Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Digital, NEO, Open Banking, Open Finance
Why Canadian Banks Are Fighting Open Banking
Open Banking | Nov 20, 2024
Image: Freepik/newelement
The Battle Over Open Banking
Open banking was first announced in Canada in 2018. It was called 'consumer-driven banking' and aimed to give consumers more control over their financial data and access to innovative services while remaining globally competitive. That was six years ago, yet not much has changed since then. While other countries like the UK are seeing millions of consumes adopt open banking (and reaping the benefits), Canada has remained in first gear and stuck in the planning phase.
Four years post announcement, in 2022 Abraham Tachjian was appointed as Canada’s Open Banking Lead but left without establishing a clear framework about a year later. Recognizing momentum needed to pick-up, the Canadian government allocated $1 million in the 2024 budget to the Financial Consumer Agency of Canada (FCAC) to kickstart the implementation of Open Banking and run a consumer awareness campaign. Why the FCAC? Ultimately they will be responsible for oversight and regulation which includes establishing guidelines and standards for secure data sharing, monitoring participant compliance of financial institutions and third party providers, and addressing any issues around consumer privacy, security, and service. Now the question is how much progress is being made and will it deliver the results that are needed?
See: Open Banking: Revolutionizing Financial Data Sharing
Until then, Canadian consumers interested in accessing financial products and tools that help them in ways that banks aren't, are taking disproportionate risks by giving their banking credentials to third parties who then login and scrape data to be used in their systems. This is the sad and very risky workaround that every day Canadian citizens have to deal with.
While open banking promises to help consumers find the best personalized and competitive financial tools to optimize mortgages, budgeting, and investments, Canadian banks are pushing back to delay its arrival. Why are they so opposed and what’s really at stake?
Open Banking Can Save Canadians Thousands
Open Banking flips the script. It puts you in charge of your financial information instead of your bank. So you can decide who has access to your data and how they can use it. That control comes with many benefits. For example
- If a fintech company could find you a better mortgage rate with lower fees and competitive options it would save you money (the banks won't like it because it eats into their profits).
- If a fintech company could give you access to new financial products tailored to your needs, you would appreciate that option and might take a look to see if it can improve your financial position or outlook (but the banks won't like it because you are getting better service and more choice at lower prices elsewhere).
See: BoE Report: Open Banking Boosts Productivity, Competition
- If a fintech company could help optimize your investments but you need to allow access to your financial data and the bank makes it incredibly difficult to access your information to share it with a third party, you wouldn't be happy because of the hoops you needed to jump through and time lost just to access your own financial data.
Why Are Banks Resisting?
If banks feel they don't have to innovate to compete, they won't spend on research and development to create new products that better serve their customers. With Open Banking banks may have a lot to lose, if adoption takes off like in other jurisdictions. Below are some of the key reasons why banks are hesitant to support change and exactly the reasons why the government should get on with it and diversify the market by giving Canadian's better options and more choice.
- Data privacy - Banks say that letting fintech companies access customer data could lead to more fraud and data breaches. But is this really a threat? The UK has proven that with strong rules in place open banking can be just as secure as traditional systems.
- Banks hold a lot of power because they control your financial data - Open banking would lesson banks control while giving fintechs a chance to compete. This Financial Post article explains it well. The Canadian mortgage market is worth over $2 trillion, and a core banking product. If banks lose their grip on this market segment it would seriously cut into their profits.
- High price tag of change - Banks would need to invest in new technology given that most systems are legacy, so for them they see it as a big expense (without guaranteed profit which they are used to).
See: Open Banking: Revolutionizing Financial Data Sharing
- Eat their lunch - Banks earn billions annually from fees and interest. Open banking would allow competitors who are offering cheaper and more personalized alternatives cut into those profits. Worth noting that there are some segments the banks underserve that would be ripe for the pickings that could lead to a waterfall of other fintech products customers might be interested in.
- Losing the primary customer relationship - today banks are the go to for most financial services. While some tech savvy consumers dabble in innovative fintech product offerings, most fintechs do not own the primary relationship. Open banking would weaken the direct connection banks have with their customers, as they soon realize there are better, cheaper, and more personalized offerings available to them.
What Can We Learn From Other Countries with Open Banking?
The results are pretty telling...
- In the UK, over 7 million people now use open banking services and competition between financial providers has spurred innovation. See: The Transition Towards Open Finance in the UK
- In Australia, the Consumer Data Right program has increased competition, especially in personal loans and mortgages. Non-bank lenders are now thriving.
- In the European Union, PSD2 regulations have created a vibrant consumer-first financial ecosystem.
- In the United States, October 2024 the CFPB introduced the new Open Banking rule, has since been sued by the Kentucky Bankers Association and policy institute. (they are feeling the pressure)
Where Does Canada Stand?
Canada's Open Banking timeline is cloudy and banks continue to raise concerns about risks and costs (delaying the process).
