MONTREAL — After years of consultations between government and industry on open banking, the fintech sector scored a major win when both the Liberals and the Conservatives included a promise to implement the system if they form government after Monday’s election.

That could clear the way for startups to compete with banks on new tech-enabled services. But some leaders in the industry say the proposals still don’t go far enough.

In their view, fintech has been overshadowed in this election by other sectors like cleantech, despite Canada having one of the world’s largest financial industries. They also worry that a lack of attention from political leaders and a regulatory patchwork could open the door for foreign fintechs to take market share from Canadian companies.

“We have created a non-competitive fintech system relative to our international peers,” said Cato Pastoll, co-founder and CEO of lending startup Loop. “There are going to be a lot of successful fintech businesses that are coming from the U.K. and the U.S. that are going to come to Canada and eat the banks’ lunch.”

Besides a promise to implement open banking, the Conservative platform includes vague pledges to remove barriers for Canadian fintechs and support competition in financial services. The Liberal platform doesn’t mention fintech, but on the campaign trail, they’ve said they plan to follow a federal advisory committee’s recommendation that Canada implement an open banking system no later than January 2023. The NDP’s platform doesn’t address fintech.

In interviews with The Logic, Pastoll and others said they hoped the country’s major parties would take a broader approach to the sector, using the federal government’s influence to promote more uniform regulations across Canada and sending a signal to the market that the industry is being taken seriously. Several pointed to the U.K. as an example for Canada, saying the country should emulate its approach to promoting competition in financial services.

The U.K., which has produced multibillion-dollar fintechs like Revolut, Monzo and Wise, recently commissioned an extensive review of its fintech sector that covered areas such as regulation, investment and international competitiveness. Unlike Canada, the U.K. government allows fintechs to participate in government lending programs through the recently created British Business Bank, and it has specialized regulations for challenger banks, Pastoll said.

“The U.K. is a country that takes fintech seriously,” said Andrew Graham, CEO of Borrowell. “I think we should be taking an equally focused approach.”

Despite the different approaches, investment activity in Canada’s fintech sector is comparable to that of the U.K. Venture capital investment in Canadian fintech companies hit US$4.8 billion in the first half of 2021, according to a report from KPMG, already surpassing the previous record. By comparison, the U.K. saw US$6.2 billion in investment during the same period, according to the report. KPMG expects fintech investment to remain strong in Canada, particularly in AI-driven services, payments and crypto.

Several of the fintech leaders who spoke with The Logic said they would like to see more government focus on crypto, an area in which regulatory scrutiny has intensified in recent months, but that the parties’ platforms don’t mention. Wealthsimple CEO Michael Katchen said this month that recent actions by the U.S. Securities and Exchange Commission—which is investigating another major crypto exchange, Coinbase—give Canada an opening to become a leader in developing standards for the industry. 

In a statement to The Logic, Blair Wiley, Wealthsimple’s chief legal officer, said the government should work with the industry to formulate clear rules for the use of cryptocurrency in areas such as gaming, art and payments, noting that rates of crypto ownership in Canada are climbing. Regulators recently signed off on Wealthsimple’s efforts to expand the list of cryptocurrencies its customers can trade through its brokerage app, even as other companies like Binance exit Ontario amid a crackdown on unlicensed exchanges.

Liberal Party spokesperson Brook Simpson said another Trudeau-led government would work with the industry on the issue. “If re-elected, we will work closely with stakeholders, consumers and regulators to ensure the interests of Canadian consumers are protected and that market stability is maintained,” Simpson said. “These efforts will also go hand in hand with our commitment to establish a Canada Financial Crimes Agency, which will be an important new tool for addressing money laundering, prosecuting fraud and cracking down on illegal financing.”

Asked by email whether they would commit to a review of the country’s fintech sector, similar to that produced by the U.K., the Liberal Party didn’t respond directly. Neither the Conservative Party nor the NDP responded at all to requests for comment. 

One way to address the lack of focus would be for the government to appoint a policy lead on fintech, said Alex Vronces, executive director of Paytechs of Canada, an industry lobbying group. While he said the work on payments modernization and open banking was promising, Canada could still make progress in areas such as regulatory sandboxing, cryptocurrency and access to government procurement programs for fintechs.

“What Canada would benefit from is a whole-of-government approach to promoting fintech innovation,” Vronces said. “Not every sector deserves a whole-of-government approach, but with the reach it has I don’t see why fintech doesn’t.”