KPMG in Canada’s recent survey has revealed that 65 percent of Canadian business leaders called for the immediate modernization of the digital infrastructure underlying the country’s financial system to enable open (consumer-driven) banking, digital identity, and real-time payments.
“Canada is in the midst of a trade war, and it must do everything it can to insulate itself from outside economic threats,” said Geoff Rush, partner and national industry leader for financial services at KPMG in Canada, in a news release. “We have an opportunity to advance our competitive position by modernizing one of our largest industries – financial services.”
“Many financial institutions in Canada are still using outdated legacy technology systems, but our survey clearly shows that they are working to modernize their systems to facilitate faster, more efficient payments that are predictable, transparent and enhance the customer experience,” added Edwin Isted, executive director and payments lead in KPMG in Canada’s financial services solutions practice.
According to KPMG LLP’s news release, the federal government has plans to develop and launch two initiatives as public discussions about nation-building and infrastructure mega-projects ramp up.
First, the real-time rail (RTR) is a national payment infrastructure seeking to enable real-time transmissions and receipts of payments, around-the-clock instant payment clearing, and settlements among financial institutions.
“The real-time rail isn’t just about faster payments, it’s about enabling more data-rich transactions so organizations have more valuable context about payments,” Isted said in the news release.
“When organizations have a better understanding about why and how a payment was made, the parties involved in the payments, as well as the frequency and history of the payments, they can serve their customers and clients more effectively,” Isted added.
“Without a real-time rail, payments can take days to be processed, exposing organizations to increased credit, liquidity, operational and systemic risks,” Rush said.
KPMG shared that the Canadian government announced its intention to finish the RTR technical build in July, followed by a year of testing, as per Payments Canada.
Second, open banking aims to allow consumers to share their financial information with app-based fintechs and other third-party financial services providers, control and transport their data, and gain a holistic perspective of their various financial accounts via a single dashboard.
“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,” Rush said.
KPMG noted that Canada passed the relevant initial legislation in 2024 and intends to roll out open banking in 2026, with further legislation eyed for full implementation. KPMG further noted that years of delays have plagued both initiatives.
“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,” Rush said.
Survey data
According to KPMG in Canada, among the 250 business leaders in all the country’s industry sectors who responded to the survey:
- 64 percent said open banking, digital identity systems, and real-time payments would ensure a resilient, competitive, and inclusive economy, rather than serve as minor upgrades
- 58 percent thought that the country would keep becoming less competitive without payment modernization
- 58 percent noticed that Canada’s major banks definitely improved their business-to-business (B2B) banking services, even before implementing open banking, RTR, and payment modernization
“In absence of the real-time rail, financial services organizations are already doing their part to modernize Canada’s payments ecosystem,” Isted said in KPMG’s news release.
Meanwhile, KPMG International’s survey of financial institutions worldwide revealed that:
- 94 percent of Canadian financial institutions polled were planning to engage or were actively involved in payment modernization programs
- The top perceived benefits of modernizing payments included speedier transaction processing, enhanced customer experience, and improved security
- The expected costs for payment modernization programs ranged from US$10 million to US$25 million