Darko Mihelic, RBC Capital Markets banking analyst said in a report this week:
“We do not think open banking will be coming in the next couple of years. [He's thinking it may take] “three to five years.”
See: Canada’s Open Banking Journey: Interview with Abe Karar, Chief Product Officer, Fintech Galaxy
Closing Thought
Consumers want and deserve better choices, lower fees, and more control over their finances. Whether the Canadian government or banks like it or not, the future of finance will be open.
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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Rachel Reeves: UK’s Financial Innovation Blueprint
Fintech Policy | Nov 19, 2024
Image: Chancellor of the Exchequer Rachel Reeves
Financial Innovation Vision from the UK's New Chancellor of the Exchequer, Rachel Reeves
The UK has a new Chancellor of the Exchequer, Rachel Reeves, who took office four months ago, delivered her first Mansion House speech on November 14, 2024 to set out her vision for the UK economy. The Chancellor is seen as the second most powerful position in the UK government after the Prime Minister, and has significant control over the country's economic direction and priorities, and works closely with businesses, financial institutions, and global partners to protect and grow the economy.
See: UK Digital Securities Sandbox to Drive Fintech Innovation
In her first major speech, the UK is doubling down with a mix of new technology and financial innovation including the creation of a stock exchange for growing businesses to using blockchain to issue government bonds. Her innovative plans reach pensions, green finance, open banking, and capital markets all to boost growth, attract investment, and make the UK a global leader in financial innovation. Here's a closer look at some of the key announced initiatives and why they matter.
1. A New Stock Exchange Called PISCES
Her speech announced the launch a new stock exchange by May 2025 called Platform for Innovation, Scaling Companies, and Emerging Sectors (PISCES) (Platform for Innovation, Scaling Companies, and Emerging Sectors) designed to help fast growing companies secure the scale-up funding they need to grow and succeed. Part of the idea is to shift capital markets to better support smaller companies with high potential that often face challenges in raising funds or going public.
See: Corporate Venture Capital in Canada: Insights and Challenges
A specialized exchange like this could help attract global investors and provide more liquidity for these companies to access. In Canada, there's the TSXV and CSE both of designed to benefit attractive startups in accessing public markets.
2. Government Bonds on Blockchain
Reeves also announced the pilot launch of a blockchain-based platform to issue government bonds called Digital Gilt Instruments (DIGIT). By using the latest distributed ledger technology (DLT), the UK hopes to improve bond issuance by making it faster, cheaper, and more transparent. For decades, the bond issuance process has largely been untouched. A pilot like this could help transform public finance, offering insights and valuable lessons for governments globally looking to modernize their systems.
Rachel Reeves, UK Chancellor of the Exchequer
“Using distributed ledger technology for DIGIT marks a step change in how we issue government debt, making the process more efficient while maintaining investor confidence.”
3. Creating Pension Megafunds
Reeves announced plans to consolidate local government and work pension plans into Canadian or Australian style 'megafunds' to grow the UK economy. In doing so, she anticipates it to unlock about £80 billion for investment for infrastructure, housing, high growth initiatives. She makes it clear that this is a new strategy in how retirement savings are managed and prioritized in the UK, and such megafunds should be designed to benefit British savers instead of the Canada Pension Plan Investment Board profiting from UK assets.
See: Public Market Challenges and Equity Crowdfunding Capital
Rachel Reeves, UK Chancellor of the Exchequer
"We must ensure that British savers benefit from the returns on productive assets, not just Canadian teachers and Australian professors investing in the UK."
4. Lead the Energy Transition
In her speech, Reeves positioned the United Kingdom as a pioneer in sustainable finance and announced a framework for raising private capital for green projects such as wind farms and solar energy. The plan is to launch the Transition Finance Council in partnership with the City of London Corporation and industry leaders that will work to ensure companies have access to decarbonization finance.
See: AI Leaders and White House Discuss Energy Infrastructure
Given Canada's renewable energy potential, Canada could establish a similar task force focused on attracting private capital for clean energy projects. Collaboration with the UK's Transition Finance Council could help accelerate global efforts to support the energy transition.
5. Regulatory Reform for Growth
Reeves speech mentioned a few ways to recalibrate financial regulations to encourage innovation and growth without compromising stability such as overhauling consumer financial advice rules, and reducing banker pay deferral periods to attract top talent.
See: Insights from the UK’s Pro-Innovation Regulation Review
Rachel Reeves, UK Chancellor of the Exchequer:
“We’ve been regulating for risk, but now it’s time to regulate for growth.”
6. Open Banking and Fintech
She doubled down on the UK's National Payments Vision reaffirming the UKs commitment to open banking, ensuring that customers benefit from improved services from safe data exchange.
Rachel Reeves, UK Chancellor of the Exchequer:
"We are laying the groundwork for London to remain the global hub for financial technology."
