“We are still waiting”: FinTech leaders urge Liberals to enact much-delayed open banking rules

Justin Trudeau and Chrystia Freeland
Open letter comes on the heels of Conservative bill pressuring federal action on open banking.

A coalition of Canadian tech leaders have penned a new letter to Canada’s finance minister, pressing for a clear roadmap on the long-overdue rollout of open banking.

The letter calls on Finance Minister Christia Freeland and the Liberal government to enact rules to mandate open banking in Canada. It comes several weeks after a report from Canada Competition Bureau found that Canada’s “competitive intensity” had fallen from where it was a few years ago.

“A lack of competition stifles innovation, drives up prices, and leads to stagnation. Canadians suffer as a result,” the letter stated. “During this cost of living crisis, there’s never been a greater need to give Canadians more control over their money.”

“We’ve been talking about [open banking] since 2018. It’s time to get on with it.”

The letter, which was coordinated by the Council of Canadian Innovators (CCI), has 36 signatories as of Wednesday afternoon, including executives from Canada’s FinTech startups and scale-ups, such as Borrowell, Helcim, Koho, and Neo Financial, as well as other tech sector organizations like Communitech and MaRS Discovery District.

Canada took the first steps towards the adoption of an open banking system roughly five years ago. The FinTech sector has long argued such a system would pave the way for new entrants in Canada’s banking landscape, which is currently dominated by the Big Six banks. Advocates also argue that open banking will give Canadians more control over their financial data and choice over who they can share that data with.

“Too often, we hear commentary in Canada that amounts to small-minded protectionism,” the letter states. “The belief that Canada’s financial sector is strong because it is concentrated in a handful of very large banks is deeply misguided.”

Despite initial interest from the federal government, Canada is currently the only G7 nation yet to establish a formal open banking system or introduce real-time payments. The federal government’s advisory committee on open banking released a plan for implementing such a system in August 2021, but since then, the implementation has encountered numerous delays.

Open banking continues to gather dust

Earlier this year, the federal government missed its target to roll out a basic open banking system by early 2023, a deadline that was recommended in the advisory committee’s report. “Ten months after that deadline has come and gone, we are still waiting,” the letter noted.

In the spring, industry groups raised their eyebrows at the 2023 budget’s glaring omission of open banking. This concern deepened following the summer’s federal cabinet reshuffle, which seemingly deprioritized open banking from the government’s agenda. Adding to the uncertainty, Randy Boissonault, a key figure in open banking discussions in his former role as associate finance minister, was reassigned and his role left unfilled.

Canada’s open banking lead, Abraham Tachjian, delivered his final recommendations on open banking to the finance ministry this fall, and last month revealed that his initial 18-month term, which was due to expire in the summer, had been extended to the end of the year. Still, the federal government has yet to reveal any next steps for implementing an open banking system.

“This decision really rests with the Minister of Finance,” Nicholas Schiavo, director of federal affairs at CCI, told BetaKit. “This is obviously her portfolio. Our campaign is really a united front from industry [and] from Canadians to say that now is the time to move forward.”

“We’ve been talking about [open banking] since 2018,” he added. “It’s time to get on with it.”

In addition to the open banking delays, Payments Canada, the organization managing the nation’s payments clearing and settlement system, this year announced its third delay in two years for the introduction of the real-time rail system, which will allow Canadians to transfer money in seconds. The organization provided an update of its delivery roadmap in late October.

Pressure mounting on multiple fronts

In response to the delays, some of Canada’s FinTech companies have taken a grassroots approach to push for more action. Last month, a group of companies that includes Wealthsimple, EQ Bank, Wise, Flinks, Xero Canada, and Borrowell, launched a public campaign urging the federal government to expedite the implementation of open banking and payments modernization.

The campaign highlights the potential advantages of these changes for Canada’s financial system, including potentially lower banking fees for consumers and small businesses, the opportunity for Canadians to use their rental history to establish credit, and increased options and competitive pricing for both consumers and small businesses.

FinTech startups aren’t the only ones urging the Liberal government to progress with open banking. Recently, Canada’s Conservative Party introduced a bill that, if passed, would mandate Finance Minister Freeland to unveil a federal open banking plan within 30 days.

“One of the reasons there’s not a lot of competition is that it’s very hard to move between banks or to other financial institutions,” Conservative Party Leader Pierre Poilievre told The Globe and Mail last week. “The big banks control the data of their customers and that gives them a massive advantage over challengers trying to break into the market.”

The absence of a formal open banking system has already had implications for some Canadian FinTech companies. Andrew Graham, CEO of Borrowell, told BetaKit the lack of open banking rules has already impacted one of the startup’s offerings which is aimed to help consumers report rent payments to build their credit histories.

Lacking an established open banking system to set a standard API, which would securely allow FinTech startups and other third parties to access user financial data, Borrowell has been forced to depend on screen scraping.

“The lack of open banking makes this much harder than it would otherwise be,” Graham said in a statement sent to BetaKit. “Consumers should have the right to share their rental payment history if they want to.”

Schiavo believes it’s not just startups that are jeopardized by the lack of movement from the federal government. “Every single day that we wait to implement a modern financial system that opens up innovation and choice, and puts more money back in the pockets of Canadians of Canadian businesses, we are in effect asking Canadians to pay more. I think right now, in particular, during the worst cost of living crisis we’ve had in many decades, that is unfair.”

The Liberals are expected to release their Fall Economic Statement next week, and Graham said he is hopeful that the statement will lay out a clear path forward for open banking.

Feature image source Flickr.

Isabelle Kirkwood

Isabelle Kirkwood

Isabelle is a Vancouver-based writer with 5+ years of experience in communications and journalism and a lifelong passion for telling stories. For over two years, she has reported on all sides of the Canadian startup ecosystem, from landmark venture deals to public policy, telling the stories of the founders putting Canadian tech on the map.

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