Fintech To Flourish In Canada
Canadian involvement in the global fintech industry is expanding.
FREMONT, CA: Fintech business models have never been more enticing. New industry disruptors are making significant inroads in insurance, lending, payments, investments, and core banking industries. Fintechs currently account for around one trillion dollars of the global banking and payments industry's $10 trillion overall market capitalization. However, not all fintechs are disruptors; many find success as enablers, assisting banks and other financial institutions in providing better services and back-office processing in areas such as credit adjudication and channel management by employing highly advanced artificial intelligence (AI) technology.
The Canadian contribution to the global fintech ecosystem is expanding. A handful of fintechs are genuinely international players, to great pride. This demonstrates significant progress over the past two decades in making Canada an attractive location for the fintech industry's growth.
Canadian governments, regulators, and investors must take measures to assure the sustained expansion of this sector, despite recent achievements.
Policy and Regulation: While the United Kingdom has been assertive in its regulatory approach in recent years (for example, the banking regulator built a regulatory sandbox), Canada's approach to fintech regulation must catch up to its global rivals. While the Ontario Securities Commission created a sandbox for fintechs and others seeking to access the public markets, the Office of the Superintendent of Financial Institutions (OSFI), a federal banking regulator, could create its sandbox where fintech players would be granted forbearance from specific essential banking regulatory requirements, such as Know Your Client rules, capital, and other compliance requirements, while testing new business models and technologies.
As a method to increase retraining and upskilling, one of the proposals of the UK study was to develop a new visa "fast track," as well as an additional work placement in fintech firms. This is also a necessity in Canada. The federal and provincial governments might collaborate with the fintech industry to sponsor initiatives such as internships at fintech firms. Regarding immigration, it is worthwhile to determine if a fast-track visa is required to support the sector. The recent, albeit modest, expansion of the skilled refugee pilot program is a step in the right direction.
During the past decade, many private venture capital funds have been established. Are they sufficient to increase investment in the Canadian fintech industry? It may be worthwhile to investigate a Canadian version of the UK fintech report, namely the release of institutional capital to create a private sector-led £1 billion Fintech Growth Fund to drive growth and establish a world-leading ecosystem.
International: The establishment of a Centre for Finance, Innovation, and Technology was a significant proposal of the United Kingdom's report. This center would be funded by the UK government but managed by the private sector, with a remit to investigate and promote worldwide policies that help UK fintechs. This approach is also worthy of consideration for Canada, as its advantages extend to all five suggestion areas.
National Collaboration: For the sector to continue to develop in Canada, the fintech sector must guarantee that main geographic fintech clusters are more collaborative and robust. Clusters consist not just of fintech companies but educational institutions that give graduates the necessary skills. Establishing a Centre for Finance, Innovation, and Technology could guarantee this vital linkage.