Open banking is still developing here in Canada but adoption and growth lessons from the UK can help Canada accelerate the implementation of the initiative which is called 'consumer-driven finance'.
Why It Matters
Rachel Reeve's speech lays out a solid blueprint for using technology and smart policies to drive economic growth for the UK. It's a clear message that says in order to stay competitive, the country has to take bold steps and be open to change. Lessons that Canada should learn from.
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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Accelerating Financial Innovation and Access in Canada
Canadian Innovation | Nov 13, 2024
Image: Freepik/www.slon.pics
How Canada Can Speed Up Financial Innovation and Serve More People
At Elevate FinTech Stage 2024, BetaKit hosted two conversations that highlight both the challenges and opportunities Canada faces in its financial sector. Together, these sessions reveal an urgent need for Canada to catch up on financial innovation. Here’s a look at what was discussed and some fresh ideas Canada can look to adopt if interested in driving real progress.
- The first session with Koho’s Daniel Eberhard and Peter Aceto focused on the obstacles of becoming a licensed bank and balancing speed with regulation.
- In the second, Josh Scott from BetaKit discussed barriers to financial inclusion with Eva Wong of Borrowell, Manzil’s Mohammed Sawwaf, and Julien Brazeau from the Department of Finance.
Session 1: Koho’s Banking License Journey and Balancing Product Innovation
Koho CEO Daniel Eberhard and Chief Banking Officer Peter Aceto shared how becoming a licensed bank would help Koho to lower costs, control its financial products, and offer benefits directly to its customers. But the process has been long and complicated with the Office of the Superintendent of Financial Institutions (OSFI) imposing unpredictable timelines and criteria.
See: Canada Post Expands into Financial Services with KOHO
To protect their ability to innovate quickly Koho split off into two divisions: one for tech and one for banking. This setup allows them continue building new features while managing the regulatory demands of becoming a bank.
Daniel Eberhard, CEO Koho:
“We’d be really foolish to bet the business on something as unpredictable as the bank license process.”
He stressed that Koho would pivot if the banking license path became too restrictive, doubling down on Koho's commitment to innovation.
Panel Takeaways:
- Securing a bank license comes with significant regulatory hurdles and compliance requirements. Koho is carefully weighing the costs/risks with the benefits.
- Koho is continuing to innovate without waiting on regulatory approval by cleverly separating tech and banking into separate divisions.
- Koho’s story highlights how difficult it is for Canadian fintechs to break into the traditional banking sector. Without a clear path, companies like Koho must decide how much time and money they’re willing to risk.
Session 2: Financial Inclusion and Barriers to Access
In the second panel, Josh Scott led a conversation on financial inclusion with Eva Wong (Borrowell), Mohammed Sawwaf (Manzil), and Julien Brazeau (Department of Finance). The discussion focused on why many Canadians, especially those in niche communities, remain underserved by the traditional banking system. Wong pointed out that, although most Canadians have a bank account, many are “underbanked”—lacking access to the range of services they need. Sawwaf explained that for Canada’s 2 million Muslim citizens, the absence of halal banking options has excluded a large group from mainstream financial services.
Julien Brazeau commenting on Canada's slow approach to open banking:
“Six years is far too long for anyone to consider fast.”
Panel Takeaways:
- There’s a growing need for financial services that address the needs of specific groups like new Canadians, remote communities, and religious groups.
- Brazeau admitted that the government has been slow to work directly with fintechs, a gap that has delayed innovation and frustrated financial startups. There's a lack of collaboration.
See: Canada’s SMBs Deserve Better Banking. Lessons from US Fintechs
- After 6 years, Canada’s open banking implementation is still incomplete and the delays are stifling competition and are making it harder for Canadians to get the services they need.
Image: Freepik/Canada day
Ways Canada Can Drive Financial Innovation in Canada
Here are just a few innovative approaches that could propel Canada's financial ecosystem forward.
1. Fast track the implementation of open banking and enable the sharing of credit data from the start
For open banking to have an impact right from the start in Canada, credit data portability should be possible from the initial launch. This would enable customers to transfer their credit history between institutions smoothly thus minimizing obstacles and simplifying the process of changing service providers.
See: Open Banking: Revolutionizing Financial Data Sharing
Such an approach would establish a best practice where fintech companies could provide services to individuals encountering difficulties in accessing credit, such as those with unconventional or limited credit backgrounds (that are underserved by the banks).
2. Make it necessary for government financial programs to be compatible with Open Banking standards
When open banking is fully implemented in Canada the government could promote its usage by making it a requirement for government initiatives like business loans and housing support to be compatible with open banking standards. By enforcing this rule, banks and financial technology companies would have to follow banking protocols making it easier for Canadians to access these services no matter which institution they are with. This approach aims to increase collaboration within the industry without relying on voluntary adoption by private entities.
