On May 19, 2016, the Competition Bureau (Bureau) announced that it has launched a market study into technology led innovation in the Canadian financial services industry (FinTech); FinTech was identified as a subject matter of interest at the Bureau’s workshop on emerging competition issues held in January 2016.
The study raises important considerations not only for FinTech companies, but for the financial services industry broadly. Focusing on interactions between consumers and small and medium-sized businesses and financial services, the study will consider innovations in peer-to-peer banking, mobile wallets and payments, crowd-funding and online-based financial advisory services. While the market study’s scope is subject to change, the Bureau does not intend to consider the implications of blockchain technology for the financial services sector, nor will it consider an extensive list of other topics, including currencies and crypto-currencies such as Bitcoin, insurance, payday loans, loyalty programs or deposit taking.
Absent any express statutory mandate, the Bureau has indicated that the study aims to answer the following key questions:
- What has been the impact of technology‑led innovation on the competitive landscape? What is happening to competition? How will innovation impact competition in the future?
- How will consumers benefit from FinTech?
- Are the consumer protections in place today enough to adapt for the future? What additional protections should be put in place for consumers? Is there a need for greater transparency in fees?
- What are the barriers to entry, expansion, or adoption for FinTech companies? Are they regulatory or structural?
- What is the current state of the regulatory framework for financial services? Does it support or inhibit competition and innovation? Are changes required to encourage greater competition and innovation in the sector?
- What issues should be considered when developing or amending regulations to ensure competition is not unnecessarily restricted?
Past experience and Bureau commentary, notably references to recent reports that FinTech adoption in Canada has lagged other jurisdictions, suggest that the study’s focus will be on regulatory or structural barriers or hindrances to the emergence of competition from FinTech companies or the adoption of FinTech by existing financial services companies.
The FinTech market study reflects the Commissioner of Competition John Pecman’s belief in the Bureau’s role as a competition advocate, and is another example of the Bureau’s focus on the role of innovation and its effects on competition, particularly in regulated industries. In that respect, the current focus of the market study parallels some of the Bureau’s recent focus on the appropriate scope of regulation for ride sharing services. The study raises important considerations for both FinTech companies and the financial services industry; for example, will the Bureau recommend — as it did regarding ride sharing services — that regulations be relaxed for existing industry participants while simultaneously being extended to the FinTech sector? What will be the nature of the Bureau’s advocacy in this regard — what levels of government and which regulators will any Bureau advocacy extend to?
Given the broad scope of the financial services sector, and its importance to consumers and for the Canadian economy, it will be interesting to see how the Bureau achieves a balance between protecting consumers, promoting innovation, and ensuring a “level playing field” for all participants in the financial services industry.
The Bureau is inviting interested stakeholders to file submissions and/or indicate whether they wish to participate in the market study by June 30, 2016. The market study’s results will be published in the spring of 2017.