While recent public discourse around nation-building has focused on major infrastructure mega-projects, modernizing Canada’s digital infrastructure is also an emerging priority, with new research showing nearly two-thirds of business leaders want Canada’s payments system and open banking fast-tracked to boost productivity and competitiveness.
In a recent KPMG in Canada survey of 250 business leaders across Canada, 65 per cent of respondents said the infrastructure underpinning Canada’s financial and payments system must be modernized immediately to enable open banking, digital identity and real-time payments. Nearly six in 10 (58 per cent) believe that without payments modernization, Canada’s competitiveness will continue to erode.
“Canada is in the midst of a trade war, and it must do everything it can to insulate itself from outside economic threats. We have an opportunity to advance our competitive position by modernizing one of our largest industries – financial services. Digital infrastructure advancements like the real-time rail and open banking will foster more competition, enable innovation, promote financial inclusion, and drive more growth and investment in Canada. We must seize this opportunity now, or we will fall behind,” says Geoff Rush, Partner and National Industry Leader for financial services at KPMG in Canada.
Canada is developing the Real-Time Rail (RTR), a national payment infrastructure that will allow Canadians to send and receive payments in real-time and enable around-the-clock instant payment clearing and settlement between financial institutions in real-time. Canada also plans to implement open banking (or consumer-driven banking), which allows consumers to easily share their financial data with third-party financial services providers such as app-based fintechs, allowing them to control and transport their information and see their entire financial picture across multiple accounts in one dashboard.
Both initiatives have faced years of delays but have taken on a renewed sense of urgency as the focus on nation building gathers momentum. The federal government plans to launch a framework for open banking next year after passing initial legislation in 2024, but further legislation is needed for a full rollout. Meanwhile, the real-time rail technical build is scheduled to be completed in July, with a year-long testing phase to follow, according to Payments Canada.
Mr. Rush says now is an opportune time to expedite both projects, given the strong push from governments, citizens and business leaders to boost Canadian productivity, competitiveness and economic self-sufficiency.
“Our survey shows that 64 per cent of business leaders agree that open banking, digital identity systems and real-time payment rails are not mere upgrades – they are the bedrock of a resilient, competitive, and inclusive economy, so it’s imperative for those projects to move forward as quickly as possible,” Mr. Rush says.
“Without a real-time rail, payments can take days to be processed, exposing organizations to increased credit, liquidity, operational and systemic risks. Without open banking, consumers who want to engage with fintechs are forced to share their financial data through ‘screen scraping,’ which creates serious privacy concerns and deters them from signing up for the innovative services that fintechs offer. We need to reduce these risks and competitive barriers for Canadian businesses and consumers,” Mr. Rush says.
