New research sees opportunity to increase competition in banking

Canada’s banking sector is more concentrated and shows some signs of being less competitive than that of its peers, according to new research by McMaster University’s MPP in Digital Society Program. Though different metrics have different stories to tell about the level of competition in Canada’s banking sector, the report finds ways for policymakers to increase the level of competition to benefit consumers, businesses, and the new entrants that serve them. 

This research is the first of its kind in Canada, more comprehensive than other attempts to assess the level of competition in Canada’s banking sector and done with a level of quantitative rigor that hasn’t been common.

Commissioned by Fintechs Canada, and authored by Vass Bednar, Keldon Bester, Bryce Edwards, and Debbie Liang, the research assessed the level of competition in Canada’s banking sector by reviewing the domestic and international literature on competition and banking, publicly available data, and discussions about financial sector policy. Stakeholders were also interviewed to inform the authors’ review of the available information.

Key findings from the research include:

  • Depending on the metric considered, there is mixed evidence on the current state of competition in Canada’s banking and payments sector
  • Canada’s banking system is more concentrated than international peers, and the Big Six banks market share in major product categories has remained stable over the past decade despite the growth of fintech challengers 
  • Canadian banks consistently outperform international peers on return on equity (ROE), driven in part by highly profitable domestic personal and commercial banking
  • The proportion of bank income from non-interest sources such as transaction and investment management fees has increased over the past decade, along with the absolute level of these fees 


Identifying meaningful opportunities to increase the level of competition in Canada’s banking sector, the report recommends actions the federal government can take:

  • ​​Data
    • Adopt the recommendations of the Open Banking Advisory Committee and use the experience of international peers to adopt a more aggressive approach
    • Use open banking as an opportunity to lead by example on future data portability rights in forthcoming privacy legislation
    • Consider a broad range of use cases for open banking data beyond the financial sector. 
  • Infrastructure
    • Ensure that Payments Canada has the resources to meet or exceed the current timeline for payments modernization and that Canadians understand the cause of delays to date
    • Explore the potential of a Central Bank Digital Currency (CBDC) to serve as a competitive and cost effective outside payment option. 
  • Access
    • Open access to the infrastructure supporting Canada’s payments system to FinTech firms under Bank of Canada regulation.


For the full report, click here.


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