3. Create a "Digital Financial Inclusion Fund" to broaden access, for interest groups
Canada could establish a "Digital Financial Inclusion Fund" similar to initiatives in Singapore and the EU to address the financial needs of marginalized communities by supporting fintech companies in developing specialized products for groups such as rural residents and underserved populations with limited access to traditional banking services. This would be a collaborative effort involving the government of Canada and the private sector and its partners.
4. Tiered licensing system could help smaller fintech companies enter the market more smoothly
Canada could consider implementing a strategy like in Australia with a restricted banking license regime which permits fintech firms to offer services as they grow. This approach would enable startups to connect with customers on and gradually meet full qualifications without sacrificing security or consumer safety.
5. Establishing a Unified Digital Identification System for financial services
Influenced by India's Aadhaar and Estonia's e-residency initiatives a government supported digital identification system could enhance Know Your Customer (KYC) procedures within Canada's institutions. With a digital identity Canadian citizens could safely use financial services reducing the time consuming and frequently repetitive account setup processes.
See: The Trifecta of India’s Digital Transformation is Turning Heads Globally
The government management of a digital ID system would streamline access for Canadians living in underprivileged areas and potentially link with open banking to ensure secure data sharing practices. Data privacy may be a concern however.
6. Establish a program for fostering partnerships between Fintechs and Banks to offer financial solutions
Canada could create a program to encourage partnerships between banks and fintech companies to focus on financial inclusion projects. Inspired by Brazil where banks and fintechs have teamed up to serve underserved communities, this program would encourage similar collaboration in Canada for initiatives like microloans, financial education, and better digital banking services in remote areas. Rather than mandating these partnerships, the government could offer incentives, such as tax benefits or lighter regulatory requirements to banks and fintechs that meet goals for reaching underbanked populations. This would allow both sectors to work together to create practical solutions that benefit consumers and support Canada’s financial inclusion goals.
Closing Thought
Creating a faster, more competitive, and more accessible financial ecosystem requires bold action, a risk-taking mindset (with the benefits in sight) and proactive partnerships between the government, banks, and fintechs.
See: Canada’s Innovation Paradox – Strong Start, Missing Impact
By embracing innovative approaches and learning from global successes, Canada can move beyond slow timelines and limited access and work towards becoming a leader in financial inclusion.
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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Key Findings from 2025 Advanced Payments and Fintech Survey
Fintech and Payments Research Report | Nov 12, 2024
Image: Advanced Payments and Fintech Report 2025 (Edgar, Dunn and Co.)
Insights and Opportunities for Global Payments and Fintech Innovations 2025
Edgar, Dunn & Co. has just dropped the 17th edition of the 2025 Advanced Payments and Fintech Survey (103 page PDF report) digging into the latest innovations and momentum powering the global payments industry forward. The report brings together insights from a 100 senior payment professionals from around the world who explore the influence of emerging technologies like AI, IoT, and blockchain, the rise of digital banking, and the impact of alternative payment methods and Central Bank Digital Currencies (CBDCs).
See: 2024 Global Payments Growth, Trends, and Fintech’s Edge
This post by NCFA Canada highlights the key findings from the payments survey and uncovers the latest data-driven and actionable insights to propel your business forward, providing a strategic roadmap for growth.
Key Findings from the Advanced Payments Survey
The survey was hosted between May and July 2024 with responses from 100 senior payments professionals around the globe.
1. Top Use Cases for AI and Machine Learning in Payments
- 85% of respondents see AI’s primary role in risk management and fraud detection.
- 51% identified customer behavior analytics as a growing application of AI.
- 55% say automating operations for error-free and quicker payments is a priority.
2. B2B Cross-Border Payments in Play
- 52% of respondents said B2B payments are the main focus for cross-border innovations given the demand for efficient and low cost international transactions.
See: AI, Funding Shifts and Regulatory Hurdles in Fintech 2024
3. Sectoral Growth in Digital Payments
- Retail and e-commerce are expected to lead digital payment adoption (65%), with remittances (48%) and travel (46%) also ready for growth.
4. Future Growth in Payment Methods
- Digital wallets (88%) and bank transfers (57%) dominate the future payment landscape, a shift away from traditional credit card payments.
- Buy Now Pay Later (BNPL) solutions are also gaining traction, particularly among younger consumers.
5. Mobile Solutions and Instant Payment Demand
- 68% of respondents expect instant payments to become standard, as consumers demand faster and more convenient transactions.
6. Influence of Regional Trends
- Asia-Pacific leads in expected payment innovations (50%), with Europe following at 23%. Canadian Fintechs can look to these regions for inspiration in mobile and instant payments.
7. IoT’s Role in Enhancing Payments
- IoT devices for payments such as wearables and connected cars are gaining momentum, particularly in retail and automotive sectors.
8. The Role of Security in Mobile Banking
- 63% of respondents stress the importance of biometric authentication to enhance mobile banking security.
- Real-time payment features are equally critical with 57% saying these as essential for consumer trust.
