FinTech In Canada & Thoughts for Global Regulators

The Global Risk Institute Published “An Overview of FinTech in Canada” this month.  It is a very interesting review of the state of the Canadian FinTech market with broad implications for the financial services industry and for its regulators.

Every jurisdiction, and Canada is no exception, seeks to gain economic leverage and future technology investment by supporting FinTech ventures.  The Ontario Ministry of Finance is launching a super sandbox and the Ontario FinTech Accelerator Office like those already established in jurisdictions such as the UK.

FinTech Sandboxes are artificial licensing arrangements with start-up and early stage FinTech firms, in close coordination with regulators, to allow exemptions from specific constraining regulation.  These sandboxes have clearly defined market limits and are time based.  The objective is to allow the FinTech firm to “test” its innovative idea in an environment that would be impossible if it had to meet the standard of the current regulation.

Accelerators are less consistently defined than Sandboxes, but within FinTech Accelerators the firm is typically assisted in expediting regulatory approval processes to enable the firm to bring its innovative service to market in a timely fashion.

This concept is fundamental to innovation as every jurisdiction seeks to nurture a FinTech industry within its borders to help enhance future economic competitiveness.

The Global Risk Institute report is very comprehensive and raises several compelling questions.  Since FinTech innovation includes activites ranging from Lending, Accounting, Insurance, Payments, Financial Data & Analytics, Security, Capital Markets, Equity, Crowdfunding, Personal Finance, Wealth Management to Blockchain/Distributed Ledger technology there are a huge number of areas to explore.

The report also briefly mentions the Open Banking concepts with reference to the UK’s Open Banking (PSD2) which came into effect on 13 January 2018.  Open Banking gives licensed third party FinTech firms direct access to personal banking information (with permission) of the bank’s clients via API’s (Application Programming Interface).  The scope of services FinTech can impact is simply overwhelming.  The potential for cross sector disruption is daunting.

This complexity is going to create challenges for Regulators in every jurisdiction. FinTech is digital innovation which combines two critical characteristics: Speed and Volume.  While every jurisdiction seeks to incubate its own disrupting FinTech’s, it also needs to support its regulators with the policy, legislation, and infrastructure to meet their risk and consumer protection mandates.

The speed and volume of these digital innovations will demand regulators have the technology infrastructure to accept data, analyze it, and identify calls to action that will enhance their efficiency in identifying and mitigating risk and misconduct.  It will also demand regulators, through MOU’s and technology capabilities, share relevant data in a timely manner with each other and with their constituents. We live in such a data driven world where the one who has analyzed data, has the power. It is now time to harness this power by updating legacy systems and embracing cutting edge Supervision Technology or SupTech’.

How future ready are you?

SQL Power Group Inc., a global application software firm specializing in Financial Supervision technology and Artificial Intelligence – We simplify the process of financial submissions while enabling successful timely intervention by regulatory bodies. Since 1989, through transformative thinking and innovative technology, SQL Power has been changing the way regulatory organizations worldwide, gather, control, mine, consume and report against data.

If your organization could benefit from SQL Power’s advanced, tailored and cost effective solution, we’d love to hear from you!