By Andrew Chau

The federal government is finally acting on

long-promised banking reforms

, designed for greater fairness and competition. This includes the

Consumer-Driven Banking Framework

and the new Financial Consumer Protection Framework regulations to cap junk fees, enable open banking and improve payments infrastructure.

It’s a welcome development, but these changes arrive after years of bureaucratic delays.

Canada’s banking sector

remains one of the most concentrated in the G7, one that is dominated by

the Big Six

. The oligopolistic structure protected its excess income and slowed the pace of change, allowing those banks to earn $16.45 billion in profit in the last quarter alone and $69.92 billion for the year. In the past year, we’ve seen three smaller banks make deals to consolidate with others, which will lead to even less competition in the market.

That said, not everything was at a standstill, with the

fintech sector

leading the way in

pursuing consumer-friendly innovations

. The sector created digital-first experiences and eliminated nuisance fees for low balances. We’ve also seen the introduction of digital investing platforms to lower fees.

The risk now is assuming this progress will continue on its own. Without urgent implementation of the new banking framework,

Canada could slip back

into the same old pattern of delay that made these reforms necessary in the first place.

Don’t listen to the Big Six that play down smaller firms. Together, fintechs have proved that

competition works for Canadians

. They can now easily and securely port their financial data, thanks to third-party apps such as Flinks and Plaid. These innovations happened because fintechs recognized the unfairness in Canada. Fintech has modernized banking here by creating open-banking-like tools. And it’s not because the government encouraged it.

Just look at junk fees. Canadians once paid $45 to $50 non-sufficient funds fees (NSF), a penalty that compounds financial stress, which then creates overdrafts and even more fees. Banks justified them as a way to encourage responsible account management, even though consumer advocates had raised concerns about how punitive and opaque these fees had become. Some fintechs eliminated NSF fees outright, proving that basic banking services could operate without such penalties, making junk fees harder to defend.

Ottawa only recently capped NSF fees at $10 and introduced a grace period after years of market pressure. But it didn’t emerge in a vacuum. It formalized a correction that competition had already begun. Regulation is now catching up to what the market demonstrated was both possible and necessary.

The same thing happened with investing. Canadians were conditioned to pay commissions, often around $10 per trade, just to buy a stock or exchange-traded fund (ETF).

Then, fintech changed the game. Wealthsimple was the first to offer unlimited, zero-commission trades in Canada in March 2019, and a handful of big-bank brokerages and investment firms followed suit: National Bank of Canada in August 2021 and Desjardins Group in September 2021. Why? This competition forced them to. As a result, millions of Canadians can now invest at a lower cost than the traditional firms would have offered on their own.

Data access was another barrier to change. Because Canadians had no simple way to seamlessly interact with multiple institutions by digitally sharing their financial information, fintech apps filled the gap. They enabled consumers to aggregate account data, such as balances, transactions and more, as a workaround for the lack of regulated data portability.

For example, the company I co-founded, Neo Financial Technologies Inc., launched a completely digital banking experience in September 2020, offering a no-fee cash-back credit card and a no-fee high-interest savings account. And more fintechs entered the space, including Koho Financial Inc., President’s Choice Financial and others. People were then able to seek better tools, rates and platforms to improve their financial lives.

Open banking promises to finally establish a regulated, standardized way for Canadians to share their data with authorized providers. But the underlying demand for better visibility, control and competition in financial services was evident years ago.

Contrary to the belief that fintechs are a so-called trend and operate outside the protections Canadians rely on, all these innovations didn’t come at the expense of consumer safety. Many fintechs offer the same $100,000 deposit insurance coverage as any of the Big Six do. The safeguards and compliance standards are equal, ultimately debunking any belief that financial innovation must come with risk.

Of course, the federal government deserves credit for finally putting long-delayed reforms back on the agenda, but the impact depends on its implementation.

Look at the United Kingdom, where regulators went from testing the first data-sharing systems in 2017 to fully implementing open banking by early 2018 — about a year from pilot to reality. This speed gave consumers access to better tools quickly and created a wave of competition; three out of four British consumers are now using open banking to save more and better manage their finances.

Canada has a clear path in place to fix the gaps that fintech companies have been filling. The government’s banking platform rollout must be centred on giving Canadians financial wins through more choice, more control and more value. The addition of fintechs has shown what a fairer, faster system can deliver for Canadians: fewer and lower fees, the ability to move money faster, more transparency and more.

This next phase will determine if Canada’s financial sector has the will to follow through or if fintechs will continue to fill the gaps.

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Andrew Chau is co-founder and chief executive of Neo Financial Technologies Inc.