Innovation | March 5, 2025

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Canada’s Fintech Paralysis is A Crisis of Political Will and Competition

The impetus for this article is a recent interview by the Toronto Star with EQ Bank's CEO Andrew Moor.  While everyone is busy dealing with the impact and new realities of North American's tariff and trade war, the primary messages in interviews like these cannot be lost, especially during times of economic crisis where Canada needs to be resilient and more competitive.

So what's the problem?  Well to restate what's been stated hundreds, if not thousands, of times before, Canada’s financial system always seems to move slower than others, not because Canadians aren't innovative, but because there’s no political will to support real competition.

See:  UK Banking Competition Remedies, Lessons for Fintech Growth

After being involved with fintech for over a decade, the above message always seems to reappear, either from a new fintech or investor group or as a result of another crisis or need.  The harsh reality is that NCFA and fintech leaders across the country have consistently been pushing for clear, modern innovations and rules that encourage growth and competition in Canada's financial services sector but there are always delays, weak reforms, and policies that protect the big banks at the expense of progress and innovation.  Open banking and payments modernization are examples of the day of the real problem.  Canada drags its feet on implementing fintech innovations that would benefit consumers and businesses alike.  The result is fewer opportunities, slower economic growth, and a financial system that remains behind its peers.

Canada Acts When It Wants to But Delays On Fintech

The argument that Canada is just slow to act on policy decisions isn’t entirely true.  When the U.S. proposed and then implemented economically punishing tariffs on most Canadian imports into America, the Canadian government at all levels acted swiftly, implementing its own retaliatory countermeasures in a matter of weeks.  Another example is when the Covid-19 pandemic hit, the government launched support programs at an unprecedented pace (even relative to most of its peers).

See:  Accelerating Financial Innovation and Access in Canada

So why does fintech reform keep getting delayed? We can only surmise after so many years that the slow pace of fintech reform is about whose interests are being protected, not about government inefficiency (which is also often cited).

Andrew Moor, CEO EQ Bank:

"Prudence in banking is always good, but since 2007 we’ve only cemented the position of the largest banks further. We’ve been talking about open banking in Canada for six or seven years and we seem to be no closer to launching it."

Moor's quote stresses that while stability is important, Canada has gone too far in protecting incumbents instead of encouraging competition. The Big Five banks control over 90% of the market, which leaves consumers with little reason or ability to switch.  Other countries have moved forward with regulatory changes but Canada remains paralyzed in research or consultation mode.

Three Examples Showing the Cost of Hesitation

1. Open Banking File

Open banking has been discussed in Canada for over six years and the implementation date keeps getting pushed out longer.  At the time of publishing, the federal government announced that open banking will be implemented in 2026, yet there's still no commitment to a firm implementation date.

To be clear, many peer countries like the UK and Australia have adopted open banking frameworks years ago (and are moving towards open finance), allowing consumers to share their financial data with fintech companies. The result is lower fees, better banking products (choice) and real competition.

Andrew Moor CEO EQ Bank:

"We built a railway across the country in four years, and this is just a collection of computer codes and regulations, yet I’m still making the same speeches about open banking that I delivered in 2018. It’s ridiculous, and it’s embarrassing."

Moor’s frustration highlights that Canada’s delay is not due to complexity but the government's failure to prioritize fintech reform. The Canadian government should not wait for customers to demand open banking because they don’t know what they’re missing. That’s part of the problem.

See:  BoE Report: Open Banking Boosts Productivity, Competition

• Canadians rarely switch banks because they believe all banks offer the same thing
• All banks offer the same thing because real competition isn’t encouraged
• Real competition doesn’t exist because Canada has yet to implement open banking

This chicken-and-egg problem has locked Canadians into a system where they pay some of the highest banking fees in the world.  And who benefits from these delays? The same major banks that dominate Ottawa’s lobbying circles.

2. Payments Modernization - Who Gains from Slow Progress?

It’s not just open banking. Canada’s payments infrastructure has been slow to modernize, leaving businesses and consumers dealing with high costs, delays, and inefficiencies.  Even as regulators move forward with aspects of payments modernization, the slow pace of adoption means Canada still lags behind global peers who have been using real-time payment systems for years.

Andrew Moor CEO EQ Bank:

"It’s easier for us to send an EFT to a bank account in India using one of our fintech partners than it is to move money between provinces. Why is that?"

Canada’s Retail Payments Modernization initiative has started allowing companies to sign up for access, but real-time payments which are the foundation of a truly modern financial system are still not fully implemented.  The Real-Time Rail (RTR) system was originally scheduled to launch in 2019 but faced multiple delays with Payments Canada most recently announcing that the system's launch would not occur before 2026, with technical builds and testing phases extending through 2025 and into 2026.

Michael Katchen, CEO of Wealthsimple:

"If Canada is serious about innovation, it needs to stop protecting the status quo and start enabling real competition."

Until the government takes control of the agenda and ensures full implementation of real-time payments, innovation in digital transactions and financial infrastructure remains stuck in molasses.

3. Equity Crowdfunding: A Lesson in the Cost of Regulatory Patchwork

Equity crowdfunding had the potential to revolutionize early-stage investing in Canada, allowing startups to raise money from angel and retail investors instead of relying solely on banks or venture capital.  But instead of introducing a single national framework, Canada created a fragmented framework with 3 sets of different rules depending on the province, making compliance costly and impractical.  By the time regulators finally harmonized the rules, the damage had been done. The industry never had a real chance to succeed at the same level as its peer countries.

See:  The Transformative Impact of Instant Payments on Financial Crime Mitigation

This problem (i.e., lack of national strategy, coordination) also appears as Canada looks for solutions to the U.S. imposed tariffs by seeking to increase trade among provinces but hits roadblocks of unnecessary costs and inefficiencies across multiple industries from finance to agriculture to energy (see: Canada's interprovincial trade barriers).

Andrew Moor CEO EQ Bank:

"Hooking up a bit of innovation would be a good thing, and it wouldn’t endanger the nation. There are so many safeguards in our banking system already."

Moor's quote reflects that competition and innovation won’t destroy Canada’s banking system but rather it will strengthen it. This conservative issue seems to go beyond fintech and is a Canadian problem.

Don’t Waste This Crisis

Canada’s economy is under pressure and the tariff and trade war crisis should be used to help Canada push forward on innovation and fintech reforms.  Policymakers need to stop consulting and start acting.  The financial system should encourage real competition and consumer choice to make markets more resilient, not protect incumbents.  Fintech entrepreneurs and investors need transparent progress and cost effective regulations, not shifting policies or a slow no.

Canada needs clear deadlines for open banking, real-time payments, and regulatory harmonization now, not in another three years. If the federal and provincial governments can’t or won’t act, then the private sector must lead.  If Canada’s fintech community forms a collaborative working group to build the roadmap, consult where necessary, and take action, progress can happen without waiting for political will to catch up.  If the government won’t lead, the private sector must step up or risk wasting yet another economic moment.

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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