What is the common thread between building trust with clients, creating partnerships with big banks, and building a compliant product? They all require your company to have strong regulatory expertise. The kind that lives in your company’s DNA – not the result of hiring a few temporary consultants, however helpful they may be.
Our team at NorthOne is building a mobile-first banking platform that helps startups and small businesses. Our platform will let them bank, manage their finances, and integrate all of their financial products and services in a simple and intuitive way. We believe we’re building the future, and are partnering up with a fully-licensed and heavily regulated deposit-taking institution to do so. We realized early on that our aspirations of meaningful impact would only be possible if we successfully maneuvered the regulatory landscape and lived to tell the tale.
Our clients would need to feel in their bones that they could trust us. Our deposit-taking partner would need to feel comfortable allowing us to plug in. And finally, regulators would need to feel comfortable that our model didn’t pose any threat to the stability of the financial system we want to improve.
To empower ourselves, we decided to own our regulatory know-how. This meant that our team needed to build the regulatory expertise “muscle.” There was no shortcut to achieving this – it required months upon months of reading, research, and face-time with experts.
Once we had gained a solid expertise in regulation, we then needed to figure out which regulators mattered most. This became a major issue as we realized that there was a gap in the system. Nobody could provide us with a map of all the regulatory organizations in Canada and what each cared about. Not only that, but we had to look for non-governmental bodies (like the Canadian Securities Administrators) that we’d have to treat with just as much regulatory deference.
The only way to move forward was to map it out ourselves.
Three types of regulation
It’s key to think of regulators in terms of their mandates. In other words, ask yourself: what are they trying to achieve?
We decided to categorize our regulators around three common forms of purpose: protection, behaviour, and permission.
- Systemic Protection: Regulators who want to minimize risk to the health of the financial system created by potential financial service provider failures.
- Depositor/Investor Protection: Regulators who want to protect customers from the potential failures of the financial service providers holding their assets.
- Consumer Protection: Regulators who want to protect and inform consumers of financial products and services from being misled, confused, or poorly treated, etc.
- International Crime and Terrorism: Regulators who want to detect, prevent, and deter money-laundering and terrorist financing.
- Privacy: Regulators who govern how private sector organizations collect, use, and disclose personal information in the course of commercial business.
- Good business conduct: Regulators who want to ensure the proper conduct of business according to standards appropriate for their industry. For example, this is where self-regulating entities, like the Insurance Brokers Association of Canada, play an important self-regulating role.
Licensing: Regulators who grant companies permission to conduct business in a jurisdiction, either federal or provincial.
We’ve created the first full (we think) map of Canadian financial services regulators organized by FinTech verticals. We invite you to help us improve this map. We’ve made our research available here.
We’d love if you’d help us further refine this map for the Canadian FinTech community. This is a conversation and we hope to get your feedback and perspective on this emerging industry.
Note: This article is not meant to provide any legal opinions. It is focused on what we believe are some of the most important issues for discussion. It should empower you to ask smart questions to your lawyers, regulators, and policy makers.
Special thanks to Sadia Rafiquddin