The emergence of banking as a service (BaaS) models is significantly transforming Canada’s financial ecosystem by unbundling traditional banking, enabling technology companies to deliver financial products while regulated institutions maintain balance sheets and licences. This separation creates regulatory blind spots as customer relationships become disconnected from underlying banking operations. Most Canadians mistakenly believe financial technology (fintech) services offer identical protections to traditional banks, highlighting an urgent need for transparency reforms. Transparency in BaaS relationships is fundamental to market integrity and consumer protection. Without robust transparency standards, trust erodes, misconduct proliferates and the financial system faces heightened vulnerability to instability. Current regulatory oversight fails to address the distribution of banking functions across multiple entities, particularly when fintech companies influence lending decisions and money creation while operating outside traditional regulatory frameworks designed for unified banking institutions. Policy solutions must balance innovation with stability through standardized disclosures, joint liability mechanisms, and a shift to functional regulation that focuses on activities rather than entities. This adaptability is crucial for maintaining long-term financial stability and public confidence while enabling responsible evolution of Canada’s financial services landscape.
