Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Canada At A Productivity Crossroads, Bank Of Canada Warns
Economy | February 6, 2026
Productivity Now Limits Growth, Wages, and Scale Across Canada’s Economy
On February 5, 2026, Bank of Canada Governor Tiff Macklem delivered a speech at the Empire Club of Canada called 'Structural Change - Canada at Crossroads' warning that Canada has reached a productivity crossroads, where long standing structural limits now cap growth, wages, and competitiveness. Inflation no longer defines the constraint. Productivity does. For founders, investors, and policymakers, the question is no longer whether innovation exists in Canada, but whether the economic system allows it to scale. Of course, many stakeholders have been eluding to this data-driven fact for a decade, including NCFA.
At The Center Of Canada’s Growth Problem
“Canada’s productivity performance has been weak for a long time, and that limits how fast our economy can grow.”
Macklem identifies productivity as the binding constraint on Canada’s economic outlook. The data is clear. According to OECD GDP per hour worked data, Canada’s labour productivity remains well below the United States and has fallen further behind over the past decade. In 2023, Canada produced roughly 72% of US output per hour worked, a gap that continues to widen.
The Bank of Canada links this shortfall to weak business investment, slow technology adoption, and limited competitive pressure. These factors suppress output growth even as employment rises. As a result, wage growth, firm profitability, and national competitiveness all face structural limits.
NCFA analysis shows that productivity challenges increasingly reflect underinvestment in digital infrastructure, automation, and scalable financial systems rather than a shortage of talent or ideas. For example, see: Breaking Canada’s Productivity Trap For Stronger Growth or Fintech’s Role In Canada’s Productivity Revival or Canada's Productivity Depends on Intangible Tech Adoption, which detail how capital misallocation and limited competition slow modernization across sectors.
For fintech founders, productivity gaps point to unmet demand for tools that reduce friction in payments, lending, compliance, and data driven decision making. Where legacy systems persist, productivity losses accumulate across the economy.
Competition Drives Productivity And Canada Still Falls Short
“More competition pushes firms to innovate, invest, and become more productive.”
Macklem ties productivity directly to competitive intensity. Where markets concentrate, firms face less pressure to adopt new technology or improve efficiency. Canada’s financial services sector illustrates this clearly. In fact, the Bank of Canada's Senior Deputy Governor, Carolyn Rogers, called Canada's banking system an Oligopoly. Concentration in lending, payments, and capital markets slows adoption of new models that could lower costs for businesses.
NCFA tracks this dynamic, here are just a couple of examples: How Competition Powers Canada’s Economic Growth and Why SME Loan Competition In Canada Is Under Review.
Small and medium sized businesses feel the impact most. Limited lender choice raises borrowing costs and lengthens approval timelines. For fintech lenders and embedded finance platforms, this reinforces demand for modern credit models that expand access while maintaining risk discipline.
Capital Allocation Limits Scale And Slows Innovation
“Investment needs to flow to the firms that can grow and raise productivity.”
Canada’s venture capital structure continues to constrain scale. According to RBCx data, Canadian VC Fundraising Contracts And Concentrates, raising just over $2 billion in 2025. Capital concentrates heavily. The top five funds account for roughly 83% of total capital raised, while emerging managers raise approximately $249 million.
At the same time, total venture investment reached about $4.9 billion across 386 deals through the first nine months of 2025, compared with roughly $8.6 billion across all of 2024. These figures describe two forces in the same system. Fundraising concentrates while deployment becomes more selective.
For founders, capital access becomes a strategic constraint rather than a timing issue. For investors, it narrows the pool of companies able to scale inside Canada.
Regulation Shapes Productivity Outcomes
“Good policy supports competition, investment, and long term growth.”
Macklem acknowledges that productivity doesn't improve in a vacuum. Firms respond to the regulatory environment they operate in. When compliance costs rise faster than firms' capacity, or when rules favour incumbents over new entrants, productivity suffers.
NCFA has consistently shown that regulatory design plays a decisive role in whether innovation scales. When rules increase cost or delay without improving outcomes, firms delay investment and avoid experimentation. Productivity improves when regulation supports entry, proportional compliance, and faster market testing, as outlined in Innovative Approaches to Smarter Regulation and Overcoming Barriers to Growth in Financial Regulation.
Smarter regulation does not weaken safeguards. It reduces duplication, improves clarity, and aligns oversight with actual risk. Jurisdictions that achieve this balance create space for competition and faster technology adoption, lessons explored in Lessons for Canada from Global Leaders in Regulation.
Payments Infrastructure Is A Productivity Lever
“Efficient financial systems help capital move to its most productive uses.”
Macklem’s remarks extend naturally to payments infrastructure. Canada payments system processes enormous transaction volumes, reaching $12.2 trillion in 2024, yet modernization remains uneven.
Slow settlement and high transaction costs lengthen working capital cycles and increase operational risk, especially for SMEs. The productivity impact of faster payments and modern rails can't be understated as many countries rush to modernize their payment ecosystem and functionality, including Canada who has been working to update it's payment system for years and only now making progress being under the gun.
For fintech builders, payments remain one of the most direct ways to improve productivity across the economy.
Founders Face Structural Tradeoffs, Not Preference Gaps
“Productivity growth depends on the environment firms operate in.”
Macklem’s framing helps explain why successful Canadian built companies increasingly scale elsewhere. Why A $35M Built In Canada Startup Still Moved To The US, shows how growth stage constraints shape founder decisions even after proving traction at home. When capital pools, market size, and regulatory pathways align more clearly abroad, relocation of entrepreneurs and venture brain drain mirrors operating decisions, not national sentiment.
This trend reinforces the need to address productivity, competition, capital access, and regulation together rather than treating talent retention as a standalone issue. Founders are now at crossroads, and trying to make it work within system constraints.
When capital, regulation, and market access align, firms stay. When they do not, firms move.
What This Means For Fintech And Policy
Macklem’s speech aligns closely with the productivity, competition, and innovation themes NCFA has tracked and raised for years. Productivity improves when competition deepens, capital flows efficiently, regulation supports entry, and technology adoption accelerates. Fintech sits at the intersection of all four.
Policy tools that support SME expansion, such as export financing and market access programs, can reinforce financial innovation when aligned properly. Programs like CanExport SMEs show how capital support and operational scale can work together rather than in isolation. The challenge now is execution. Productivity gains come from systems that allow new firms to compete, scale, and deploy technology without unnecessary friction.
You may like these additional reads:
- Breaking Canada’s Productivity Trap For Stronger Growth
- Canada’s Public Sector Costs and Productivity Gap
- Why Upskilling Employs Leads to Greater Productivity and Engagement
- Reversing Canada’s Digital Economy Productivity Decline
- CMA Lessons on Competition and Growth for Canada
- Canada’s Competition Plan Is Getting More Serious
- Y Combinator Removes Canada From Standard Deal Terms
- CVCA And TCS Release The 50 Guide For 2026
- Payments Canada Admits Five New Payment Service Providers
- Good Money Trust Innovation And Canada’s Payments Future
- Global Payments to Reach $2.4 Trillion and Tokenized Future
- Canada Releases The First Draft Of The Stablecoin Act
- Canada Open Banking Commercialization Roadmap
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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