Finance Canada considers regulating fintech

Fintech's Wild West ways may be coming to an end in Canada. On August 26, the Department of Finance launched the country's first-ever consultations of the financial sector, including the relatively new but rapidly growing fintech sector.

"While fintech companies are creating the potential for more innovation and competition in the financial services sector, concerns have been raised regarding appropriate regulation of fintech companies, consumer protection, and how best to support a level playing field with regulated financial institutions," the consultation document states.

Pressure for government intervention is mounting from big banks concerned about competition from thousands of unregulated fintechs. In a March 31 speech to shareholders, TD Bank CEO Bharat Masrani warned that "security breaches, service interruptions and solvency issues have plagued a number of fintechs".

Protecting consumers without stifling innovation will be a difficult balancing act for the government. A recent report on Toronto's fintech system notes that the current regulatory environment is forcing many of these companies to relocate to other countries or remain more conservative in their scale-up efforts (R$, Nov. 16/15).

A parallel review launched in May by the Competition Bureau is examining how consumers use financial services, the competitive impact of fintech on existing banks, barriers to entry faced by competitors and the need for regulatory reform.

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