Law professor aims to make banking system fair and accessible for all

Most of us take banking and the ability to do so quickly and without much trouble as a given in Canada, as we go about transacting and spending almost daily, often with the convenience of digital services that have arisen from innovations in financial technologies (fintech).

Not everyone has it so good.

What’s known as “financial inclusion” is an emerging public problem worldwide. People who are “unbanked or underbanked” in Canada, meaning those who don’t or can’t have full access to the banking system for various reasons, number more than one million adults.

There is a disproportionate impact on Indigenous populations, according to Able Financial Group data. New residents of Canada, people of colour and women living in inner-city neighbourhoods have also been shown to be hit hard by this problem.

Research emphasizes financial innovation

As an assistant professor and Chair in Business Law and Regulation at the University of Calgary Faculty of Law, Dr. Ryan Clements, SJD, is uniquely positioned to research the problem and help to discover solutions. His area of scholarship research is in financial markets regulation with an emphasis on financial innovation.

He is at the vanguard of Canadian academics, entrepreneurs, organizations and government agencies exploring how innovations in financial market products and services can offer both benefits and risks for society, particularly for those who need help the most.

Innovations are evolving in universities as well as within financial technologies. Last year, UCalgary launched a FinTech Law and Policy course designed and taught by Clements that was the first of its kind in Canada.

Q: Why and how do people find themselves shut out of the traditional banking system?

A: The answer is complex. A lack of financial literary, poor education, low income, things like a lack of credit history or no institutionalized means of saving, challenges with government and legal documentation, all are part of the landscape that can lead to exclusions.

Q: What if someone needs, say, a quick loan or fast access to money just to pay the bills but they can’t use traditional banking for whatever reason?

A: They could be forced to go to the fringe finance industries such as payday lenders, pawn shops or rent-to-own or cheque-cashing services. It just worsens the problems of poverty and wealth inequality because they usually have higher costs and fees.

Q: What are the benefits of being “included” financially that most of us take for granted and others are missing out on?

A: They include economic prosperity and improved health, entrepreneurial and education prospects, as well as the ability to smooth financial and economic shocks.

Q: How is your research, teaching and advocacy helping to solve the problem of access?

A: My research is transdisciplinary and very community facing. We look at the role that technology and innovation can play in providing financial inclusion in society. We consider whether new forms of technology can help to include people who don’t use traditional banks, in a way that lowers costs and fees for them. I’m also looking at regulatory impediments or frictions that prevent these new kinds of fintech firms and innovations from providing products and services.

Q: Can innovations in fintech remedy the problem?

A: Yes, but it’s also complex. There are fintech innovations with financial inclusion potential in Canada, including things like mobile financial services, credit, real-time payments, tech-enabled savings and more. Yet, there are significant implementation barriers both legal and structural. There is also the question of introducing risk and potential destabilization into the financial system.

Q: Where does Canada stand globally on this issue?

A: In a Financial Post op-ed on fintech and innovation in Canada, I showed how Canada and the U.S. are trailing world leaders like China and India. Our lag can be attributed in part to regulations. That said, the need for fintech regulation is evident. While the stability of our financial system in Canada is a strength that serves people well, it can also be a drag on disruptive technologies with inclusionary potential.

Q: What can be done to enable more innovations in the fintech sector?

A: Regulatory steps have been taken to foster innovation, such as the Canadian Securities Administrators’ (CSA) fintech “regulatory sandbox” but we can be more progressive. I’d like to see more movement in open banking in Canada, for example, under parameters similar to what’s been done in Australia.

Q: Where do UCalgary and Calgary sit on the world stage for fintech?

A: We have extremely talented students at UCalgary and I see myself as a facilitator in the law faculty. We are a launch pad for them to get into the world and perhaps be legal counsel to the next big fintech companies. I am very optimistic about the sector in Alberta and Calgary. We don’t have a talent deficit here. We do have a risk of talent flight if we can’t compete to keep them.