative open banking,” the letter says.
This intervention is not the first recently either.
In early October, industry group Fintechs Canada, as well as companies such as Wise, launched the Choose More campaign to rally public support for government action on open banking and payments modernisation.
Canada’s open banking problem
The fintech sector in Canada has become increasingly frustrated with the slow progress being made by the government to implement a promised legal framework for open banking.
This is despite the fact that Canada is currently undergoing what Kevin Landry, associate at Stewart McKelvey law firm, referred to as “a bit of a revolution in its finance sector”.
For example, recently the Retail Payment Activities Act was put in force, which will help regulate fintechs in Canada.
“However, a main challenge for fintech in Canada will remain unless and until the Canadian Payments Act is amended,” said Landry.
This legislation creates Payments Canada, which manages the country’s payment infrastructure, and outlines Payments Canada’s members (who are the parties who have direct access to our central clearing house and payment infrastructure).
“Current members are mostly the big banks, and at present this leaves out new fintechs, credit unions and a variety of other parties, who at present, all must partner with a Payments Canada member to do something as straightforward as automatically debit a Canadian bank account,” Landry pointed out.
This is, in part, why fintechs are becoming more agitated with the slow pace of progress.
Originally, a deadline for open banking work was set by Prime Minister Justin Trudeau’s party for early 2023. However, this has failed to materialise.
Earlier in November, members of the opposition Conservative Party introduced the Consumer-led Banking Act in the country’s parliament, stating that the government is “dragging their feet”.
The act requires Freedland to submit a plan for the implementation of open banking in Canada within 30 days of the act becoming law.
In many ways, the country has moved at a sluggish pace.
In November 2017, Canada’s competition watchdog published a series of recommendations for innovation in the payments sector, signalling support for a move towards open banking in the country.
In June 2019, Canadian officials in the country’s Senate called for an open banking infrastructure that will enable consumers to share their financial data securely with third parties, urging that such a system is up and running as quickly as possible.
And, in March last year, Canada picked former digital banking director Abraham Tachjian to help set up the country’s open banking regime.
However, very little concrete progress has been made.
“The status quo here heavily favours incumbents,” commented Landry.
“The long and short answer is that we have five main banks that essentially run our entire financial system,” he told Vixio. “They enjoy a significant degree of power in the industry and open banking simply hasn’t been a demand by Canadians, and therefore legislators.”
In June, a Deloitte survey found that only 18 percent of respondents were familiar with the concept of open banking, albeit the percentage among 18 to 34 year-olds it rose to 35 percent.
Meanwhile, there were just 35 percent of Canadians who said that they felt comfortable sharing their data online, rising to 45 percent once the framework is implemented, according to the survey.
Landry said that there are legislative hurdles to making the financial system more open and friendly to financial technology companies.
“Without public support and politicians being held to task, the status quo will remain,” he said. “Canada as a country is conservative banking-wise, but with increased exposure to America we see more fintech applications every day and consumers are starting to ask why we can’t have something as simple as CashApp.”
Canada does have a solution on the way to send funds called Interac E-Transfer. “It is like most Canadian solutions. Adequate only and far from the frictionless exercise you see in most modern fintech,” said Landry.
