The Department of Finance Canada has launched consultations on how it regulates the financial services sector. One concern is how best to oversee new financial technologies (Fintech) companies. The rules governing reverse mortgages, annuities, and more complex products aimed at the aging population are also under review.
The government says these consultations are meant to ensure that federal legislation and regulations promote the stability, efficiency, and the utility of the Canadian financial sector. One of the questions raised by the consultation document is how best to deal with financial innovation. Canadians have been quick to adopt new technologies such as such as automated teller machines (ATMs) and tap and pay cards, and the government notes that new developments are once again changing how financial services providers do business. The paper points out that the significant cost savings made possible by Fintech is forcing incumbent institutions to re-evaluate how they operate.
Adapting to changing demographics
"While fintech companies are creating the potential for more innovation and competition in the financial services sector, concerns have been raised regarding appropriate regulation of fintech companies, consumer protection, and how best to support a level playing field with regulated financial institutions," reads the paper.
Another area of interest is the way the financial sector is adapting to changing demographics. The consultation document reveals that the number of Canadians over the age of 65 has exceeded the number under age 15 for the first time, and predicts that this older cohort will make up about 20% of the population by 2023.
Complexity of financial products may be a challenge
"As Canadians age, not only will their financial services needs change, but their preferences for service delivery methods may also shift. Some of the financial sector implications of an aging population have been anticipated by the sector, such as a greater draw-down of retirement savings, while others may be less predictable," says the government. "Financial institutions remain focused on meeting Canadians’ savings and retirement income needs, developing options to help them draw on savings and manage the risk of outliving their savings, such as reverse mortgages or more flexible annuity products. As baby boomers retire, the nature of their demand for wealth management services may change. The increasing complexity of financial products and services may be a challenge for many parts of the Canadian population."
These are only some of the areas under review. The full consultation paper is available on the Department of Finance Canada web site, and the comment period ends on November 15, 2016.