Fintech startups and Canada’s big financial institutions are at odds over a push to make a bank-owned tech company the data “utility” for the country’s open banking system, The Logic has learned.

Open banking would give consumers the ability to share their financial data with a third-party provider. Fintechs in Canada have been eager for the federal government to introduce standards that would let them access data that’s traditionally been controlled by the banks. The new system would give them a better chance to compete, they argue, and potentially change the face of the financial industry.

According to two fintech-industry sources close to the discussions, some of the incumbents are pushing for Symcor, a data-exchange company and joint venture of three of Canada’s big banks, to become the country’s de facto industry-wide technology provider for open banking, operating like a utility.

“This is extremely problematic since Symcor is owned by financial institutions who compete directly against third-party-providers,” said one of the sources. The Logic agreed not to identify some sources in this story so they would speak candidly about the ongoing discussions.

Symcor, a private company, was launched in 1995 as a joint venture between TD Bank, RBC and BMO. It calls itself “one of Canada’s largest providers of business and payments-processing services,” and has recently made public its interest in open banking. In December, it launched Cor.Connect, a new suite of open banking services that it said would let Canadian financial institutions, credit unions, aggregators and fintechs exchange data. 

In the accompanying press release, Symcor said it had been “working actively with stakeholders across the industry to design and launch a comprehensive ‘made-in-Canada’ open banking solution.” 

In a statement to The Logic, Rita Dias, Symcor’s vice-president of marketing and communications, said, “We see our role as enabling and accelerating our clients’ open banking readiness in the Canadian market by providing solutions that allow industry participants to exchange data safely and efficiently.” 

Dias said none of TD Bank, RBC and BMO has officially proposed that Symcor become Canada’s open banking utility. RBC and BMO did not respond to The Logic’s requests for comment, and TD Bank declined to comment. 

The concerns from some fintech players over a potential role for Symcor reflect broader tensions over open banking, whose implementation has for years been dogged in Canada. Banks initially argued that it would be a threat to the country’s financial stability, while emerging fintech companies are vying to offer new products and services. Open banking is already in place in countries like Australia and the U.K.

The federal government has appointed an open banking lead, Abraham Tachjian, and working groups with representatives from the country’s banks, credit unions and fintechs to discuss different aspects of the system, like liability and privacy and security. Members of those groups also meet as part of a steering committee, which convened for the first time on Dec. 7, a day after Symcor published the release announcing the launch of Cor.Connect.

Both groups are expected to wrap up their work no later than Sept. 29. However, according to the sources with knowledge of the discussions, the participants are still not agreed on how the system should be governed. Canada’s big financial institutions have pushed for an industry-led approach, where industry participants will regulate themselves, while fintechs prefer a government-created “fit-for-purpose” entity to oversee the system and enforce a code of conduct.  

None of TD, RBC or BMO would comment on what kind of governance framework they would like to see, but the Canadian Bankers Association told The Logic it encourages “stakeholders involved in design and implementation to arrive at outcomes that optimize the possibilities of open banking by recognizing Canada’s unique characteristics.”

However, one fintech source said they were skeptical of an “industry-led” approach because they believe the banks “intend to control the scope of open banking, and control the access to the system by controlling the core infrastructure through private entities owned by them.”

It is in this context that a potential role for Symcor has emerged as a point of contention. 

According to both fintech sources, Symcor has been floated as a potential open banking “utility,” like a water or electricity company, but in this case it would provide all of the system’s data infrastructure. 

“The worry about the Symcor model is that in the absence of a strong governing entity, the industry utility through which all the data is shared becomes the de facto governing entity,” one source said. 

If the utility gets to decide which companies can access data, as well as make decisions about terms, conditions, contracts and liability, then its role becomes similar to a policymaker’s, that source said. 

The second source echoed that sentiment. “Under this model, Symcor would also play the role of monitoring and enforcing the rules of the system—therefore, no regulator would play that role,” they said. Would-be new entrants in the market could be saddled with “onerous, prohibitive data-sharing agreements,” they said. 

“If Symcor is used to just standardize data-sharing practices between big banks and third-parties, that’s not a big issue,” said Hanna Zaidi, chief compliance officer of payments at Wealthsimple. “It becomes a big issue if it’s used to gatekeep services.” 

Andrew Graham, CEO of the fintech Borrowell, said he did not know enough about Symcor to comment on the company specifically, but said he would be concerned if open banking depended on a central data utility. “This is doubly true if it’s controlled by players in the ecosystem. … It creates a lone gatekeeper and a single point of failure.” 

Graham said it would be better to have multiple companies serving the data-utility role, competing with each other and finding ways to offer value-added services. 

One of the fintech sources said it’s more about developing a clear set of rules and putting an enforcement mechanism in place, and then leaving it up to banks and fintechs to innovate and compete. Having “a tech platform” is not necessarily the end game of open banking, the source added.

Asked about worries a data utility would stifle competition, Symcor’s Dias said, “Competition is … vital for Canada to maintain its reputation as a global centre of innovation and to attract top talent and investment. Symcor is here to support the Canadian market and believes that the success of open banking requires many players.”

Zaidi said it comes back to the bigger issue of governance of open banking. Wealthsimple is among the fintechs that want a regulatory-led rather than industry-led approach.

Zaidi said she has seen a shift in preference from policymakers in other countries toward a regulatory-led model, and “an acceptance that industry-led approaches are skewed toward the status quo—something that could be expected to be even more true in a financial-services market as concentrated as Canada.”

The U.S. Consumer Financial Protection Bureau, for example, has been considering ways to prevent excessive control by several firms in the underlying data-sharing process, its director Rohit Chopra told a fintech conference in October 2022. 

Due to the number of highly concentrated submarkets in financial services, “it’s critical that no one ‘owns’ critical infrastructure,” Chopra said in prepared comments shared before his speech. 

Alex Vronces, executive director of industry association Fintechs Canada, echoed Zaidi’s view. “For open banking to be successful, we can’t let major players in the industry regulate themselves.”

Vronces said fintechs would like open banking overseen by a government-created “fit-for-purpose” entity that would be independent of both fintechs and banks, and that would equalize what he characterized as a power imbalance in the current market. That would be in keeping with the recommendations the open banking advisory committee made in its final report to the government in April 2021, he said. 

The government would need to create it with legislation, when open banking eventually moves past the policy-development phase. “The government can do things in 2023 to signal that a government entity is coming,” he said.