Canadian Regulator On Innovation’s Slow Roll

Oh, Canada, Open Banking and finTech innovation?  No frozen landscape there, if regulators look toward a recent study of competition (and cooperation) across payments stakeholders.  Plus, bitcoin gets no credit while the CFPB scores a point on the (make the in the) courts.

Last month, Canada’s Competition Bureau released its final study on tech-led innovation in FinTech, offering regulators some thoughts on competition in the payments sphere, along with suggestions on where the competitive landscape could be improved.

In order to boost competition within FinTech, said the Bureau, among other recommendations, regulation should be neutral when it comes to technology, and move to embrace Open Banking.

In an interview this past week with PYMNTS, Leila Wright, associate deputy commissioner of the competition promotion branch, said the reaction among stakeholders in finance, from banks to FinTech, has generally been positive.

“A lot of the regulators are moving in the direction of the recommendations made, and you can see that in a number of initiatives, such as the fact that the department of finance published a consultation paper that considered Open Banking,” she told PYMNTS.

In addition, securities regulators are starting to embrace sandboxes, which are another recommendation put forth in the report.

The dialogue continues, she said, as the Bureau wanted the report to be “a big step, but a first step, and we are continuing to reach the stakeholders to understand how things are changing in the market and also to work with them on implementing the recommendations.”

Canada might be viewed as a different market when it comes to financial services. PYMNTS likened Canada to a market defined by “co-opetition,” where there are a number of streamlined rails in place that are not commonly seen elsewhere. The thought proffered by PYMNTS: That innovation could, and should, get to the marketplace a bit more quickly.

And why hasn’t that quite happened yet? Wright said “that was really the big question that we were asking ourselves in the FinTech market – why is Canada lagging in terms of innovation and competition in this market? If there was a really simple answer to that, the report would have been much shorter,” she joked, “but it is a complex question and a lot of different things feed into it. I think one of the big things that we saw out of the study is that the process has changed … what the consumer wants has changed, and right now it is important for the regulation to keep up with and support that change.”

Against that backdrop, many of the Bureau’s recommendations focused on modernizing regulation, making sure that it can last for a long time, driven by broad principles. Coming to market, among the issues that need to be most urgently addressed is that regulation should be proportionate to risk. There’s a difference between the risk of depositing money into a bank account, said Wright, and depositing money into a Starbucks card held on a phone. In the case of the former, there’s obviously a lot more risk to the individual and to the financial system.

If Starbucks goes under, the individual has lost the $20 they have put on the card. If the bank goes under, much more is at stake. “If you make Starbucks, or another coffee shop, abide by the same financial regulations as the institution,” said Wright, “it becomes so expensive to them to implement that business model that they wouldn’t have an incentive to do that.”

As for digital identification – another staple of the December report – she said that the easier it is for these new business models to operate entirely online, and to check people’s verification rather than having them come into a physical location and show a driver’s license, for example, the easier it will be for these business models to take off.

PYMNTS asked which countries might be a model and a template for innovation for Canada. She noted the continuing focus on Open Banking, which naturally lends itself to looking at the U.K. and the EU. Open Banking could be powerful in Canada, said Wright, offering ways to compare different types of accounts – and from a competition perspective, more competition leads to lower prices, something every consumer wants.

Amid Canada-specific challenges: Navigating regulations that differ from province to province, where Wright noted businesses may find it difficult to comply from place to place. Regulator and securities regulators, she said, have been looking to create some consistency across provinces.


We looked north of the border. South of the border this past week, it was reported that in Mexico, that country’s antitrust agency is investigating the nation’s eCommerce market, amid concerns of monopolistic strategies that hurt smaller firms. The investigation has been in place since September, and names have not been named thus far.

Closer to Home

Here in the States, and amid legal battling, the Consumer Financial Protection Bureau (CFPB) got one for the win column this past week. You may recall that there is ongoing dispute over the agency’s structure, how it can be staffed, and just how far-reaching the president’s power might be in terms of both those considerations.

Last week, an appeals court ruled the president can only remove the head of the watchdog agency with a specific cause. Those causes might span dereliction of duty, for example. The court ruled Congress created the CFPB – and its current structure – to protect against changes in the political climate.

News came Friday that large U.S. banks, and specifically those that are large credit card issuers, are stating that they will not let their consumers buy bitcoin with their cards. The roster of those saying no to the bitcoin buy include JPMorgan Chase, Citigroup and Bank of America. JPMorgan explicitly called out credit risk.



On Tuesday, March 31, 2020 at 9:00 AM (ET) join PYMNTS CEO Karen Webster and panelists Vincent Kilcoyne and Roland Brandli of SmartStream for an in-depth discussion on the need to use transformative digital strategies to remain relevant in today’s challenging financial landscape. The discussion will cover strategies that will allow clients to improve operational control, reduce costs, build new revenue streams, mitigate risk and comply accurately with regulation.