Canada’s Competition Bureau Conducting Market Study Into Fintech

Canada’s Competition Bureau announced Thursday the launch of a market study into the country’s financial technology sector.

The Bureau said in a press release its investigation will look into the competitive impact fintech has on the financial services industry, obstacles to entry that companies face and whether there is need for regulatory reform to foster greater competition while maintaining consumer confidence in the industry.

In its Market Study Notice, the Bureau said the scope of its research will focus on innovations that affect the way Canadian consumers and small and medium-sized enterprises commonly encounter financial products and services, including peer-to-peer banking; e-wallets, mobile wallets and payments; crowdfunding, in particular for small and medium-sized business capital; and online-based financial advisory services (also referred to in the notice as “robo-advisors”).

The Bureau said it does not intend to study currencies or cryptocurrencies such as bitcoin; however, its notice does not explicitly exclude blockchain or distributed ledger technology.

The agency explained that it chose to study the financial services sector for three key reasons: first, the Bureau identified financial services in its public consultation on prospective advocacy initiatives in 2013; second, the industry itself is a strong pillar in the Canadian economy, contributing about 10 percent of the country’s GDP in 2014, and the banking sector alone employs more than 280,000 Canadians; and third, the sector plays a big role in the daily life of the majority of Canadians.

Moreover, Canada seems to be lagging behind other jurisdictions in terms of fintech adoption. The Bureau cited a recent Ernst & Young report showing that in Canada, 8.2 percent of digitally active consumers have used at least two fintech products within the past six months, in the form of money transfers and payments and savings and investments, compared to 15.5 percent globally.

According to the notice, the market 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?
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?
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 issues should be considered when developing or amending regulations to ensure competition is not unnecessarily restricted?
The Bureau said stakeholders interested in fintech or the financial services industry are welcome to provide written or oral submissions on the study or on specific issues pertinent to it. The agency said it would like submissions and/or indications of willingness to take part in an oral interview before June 30, 2016 in order to provide adequate time to review and pursue follow-up interviews as necessary.

The Bureau expects to publish its report on the market study next spring.