9. Open Banking and Open Finance as Innovation Catalysts
- According to the majority of responders, Open Banking is remain a major driver for financial innovation that enables third party access to financial data, fuelling the rise of customer-centric financial ecosystems. Open Banking is evolving into wider initiatives like Open Finance and Open Data, creating opportunities to enhance competition and improve customer experiences. (See: OECD 2023: Key Insights on Open Finance Policies | EU: MiCA, DORA, Open Finance Framework, and Digital Euro)
Image: Freepik/rawpixel.com
Strategic Insights from the Report
1. Digital Banks and Profitability
- Digital banks have seen huge growth but most still aren’t profitable (some are).
- Around 85% struggle with high customer acquisition and operating costs.
- Cutting acquisition costs by using AI for targeted marketing can save them up to 25%.
- Automating manual processes can trim costs by 30%.
- If digital banks can get customers to make digital banks their primary accounts it can make a big difference since primary account holders contributing almost 70% more in revenue.
2. AI and Machine Learning in Payments
- AI is transforming payments with powerful tools for fraud detection, personalization, and efficiency.
- Payment processors like Visa analyze millions of transactions per second with AI, catching suspicious activity instantly and reducing fraud-related losses by up to 30%.
- AI automation has been shown to reduce payment processing times by half, saving labour costs.
See: How Real-Time Agentic AI Will Boost Fintechs
- Personalized AI-based customer service is another advantage (becoming a new standard) with approx 45% of consumers now expecting personalized digital experiences whe it comes to their financial services.
3. Blockchain as a Cross-Industry Solution
- Blockchain technology reduces cross-border remittance costs by as much as 60%, thanks to its ability to remove intermediaries and process transactions directly. This savings potential is huge for the $750 billion remittance market.
- Blockchain’s secure, decentralized structure has reduced fraud cases by up to 30% in companies using it.
- Its versatility also extends beyond finance to industries like supply chain management and insurance who use blockchain to ensure transparency and accuracy in their operations. (See: Investing in the Future of AI and Blockchain)
4. IoT Payments Transforming User Experiences
- IoT-enabled payment devices such as wearables or connected cars are set to reach $6 billion in transaction value by 2028 with roughly 20% of consumers adopting these options especially in the retail and automotive sectors. See: Autonomous IoT Transactions and Micropayments
- Visa’s connected car technology allows drivers to pay for fuel directly from their vehicles, while Samsung’s wearable devices make payments as simple as a tap.
- Businesses benefit from real-time data insights that can boost sales by up to 25% through personalized offers and loyalty programs.
5. Alternative Payment Methods (APMs) and Mobile Wallet Growth
- Alternative payment methods, especially mobile wallets are on track to overtake credit cards as the primary payment choice by 2028.
- Mobile wallets already account for nearly 60% of online transactions in Asia, showing their global growth potential. However, the lack of compatibility between wallets (especially cross border) will limit usage until interoperability.
See: The Role of Fintech in the Circular Economy
- It’s estimated that increasing wallet interoperability could boost transaction volumes by around 30% with companies like Apple Pay and Alipay leading the charge in wallet expansion.
6. Central Bank Digital Currencies (CBDCs) in Cross-Border Payments
- Central banks are exploring CBDCs but most retail CBDCs face slow adoption.
- Wholesale CBDCs show promise in reducing cross-border transaction costs by 50% according to central bank estimates.
- China has issued over 180 million digital yuan wallets reaching $250 billion in transactions, while the European Central Bank is aiming for a digital euro by 2027.
- These efforts illustrate how countries are exploring CBDCs to make international payments faster and more cost effective.
7. B2B Cross-Border Payments and Fintech’s Role in Efficiency
- Traditional B2B cross-border payments face high costs, delays, and FX fees, often adding up to 8% in extra expenses.
- Fintech solutions are addressing these inefficiencies by cutting out intermediaries and offering better exchange rates.
- Companies like Ripple and Wise save businesses around 20% in transaction fees.
- The B2B cross-border market is projected to reach $56 trillion by 2030, and fintech solutions are essential in making these transactions more efficient and affordable.
8. Open Banking’s Evolution to Open Finance
- Globally, open banking is expected to grow to a $123 billion market by 2031, with platforms like Plaid and Moneyhub demonstrating the potential for open finance to enhance financial services.
- Data from a recent PwC study indicates that 72% of global Fintech investors favor open finance ecosystems due to their potential for customer retention and revenue growth.
See: Canada’s Innovation Paradox – Strong Start, Missing Impact
- Canada lags behind in open banking adoption limiting its fintech sector’s growth as investors are beginning to look outside Canada for open finance opportunities. Embracing open finance could boost competition and consumer choice, opening doors for more innovative financial products.
- 63% of Canadian consumers are interested in services that aggregate their financial data for streamlined financial planning. However, only 15% of Canadian banks currently offer comprehensive data-sharing capabilities.
