Daily Review: Canada Set to Embrace Greater Access to Core Infrastructure to Empower FinTech Ecosystem

Canada’s competition authority just released an insightful paper outlining the specifics of the FinTech industry in the country, and, more importantly, the government’s approach to make the FinTech ecosystem an organic part of the economic environment. Some of the propositions indicate a very clear position of Canada to harbor extensive innovation adoption and allow startups to flourish. Institutional banking, on the other hand, is expected to open up to opportunities and collaboration.

Pick #1. Technology-led innovation in the Canadian financial services sector

Financial sector regulators and policymakers have made significant progress in adapting Canada’s regulatory environment to support innovation in the financial services sector. In brief, the recommendations are as follows:

  1. Regulation should be technology-neutral and device-agnostic. Rules that can accommodate and encourage new and yet-to-be-developed technologies open the door to more innovative offers today and down the road.

  2. To the extent possible, regulation should be principles-based. Instead of prescribing exactly how a service must be carried out, a principles-based approach will allow regulators to be more flexible in their approach to enforcement as technology changes.

  3. Regulation should be based on the function an entity carries out. This will ensure that all entities that perform the same function carry the same regulatory burden and consumers have the same protections when dealing with competing service providers.

  4. Regulation should be proportional to risk. This requires a tiered approach: functions whose failure poses lower risks to the financial system should not necessarily face the same strict oversight as those whose failure poses higher risks. This will give smaller players a level playing field to innovate.

  5. Regulators should continue their efforts to harmonize regulation across geographic boundaries. Differences in regulations across provinces can lead to increased compliance burden. Consistency, on the other hand, can facilitate entry and expansion of FinTech across Canada and abroad.

  6. Policymakers should encourage collaboration throughout the sector. Mechanisms for doing so include the use of regulatory sandboxes and innovation hubs. Greater collaboration will enable a clear and unified approach to risk, innovation, and competition.

  7. Policymakers should identify a FinTech policy lead for Canada to facilitate FinTech development. This would give FinTech firms a one-stop resource for information and encourage greater investment in innovative businesses.

  8. Regulators should promote greater access to core infrastructure and services. This includes access to the payments system (under the appropriate risk-management framework) and banking services to facilitate the development of innovative new FinTech services.

  9. Policymakers should embrace broader open access to systems and data through application programming interfaces. With better access to consumer data (obtained through informed consent), FinTech can help Canadians overcome their inability or unwillingness to shop around and switch between service providers.

  10. Industry participants and regulators should explore the potential of digital identification verification. This would reduce customer acquisition costs for service providers, ultimately reducing the costs of switching for consumers and facilitating regulatory compliance where identity verification is needed.

  11. Policymakers should continue to review their regulatory frameworks frequently. Doing so will ensure that these frameworks remain relevant in the context of future innovation and can achieve their objectives in a way that does not unnecessarily inhibit competition.

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Pick #2. Tencent gets a license to sell mutual funds to WeChat’s 1 billion users in China

Before gaining the license, the tech giant was only able to act as a platform for fund houses and third-party fund sales companies to sell their products through, its online wealth managing platform and its popular instant messaging tool, WeChat. is for users to access the service on PC, while a similar service on WeChat is for mobile users.

The Shenzhen Bureau of the China Securities Regulatory Commission, the nation’s top securities watchdog, has given Tencent subsidiary Tengan Funds Sales (Shenzhen) the license to sell funds directly.

Tencent has already teamed up with Howbuy, an online distributor of mutual funds, and a number of fund houses to line up nearly 100 mutual funds products via WeChat. More broadly, it also reflects Tencent’s drive to transform its Tenpay from a pure payments service into a comprehensive financial services platform.

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Pick #3. China to launch first unified personal credit platform for online lending

Several internet firms have filed with the central bank to set up a credit-information platform. The new company, under the name of Baihang Credit Scoring, will be backed by Alibaba and Tencent, among others.

With 36% of the company, the National Internet Finance Association of China will be the largest shareholder. Baihang will have a registered capital of 1 billion yuan (>$150 million). Eight credit firms including Zhima Credit and Tencent Credit will each have shares of 8%.

The platform will provide personal credit information services for online lenders, supplementing the state-run credit platform.

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