Submission to the Department of Finance Canada for the Pre-Budget Consultations 2025

March 2025

Summary of Recommendations 

In the face of ongoing trade tensions and tariffs imposed by the United States, now is the time for Canada to strengthen its economic resilience. A more competitive, productive, and dynamic domestic market is essential to ensuring Canada can adapt to shifting trade conditions while improving affordability for households and businesses. 

In particular, making Canada’s financial sector more competitive will help give Canadians more control over their hard-earned money. By increasing competition in financial services, the federal government can support economic resilience, drive innovation, and lower costs for consumers. 

For Budget 2025, Wealthsimple encourages the federal government take action to increase competition in financial services and lower the cost of living by:

Recommendations 

Completing enhancements to Canada’s financial infrastructure by implementing consumer-driven banking and the Real-Time Rail (RTR)

To enable true competition in financial services, Canadians must be able to move their money when and where they choose. Two equally important pieces of modernization are needed to facilitate this: consumer-driven banking (or open banking), which provides consumers an easy and secure way to link their accounts and share their financial data, and instant payments, which provide the ability to move money in real time.

The enabling legislation for the 2024 federal budget enshrined consumer-driven banking in Canadian law for the first time. This is a significant step forward for which the Department of Finance deserves great credit. While in the current context further legislation is not immediately feasible, completing this legislation should be prioritized at the soonest opportunity. 

Once fully implemented, consumer-driven banking will benefit Canadians through lower costs, greater convenience, less friction, and more control over their own money. It can help homeowners lower their mortgage rate by proving they have a pension, help renters build their credit score by proving they pay on time, or help newcomers build credit by incorporating financial data from their countries of origin.

However, the full benefits of consumer-driven banking will only be realized with the implementation of instant payments through Canada’s Real-Time Rail (RTR). Canada’s current payment systems can take days to settle, making it impossible for households and businesses to manage cash flow efficiently.

According to a 2018 study, payment processing costs Canadian businesses between $3 billion and $6.5 billion per year. Meanwhile, Canadians living paycheque to paycheque have to pay expenses like bills and rent earlier than they should, because of uncertainty around payment processing times and the fear of overdraft and late fees.

Unfortunately, the RTR has been delayed multiple times since 2022, leaving Canada as the sole G20 country without an instant payment system. The continued delay disproportionately affects those with the least financial flexibility, including young people, new Canadians, seniors and small business owners. It may also be costing Canada’s economy as much as 2.7% in GDP growth.

While the progress made on consumer-driven banking is welcome, the government must work with the new leadership of Payments Canada to ensure that the RTR is built and implemented on the fastest possible timeline, while serving its original policy objectives of “[promoting] fair and open access, [enabling] competition and innovation, [fostering] fair and transparent pricing, [implementing] appropriate risk controls and [considering] end-user interests.”

Mandating financial regulators to promote competition within their industries

The best way to maintain and increase competition in financial services over the long term is to make doing so an explicit responsibility of regulators and policymakers at every stage of their activities.

As a regulated portfolio manager, securities dealer and money services business, Wealthsimple engages frequently with policymakers and regulators both at the federal and provincial level. We use these forums to advocate for changes that would expand choice, improve service and lower costs to consumers. But regulators’ options are limited by the boundaries of their mandates; no federal financial regulator has an explicit mandate to promote competition, while provincial regulators may have competition mandates that lack definition and enforceability.

The result is that the Competition Bureau is the only federal regulator with a responsibility to promote competition in financial services. The Bureau does not have the capacity or authority to fulfil this role alone while regulating every other industry in Canada. In addition, through its advisory function, the Bureau has issued a dozen submissions over the last decade making recommendations to improve competition in financial services, none of which have been implemented by the relevant authorities.

Financial regulators with an explicit mandate to promote competition would be empowered to reduce the cost of financial services, especially where arbitrary fees are unrelated to the actual cost of the service. For example, Canadians who move an investment account, like a TFSA or RRSP, from one financial institution to another are charged over $100 on average to move their own money. The actual cost of processing these transfers through widely available automated systems is around 60 cents. These fees are a transparent strategy to prevent Canadians from making a free choice of financial provider; regulators should have the mandate and powers to intervene to protect competition in such cases.

Other jurisdictions have chosen to prioritize the promotion of competition in financial services, with positive outcomes for consumers.

In Australia, the National Competition Policy, a whole-of- government review of opportunities to boost competition launched in 1995, increased GDP by at least 2.5%, or $5,000 per household. Three national financial regulators, the Payments System Board, the Australian Securities and Investment Commission and the Australian Prudential Regulatory Authority, each have explicit statutory obligations related to competition. In 2022 alone, 17% of Australians switched their primary bank account, with half citing competitive pricing ​ or value for money as a primary motivation. Meanwhile, four out of five Canadians have never switched their primary bank.

The UK’s three financial regulators – the Bank of England, the Prudential Regulation Authority and the Financial Conduct Authority – added a competition objective to their mandates in 2014, with a view to improving the quality, efficiency, and economy of regulated services. The Current Account Switch Service, launched the same year, has decreased concentration in the personal chequing account market by 21%. And this year, the Financial Conduct Authority leveraged its competition mandate to launch a £600,000 education campaign (funded entirely by fees from regulated firms) encouraging consumers to consider switching banks to access higher interest rates.

Canada should learn from these jurisdictions that when advancing competition is an explicit, shared and monitored responsibility for multiple financial regulators, the financial services market can become more dynamic, to the ultimate benefit of consumers.

Taking action to make exit fees Canadians are charged to move an investment account fairer 

Canadians and businesses pay hundreds of millions in exit fees each year simply to transfer their own investments between providers. These fees, often in excess of $150 per transfer, serve to discourage competition, reduce financial mobility, and cost Canadians too much of their hard-earned money. While onerous manual processes may have once justified these charges, today’s widely available technology allows transfers to be completed instantly for pennies.

Wealthsimple clients alone were charged tens of millions of dollars in transfer fees by their previous financial institutions in 2024, absorbing costs that should not exist in a competitive financial system. 

The federal government should lead work amongst the provincial Canadian Securities Administrators to cap investment account transfer fees, ensuring they more closely reflect the actual cost of the transaction. This will promote competition, reduce unnecessary costs for consumers, and support economic mobility.

Again, Canada should follow the lead of its global peers in recognizing and addressing this issue. The UK’s Financial Conduct Authority introduced the Consumer Duty in 2023, offering greater protections against exit fees. The Duty clarifies that exit fees must not discourage customers from leaving products or providers for a better deal elsewhere. Instead, firms must prove that their exit fees are designed to cover the costs incurred by the firm facilitating a transfer for a departing client. The federal government’s recent initiatives to ensure Canadians are treated more fairly by their banks in the past included cracking down on junk fees. Exit fees are a clear example of unnecessary and punitive fees which prevent Canadians from accessing the financial products that best suit them, and should be included in the scope of junk fees that the government seeks to limit.

About Wealthsimple 

Wealthsimple is one of Canada’s fastest growing and most trusted financial institutions. We offer a full suite of simple, sophisticated products across managed investing, do-it-yourself trading, cryptocurrency, tax filing, spending and saving. Wealthsimple serves more than 3 million Canadians, including 1 in 5 adults under 40, holds over $50 billion in assets, and employs more than 1,000 Canadians from coast to coast. 

For a copy of the document contact: press@wealthsimple.com