- The UK has led the way with over 7 million open banking users and a 15% year-over-year growth in payment transactions linked to open finance. Canada’s hesitant rollout could place it at a disadvantage if regulatory and technical hurdles are not addressed quickly.
9. Digital Remittance Transformation
- Digital remittance solutions like Remitly and Xoom have significantly lowered transfer fees from traditional methods 7-10% to around 2-3% rates.
- Digital remittance is growing 10% annually, especially in areas with high migration rates such as Canada, offering an affordable alternative for underserved populations.
- Digital remittance platforms support financial inclusion by reducing fees which enables remittance families to retain more income for daily needs or investment.
10. Financial Inclusion Through Innovative Payment Solutions
- Roughly 24% of the global population is still considered unbanked (typically in emerging markets).
- Mobile money and digital wallet services are addressing this gap.
See: How Fintechs Are Tackling Financial Inclusion in Canada
- Greater financial inclusion through digital payments could add $3.7 trillion to emerging markets’ GDP by 2025.
- Kenya’s M-Pesa service exemplifies how mobile finance can provide essential banking services without traditional banks. Other countries can follow suit by improving digital infrastructure.
11. Insurtech and Embedded Finance Driving Financial Innovation
- Insurtech is growing rapidly with the market expected to hit $152 billion by 2030.
- Advanced data analytics let insurers offer custom policies, adjusting based on real-time user data.
- The offering of financial services by non-financial platforms via embedded finance is helping companies improve user experiences. For example, Shopify’s embedded financing options make it easier for small businesses to access funds directly on its platform with integrated services.
12. Evolving Retail and Gig Economy Payment Models
- Personalizing retail experiences increases purchase likelihood by about 40%, making social commerce and omnichannel strategies more essential.
- Gig economy workers and small businesses want real time payments. Half of gig workers prefer platforms offering instant payouts.
- Real-time payments also reduce administrative work for platforms so transactions run more smoothly and offer a better user experience.
13. The Resilience and Decline of Cash Usage
- Cash is losing ground worldwide as digital payments rise with some countries seeing cash used in less than 5% of transactions.
- Having said that, cash still plays a key role in areas with limited digital access or where people have less trust in banking institutions.
- While cash usage may continue declining, local economies and infrastructure gaps mean it won’t disappear anytime soon.
Closing Thoughts
The convergence of emerging technologies and their adoption globally reveal major shifts in global payments representing significant opportunities for fintechs as AI, IoT, blockchain, digital banking, open and embedded finance broaden access to financial services, making corss-border transactions faster and easier than ever before.
See: Industry Reports and Research
For fintech founders and investors, the survey uncovers prime areas for growth. Companies need to prepare for a more connected financial ecosystem and high bar for speed and inclusiveness to meet today's demand. Integrating these technologies and tools is about building a future of finance that's user-friendly, secure, and accessible.
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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U.S. Open Banking Rule Lawsuit and Canada’s Implications
Open Banking | Nov 5, 2024
Image: Freepik/stockgiu
U.S. Banks Sue the CFPB Over New Open Banking Rule
Last month on October 22, the U.S. Consumer Financial Protection Bureau (CFPB) introduced a new rule that would give Americans more control over their financial information, improve consumer choice and transparency while also promoting competition (level the playing field for non-banks). However, push back from trade policy groups representing the banks came in the form of a lawsuit against the CFPB just a day later including Forcht Bank, the Kentucky Bankers Association, and Bank Policy Institute.
The lawsuit claims that the CFPB went beyond its legal powers by introducing the Open Banking rule without adequate reasoning. The plaintiffs believe that the benefits of Open Banking do not justify the costs. They also say that the CFPB didn't follow proper procedures when creating the rule since there was insufficient consulting with important groups that need to thoroughly assess the rule's impact.
See: Open Banking: Revolutionizing Financial Data Sharing
They claim the rule is random, unreasonable and not legal. They argue that it creates too many costs, raises security risks, wrongly gives regulatory power to others, sets impossible deadlines for banks to follow, and unfairly stops banks from charging fees for access. All of these problems hurt both the banks and their customers.
What the U.S. Lawsuit Could Mean for Canada's Open Banking Path
The outcome of this lawsuit could impact more than just the United States. Canada is also moving forward with open banking. Watching how this legal dispute plays out may foreshadow some future challenges that Canada needs to consider as it progresses (albeit slowly) with its own consumer-driven banking plans, such as:
1. Possible Delays and Policy Adjustments
The lawsuit might slow down the introduction of open banking in the U.S. which could influence how quickly Canada rolls out its own version of the rule. Canadian policymakers may take extra precautions to implement similar rules to proactively avoid any potential legal issues.
2. Emphasis on Data Privacy and Security
A major concern in the lawsuit is the safety of data. U.S. banks argue that being forced to share data with third parties could lead to breaches and fraud. Canada's open banking system may need stronger privacy and security measures to address risks.
