On May 19 2016 the Competition Bureau of Canada launched a market study of the financial technology (fintech) sector in Canada. The bureau enforces and administers the Competition Act and, as part of its mandate, participates in activities to promote a competitive marketplace.
As described by the bureau, the purpose of the study is to advise and guide financial sector regulators and other relevant authorities on how to ensure that regulation does not unnecessarily impede competition in the sector. Both the Department of Finance and the Office of the Superintendent of Financial Institutions (the two government agencies directly responsible for banks and other federally regulated financial institutions) appear to have been taking a 'wait and see' approach to fintech developments.
According to the press release issued by the bureau, the study will:
- focus on how innovation is affecting the way that consumers and businesses use financial products and services;
- explore the competitive impact that fintech is having on the financial sector, including any barriers to entry;
- determine whether there is a need for regulatory reform to promote greater competition while maintaining consumer confidence in the fintech sector; and
- examine peer-to-peer banking, e-wallets, mobile wallets, mobile payments, crowdfunding and online financial advisory services.
The bureau states as one of its fundamental premises for the study that overregulation can restrain competition and affect the efficiency of a market. Most industry observers would probably be confident that they will find plenty of examples of overregulation.
The following key questions for the study were set out in the bureau's market study notice:
- What has been the impact of technology‑led innovation on the competitive landscape?
- What is happening to competition? How will innovation affect competition in the future?
- How will consumers benefit from fintech?
- 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 fintech sector?
- Are the consumer protections in place today enough to meet the needs of further fintech developments? What additional protections should be put in place for consumers? Is there a need for greater transparency in fees?
- What issues should be considered when developing or amending regulations to ensure that competition is not unnecessarily restricted?
Interested stakeholders are invited to make a submission to the bureau. The bureau would appreciate receiving submissions, or indications of willingness to participate in an oral interview with the bureau, before June 30 2016.
For further information on this topic please contact John Jason or Sharissa Ellyn at Norton Rose Fulbright Canada by telephone (+1 416 216 4000) or email ([email protected] or [email protected]). The Norton Rose Fulbright Canada website can be accessed at www.nortonrosefulbright.com/ca/en/.