The federal government is jumping firmly on the fintech bandwagon with promised legislative measures designed to embrace fintech innovation, including the possible introduction of “open banking” in Canada, in Tuesday’s federal budget.
Following a second round of consultations on possible changes to financial services sector legislation, which was carried out this past autumn, Budget 2018 promises legislative changes to provide financial services institutions with “greater flexibility” to partner with fintech firms and undertake their own fintech activities, with an eye to allowing the delivery of “new and innovative” financial services.
The government also intends to study the phenomenon of “open banking,” which enables consumers to share their financial data with fintech firms and other financial services firms in order to stoke competition for their business. The practice is being adopted in other parts of the world, such as Europe, the U.K., and Japan.
In general, consumer groups have been in favour of the idea, as it could help ramp up consumer-friendly competition and innovation. Budget 2018 notes that open banking “has the potential to provide consumers with greater transparency on the products and services offered by financial institutions, thus allowing them to make more informed decisions, and makes it easier for consumers to move and manage their money.”
So, the government, as it signalled in this past autumn’s consultation, now is planning to review the idea, with an eye to determining whether “open banking would deliver positive results for Canadians.”
In addition, the government says in Tuesday’s budget that it intends to introduce legislation to implement a new framework for the oversight of retail payments. Last year, the Department of Finance Canada proposed a new oversight framework for consultation — and the government says it will pursue legislation once these deliberations are complete.
The underlying objective is innovation. The government says in Budget 2018 that it aims to adopt an oversight framework that maintains the safety and reliability of the payments system, while also allowing the industry “to develop faster, cheaper and more convenient methods of payments.”
At the same time, the government intends to launch a review of the Canadian Payments Act “to ensure that Payments Canada is well positioned to continue to fulfill its public policy objectives of ensuring the efficiency, safety and soundness of its systems.”
Other issues addressed in this year’s budget include the use of “bank” terminology by other financial services firms, such as credit unions. Federal banking regulators have opposed this measure, but the government announced that it intends to allow this practice, subject to disclosure.
Budget 2018 also indicates that the government is planning measures to enable insurers to make long-term investments in infrastructure projects and that it will be proposing amendments to modernize corporate governance requirements for federally regulated financial services firms.