Regulators Stand in the Way of What Canadians Want: More Competition in Banking



Financial Post OpEd | Vass Bednar | Jul 13, 2022

Competition in banking - Regulators Stand in the Way of What Canadians Want:  More Competition in BankingA responsive regulatory environment is needed to allow technology-driven financial services firms to thrive

The crypto crash and fintech’s reality check through reduced valuations are obscuring a powerful reminder that while everyday people are hungry for competition in broader banking services, the corresponding legislative infrastructure just isn’t there to actually facilitate it. Sustained consumer demand for alternatives to traditional banking products and services alone is insufficient for these firms to thrive. We need modern regulatory environments that better facilitate true competition through authentic innovation.

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Without a responsive regulatory environment that allows technology-driven financial services firms to legitimately thrive, they will remain reliant on significant subsidization by venture capital firms that makes them vulnerable to market shifts like the one we are currently living through. Our leaders have held up our uncompetitive system as a strength since 2008. It seems as if our legislatures are significantly undervaluing these companies, too; delaying promising initiatives such as open banking, locking smaller firms out of payment infrastructure, and being slow to respond to the realities of cryptocurrencies and stablecoins federally.

Is it because decision-makers undervalue challengers, or do they overvalue the presumed stability of an oligopoly?

Some have relished the implosion of cryptocurrency markets and concurrent plummeting of fintech valuations with schadenfreude. But those that smirk at the implosion of non-bank-owned financial services and products also seem to ignore that Canada’s banking system is similarly subsidized — not by venture capital, but by legislation that insulates, and sometimes shields, the institutions from vigorous competition.

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Cryptocurrency initiatives and various financial technology firms created excitement and energy for freedom from Canada’s oligopolistic banks whose stability is unfairly subsidized by a protectionist policy regime.

This vibrant consumer thirst for alternatives to the Big Six banks in order to manage their money is now likely to be obscured by hyperinflation and the looming threat of a recession —to the benefit of banks, not people.

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