(Bloomberg) -- Payment firms including Mastercard Inc. and Block Inc. are banding together with fintech companies to press Canada to move faster on rules that may boost competition in financial services.
More than 40 companies have joined forces to launch Fintechs Canada, a lobby group that will push for so-called open-banking rules and other regulations they say would enable more innovation in a financial sector that’s dominated by a handful of domestic banks.
Open banking is a regulatory system that makes it easier for consumers to share their financial data with third parties -- reducing barriers to switching from one financial provider to another. Many countries, including Australia and the UK, offer some form of it. In the US, the Consumer Financial Protection Bureau is trying to move ahead with long-awaited measures in that direction.
Read more: US Banks Face Fresh Push to Share Client Data with Fintech Firms
Canada has been slowly moving ahead with consultations on an open-banking framework. Data protection and consumer privacy are key issues. In March, the federal government named lawyer and consultant Abraham Tachjian as its czar on the topic. But the process is moving too slowly for some firms.
“Regulatory barriers to entry in Canada’s financial sector remain high, making it hard for fintechs to operate and grow in Canada,” Alex Vronces, executive director of the lobby group, said in an interview. “My worry is that the future of responsible innovation is at risk.”
Equifax Inc., Block’s Square payment division, online brokerage Wealthsimple Inc. and Power Corp. of Canada’s Portage Ventures unit are all listed as members of the group, according to a draft statement seen by Bloomberg. It replaces a smaller organization known as Paytechs.
An open-banking framework would eventually bring more options for consumers, Vronces said.
“It’s going to bring the entire industry out of that kind of gray zone, and make it clear that customers have a right to access their data for other financial services than their main financial institution,” said Yves-Gabriel Leboeuf, chief executive officer of Flinks and a board member of Fintechs Canada.
Montreal-based Flinks provides infrastructure for companies to access the bank data of their clients, and is potentially one of the winners of a open-banking system. It’s majority-owned by National Bank of Canada, the country’s sixth-largest commercial bank.
At the Canadian Club of Toronto last week, the head of the Canadian Bankers Association expressed concerns about payment providers operating in the absence of a proper regulatory structure.
“Payment services providers deal directly with consumers, so the absence of consumer protection is a significant shortcoming,” CBA CEO Anthony Ostler said. “Let’s be clear: we don’t want the next FTX or Celsius coming from Canada’s payment ecosystem.”
Officials from Finance Minister Chrystia Freeland’s department didn’t respond to a request for comment.
©2022 Bloomberg L.P.