Mahima Poddar is the group head of personal banking at Equitable Bank. Andrew Graham is co-founder and CEO of Borrowell, one of Canada’s largest fintech companies. Colin Deacon is an independent senator for Nova Scotia who was previously a tech entrepreneur and angel investor.
Some policy challenges are suited to slow, sequential action, while others demand urgency. Which is necessary for Canada’s transformation into a digital economy? When it comes to implementing open banking and revamping privacy law, slow sequential action would be a mistake.
It’s an indisputable reality that Canada has been falling behind on establishing the critical legislative and regulatory building blocks of the digital economy. We urgently need to catch up to global standards in the areas of open data (e.g., privacy, banking, digital health), competition policy, payment systems and digital identity if we are to manage the risks and capitalize on the opportunities of the digital era.
The question is not whether these changes are needed, but whether we have the luxury of moving on these priorities sequentially. We believe that Canada must work on these priorities in parallel, and at a pace more akin to how government initially responded to the threat of COVID-19. This economic threat is no less serious. The OECD predicts that Canada will be the worst-performing advanced economy, in real GDP growth per capita, over the next four decades. Slow progress on these files is already undermining the prosperity of our children and grandchildren.
Canada is home to the second-largest technology cluster in North America – the Toronto-Waterloo corridor – and global tech leaders are emerging from communities across our country. But regulatory stagnation has meant that we are not getting the full benefit of this enviable capacity.
Let’s look specifically at open banking. Today, at least five million Canadians already use a fintech product that helps them to reduce their banking costs, better manage their investments or increase their credit score. These fintechs, whether publicly traded or backed by experienced investors, require robust cybersecurity practices and consumer privacy protections that go beyond Canada’s current rules. These are table stakes.
The reality is that Canadians cannot fully and safely control their financial data until an open-banking regulatory framework exists. This would enable consumers and small businesses to choose what data they would like to share with an accredited financial service provider in a secure ecosystem where they can opt out of that data-sharing arrangement at any time. Slow-walking regulatory changes in open banking – as recommended in a column in this paper – can actually perpetuate, not reduce, potential risks.
But why are so many Canadians and small businesses already using fintechs? Simply, to manage their financial affairs in ways that make their lives easier. They can reduce their costs, increase savings and better control their expenditures by using tools that have not been available through their bank. In other countries, where open banking is more developed, consumers can easily compare loans, consolidate their finances across accounts, manage cash week-to-week in order to save money, and even quantify their carbon footprint. The time, expense and limited options associated with traditional banking services can create stress, especially for marginalized Canadians and small businesses, as identified in a survey of Black Entrepreneurs sponsored by several senators last year.
A year ago, the Minister of Finance received the final report from her Advisory Committee on Open Banking. It offered an important perspective on the interplay between privacy laws and open banking. The committee astutely highlighted that while the Digital Charter Implementation Act (that died in the last Parliament) could inform the privacy rules in an open-banking framework, revisions to Canada’s privacy laws will not, on their own, provide sufficient guardrails for open banking. The committee clearly and rightly stated that any third-party financial service provider will have to be accredited and meet minimum security, privacy, liability, and other standards before they will be permitted to offer their products or services to Canadians.
Last week, the associate minister of finance announced that the government is now implementing the advisory committee’s report and the Minister of Innovation identified privacy law updates as a top priority. We applaud the government for beginning to prioritize these issues and encourage them to work on these files simultaneously and with haste. This will not only help to ensure that our legislative and regulatory frameworks better serve Canadians, but begin to catalyze private investment, creating opportunity, jobs and prosperity now and for future generations.
We cannot relax. We cannot settle.
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