See: How Fintechs Are Tackling Financial Inclusion in Canada
3. Balancing Bank Competition vs Consumer Protection
While open banking fosters competition and provides consumers with more choices and enhanced services, some worry that it will undermine financial stability. Canada will need to find the right balance that advances innovation without placing consumers at unnecessary risk. There are many jurisdictions who have successfully implemented open banking ahead of the U.S. rule where Canada can learn from such as in the UK where over 3000 banks and non-banks are currently registered and operating in the open banking ecosystem. See what the UK government recommends for next phase for open banking after several years of operating the program.
4. Cross-Border Financial Services
With the majority of Canada's export trade tied up with the U.S., any open banking policy delays may make it harder for Canadian consumers using services across the border. Having aligned regulations would help Canadians easily access financial products and services in both countries. Conversely, different approaches could lead to higher compliance costs and more complexity for cross border operations.
Outlook
The lawsuit against the CFPB’s rule brings up important issues like protecting consumers, keeping data safe, and deciding who has the authority to set the rules.
See: BoC Opens Registration for Retail Payment Service Providers
As the U.S. case progresses, Canada will need to follow developments closely and use what it learns to create open banking rules that give Canadian consumers more control over their finances while protecting their data and privacy.
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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Canada’s SMBs Deserve Better Banking. Lessons from US Fintechs
SMB Banking | Nov 4, 2024
Image: Freepik/wavebreakmedia micro
Survey Reveals Need for Flexible Banking Solutions to Support Canadian SMBs
Canada’s small and medium-sized businesses (SMBs) are a backbone of the economy. Canada ISED publication shows that small businesses (<500 employees) employed 52.12% of the work force creating 9.29 million jobs in the country. Even the smallest businesses with <100 employees hire 38.71% of all employed. These businesses nurture innovation, create jobs and growth, and strengthen communities but a recent survey of 700 Canadian SMBs by Canadian fintech, Float, highlights that high expenses and fees, tough access to credit, and outdated financial systems make it very challenging for SMBs to be productive and thrive.
Simply put, many of these businesses aren’t getting the support they need from traditional banks because Canada's financial system isn't designed for SMBs. Instead, it’s set up to support big banks and large corporations that have steady cash flows, solid credit histories, and plenty of resources. Traditional banking products work well for these bigger players because they focus on stability, low risk, and lengthy, careful approval processes.
Snapshot of SMB Challenges from Survey Responses
While it's not meant to be easy running a small business, below are select data points based on survey responses that point to the lack of financial infrastructure challenges for SMBs specifically.
See: Open Banking: Revolutionizing Financial Data Sharing
1. Financial Barriers (many SMBs experience serious financial obstacles)
- Approx 40% of business owners report that rising operating costs are their biggest concern, making it difficult to manage expenses and maintain profitability.
- Almost 30% of SMBs struggle to secure loans or credit due to strict lending requirements from banks. This lack of access limits their ability manage cash flows or invest in growth.
- Many participants are concerned that increasing interest rates and fees are making borrowing more expensive, which adds to the financial strain.
2. Inefficient Processes
- Many SMB owners report spending up to 40 hours a month managing payments and handling paperwork, diverting their attention from growing their businesses.
- More than half of SMBs feel that traditional banks do not understand their business or its unique needs. They express dissatisfaction with an outdated banking system:
- Inadequate customer service
- Low yields on cash balances
- Unsatisfactory interest rates on business savings accounts
- Lack of attractive cashback or rewards programs
Image: Float Financial (SMB Survey Results)
U.S. Banking Products that Canada Could Adopt to Better Serve SMBs
Given that Canadian SMBs feel underserved and supported. Let's take a closer look at just a few popular products available in the US and how similar solutions could benefit Canadian SMBs, assuming banks or fintechs could step in/up with similar support.
See: The Case for Better Banking Options for Canadian SMEs
1. Revenue-based financing (RBF) is a flexible funding model available to SMBs in the U.S. that allows them to repay loans as a percentage of their future revenue. This approach is a great fit for early-stage companies with variable cash flow since it matches and scales repayments with revenue generated. Canadian fintech, Clearbanc (now Clearco), originally popularized RBF in both Canada and the U.S.. Canadian banks largely offer traditional standard loans with fixed repayments making it more difficult for SMBs to manage cash flow during slower months.
2. Business Credit Cards Without Personal Guarantees Companies like Brex and Divvy in the U.S. provide business credit cards that don’t require a personal guarantee or personal credit check, therefore helping entrepreneurs build business credit independently of their personal credit. These business cards often include expense management software and other credit building tools. Most Canadian banks still require a personal guarantee on business credit cards which can deter new business owners or hurt those with limited personal credit history.
