Canada's federal Competition Bureau is highlighting the need for collaboration among financial technology (fintech) firms, regulators and between both parties in a summary report issued on Monday.
The federal competition regulator is in the midst of a market study expected to produce recommendations for fostering competition in the fintech sector by the end of 2017. The summary published on Monday discusses the results of a workshop the Bureau hosted in late February to discuss some of the issues that have arisen so far.
"Regulators are still learning about the impact of fintech on the market, which underscores the importance for policy and rule-makers to continue to engage and exchange ideas with all stakeholders before issuing new policy," the Bureau says in its summary report. "There was no dispute that collaboration between regulators and industry is needed to get policy and regulation right and to move innovation forward."
The Bureau also notes in the summary report that it's essential "to ensure a diversity of stakeholder input and perspectives" in developing the appropriate policies for the emerging fintech world — and that the resulting regulatory framework should be dynamic, flexible and proportional.
"We heard that this can be done with a regulatory approach that's balanced, principles- and function-based, technology neutral, focused on the appropriate risks, harmonized and ‘lighter'," the report notes. "The right regulatory approach is about striking a balance between enabling the benefits that fintech innovation has to offer (like efficiency and optionality) and the expected and appropriate resiliency in financial security/soundness and consumer protection."
In addition, regulators in this emerging area should be aware of the global context for fintech regulation and not ignore what's going on in other markets that are actively seeking to foster fintech innovation, the report states.
"We heard that it is not sufficient for regulators to do no harm — they need to be effectively engaging and creating a supportive and responsible environment for innovation," the summary report says, noting that initiatives such as the Ontario Securities Commission's LaunchPad and the Bank of Canada's Project Jasper are helping to create that environment.
Furthermore, there's a need for regulators to clarify whether they see particular systemic risks arising due to fintech innovation in Canada, the report says: "Such guidance could assuage the concerns of investors making them more willing to invest in new entrants."
The summary report adds that "Canadian regulators are paying attention: everyone at the table is engaged and willing to work together to create a regulatory framework that is both sound and innovative. The need for continued collaboration between regulators to harmonize and provide clarity in the oversight of the financial services sector was highlighted, as well as the need for more deliberate and regular checkpoints."
Says John Pecman, Commissioner of Competition, in a statement: "The right regulatory approach is about striking a balance between innovation, resilience and consumer protection. It is about getting the principles right. We saw at the fintech workshop that Canadian regulators are paying attention: they are engaged and ready to collaborate."
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