The report finds that technological advances, which have spurred new entrants and improved service quality in other countries, have had a more muted effect in Canada. Economies of scale have allowed dominant institutions to strengthen their grip, making it harder for smaller firms to gain traction.
Among the consequences highlighted in the paper:
- Fees on basic banking activities—such as deposits, payments and transfers—sit well above their underlying cost, adding financial strain for households.
- Profitability in retail banking remains unusually high, with returns on equity of 30-40% for major players, compared with under 10% in more competitive markets.
- Payments infrastructure remains entrenched in legacy systems, while newer entrants and fintech firms struggle with access limitations and heavier compliance loads.
The authors also point out that federal regulators like OSFI and the FCAC operate with mandates focused almost solely on stability, leaving no explicit responsibility to foster competition or encourage efficient service provision.
To remedy these issues, the paper proposes several reforms: broadening regulatory mandates to include competition, streamlining the compliance burden that weighs on smaller institutions, modernizing and centralizing payments-system oversight under an independent body, and allowing deeper participation by foreign banks and fintech challengers.
The study warns that without substantive reforms, Canada’s banking marketplace will continue to deliver high prices, limited options and slower innovation; conditions that ultimately hold back productivity and living-standard growth.