3. Invoice Factoring allows businesses to receive early payment on outstanding invoices to be collected which is incredibly useful for managing cash flow without accumulating debt. Fundbox provides this for SMBs in the U.S.. In Canada, there are a number of fintechs offering invoice factoring services like FundThrough but traditional banks don't generally provide this option leaving SMBs with limited cash flow solutions other than debt.
See: The Role of Digital Banking in Supporting SMEs and Startups
4. Quick Access to Capital can help SMB capital solutions when they need it most. In the U.S. digital lenders such as BlueVine offer quick access to business lines of credit by using real time bank transaction data instead of traditional credit scores or collateral. While in Canada, banks typically have longer approval processes making it more difficult for SMBs to access cash quickly.
Looking Ahead
It’s time for Canada’s financial institutions and policymakers to move faster on Open Banking in Canada and other policies to provide better financial infrastructure for small businesses, or risk further decline in productivity.
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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SEC Insights on Balanced Regulation and Non-Bank Finance
Regulation | Speech | Oct 30, 2024
Image: Freepik/rawpixel.com
Uyeda’s Insights on a Global Framework for Balanced and Adaptable Finance for Growth
At the 2024 AIMA APAC Annual Forum, one of largest gatherings of regulators, hedge fund managers, and alternative finance and institutional investors in the Indo-Pacific region, SEC Commissioner Mark Uyeda delivered a talk around key issues including regulations for private funds, advancements in digital assets, and the importance of international cooperation among financial regulators.
See: Innovative Approaches to Smarter Regulation
Uyeda's perspective offers valuable insights for global markets especially for those aiming to strike the balance between innovation and regulatory supervision. Below are five quotes from Uyeda's speech, each reflecting on his approach to supporting a global framework for balanced financial future.
1. Supporting Growth with Balanced Private Fund Regulation
“Private fund regulation should be precise, safeguarding investors without becoming an impediment to growth.”
Commissioner Uyeda raised concerns that overly prescriptive rules could limit innovation within funds by focusing disproportionately on compliance rather than allowing room for a diverse range of approaches to investing. Such strict rules might discourage large investors from participating in alternative asset classes and strategies and they would miss out on higher yielding returns that perhaps better align with their investment goals.
See: Balancing Fintech Innovation and Regulation
He believes that rules should be designed to allow private fund managers the freedom to innovate while still ensuring transparency and accountability to investors. The key takeaway here is that regulation should support growth without unnecessary restrictions.
2. A Nuanced Approach to Digital Asset Regulation
“The approach to digital assets should avoid blanket prohibitions; instead, it should consider each asset’s unique characteristics and risks.”
Uyeda's comment highlights that digital assets need a customized approach in regulating them. Specifically, rules should be adapted to the unique features and risks associated with varying digital assets rather than a one-size fits all approach. This is true in markets around the world including the U.S. and suggests the way forward is (again) balanced growth with responsible oversight ultimately crafting flexible guidelines that support innovation while addressing specific traits of crypto and other new technologies.
3. Embracing Non-Bank Finance to Catalyze Innovation
“Non-bank financial entities are critical to a diversified economy, providing essential liquidity without the rigidity of traditional banks.”
Uyeda argues that non-bank finance (sometimes called 'shadow banking') plays an important role in maintaining diverse markets and resilience. Instead of looking at non-bank finance as purely a risk, he highlights its importance in driving economic stability and spurring innovation.
See: Federal Reserve Launches Novel Activities Supervision Program Targeting Digital Assets and Non-Bank Partnerships via Banks
He believes that policymakers should support these types of finance while still keeping markets stable, and that such an approach is especially important for economies that benefit from a range of funding sources to fuel growth.
4. The Importance of Global Regulatory Cooperation for Stability
“Global regulatory collaboration is not just beneficial but essential to maintain financial stability in an interconnected market.”
He believes that global regulators must collaborate and in doing so they can develop a unified way to oversee financial risks that cross borders. This kind of teamwork is especially beneficial for sectors like crypto and alternative finance where consistent and agreeable (global) standards will help drive innovation while also keeping global markets stable.
5. Building Sustainable Growth Through Adaptability and Transparency
“Transparent, adaptive regulation is the foundation of sustainable market growth.”
Uyeda stresses the importance of having clear and flexible regulations especially in fintech and alternative finance where things evolve quickly and regulations need to be adaptable. This mindset and approach helps build a financial environment that remains up to date with new technologies and trends while keeping investor protection a priority.
See: Insights from the UK’s Pro-Innovation Regulation Review
Looking into the future, change is constant. Uyeda’s focus on having adaptable and transparent rules is a way to future-proof financial systems for whatever challenges and opportunities come their way.
A Global Framework for Balanced Finance
Uyeda’s insights show the value of regulatory frameworks that protect investors while allowing room for economic growth and innovation. That means adaptable and well tailored regulation along with a spirit of international collaboration is necessary to keep the economy strong and competitive. Great lessons for any regulators including Canada looking to balance innovation, growth, and investor protection.
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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