The federal government's commitment to speed up consumer-focused banking is a huge win for businesses.
Mike Cascone is Vice President of Government Relations and Public Policy at Xero Canada.
Federal budget for 2025 has provided what Canadian small businesses have been desperately waiting for: a clear timeline for implementing open banking, or as regulators call it, “consumer-directed banking.”
The government has finally committed to speeding up adoption, and even if most small businesses haven't heard much about open banking yet, it's worth noting. This budget announcement represents a turning point for Canada's 1.2 million small businesses, which have operated at a competitive disadvantage while other countries have surged ahead with open banking systems.
For small businesses, it's not just about innovation; it is about survival and competitiveness in an increasingly digital economy. In anticipation of these changes, real entrepreneurs were struggling with outdated financial systems, and I worked closely with many of them.
Consumer-oriented banking supports the flow of financial information between businesses and their financial instruments. Small businesses will finally be able to take advantage of the breadth of tools available to them, including increased efficiency, improved access to capital and improved decision-making capabilities. Ultimately, this allows entrepreneurs to focus on what they do best: running their business.
At Xero, we have been a leading voice advocating for this progress, working closely with government stakeholders. We are pleased to support the implementation of this framework as it moves forward.
Real pain points are solved
I've heard stories from entrepreneurs I've worked with who face the challenges of our closed system every day. For example, many small businesses find it difficult to see their financial picture in real time. Without the right tools, businesses may be rich on paper but unable to pay wages.
Sean Hoff, CEO Moniker Partnerscorporate vacation planning company started out like many companies: with Excel spreadsheets, trying to keep track of everything. Managing 20-30 incoming and outgoing payments multiplied by 20 clients created something that was not scalable.
“You feel like an air traffic controller, trying to keep up with all these flights arriving and departing, but half your screens are dark,” Hoff explained.
Fintech companies have been eagerly awaiting this announcement. Companies across the ecosystem understand the barriers our current closed system creates.
His biggest piece of advice for new business owners? “Cash flow is king. You can make a ton of sales and think the business is doing well because you have revenue, but if it takes 30, 45 or 60 days to raise that money, you may be out of business before you see that revenue.”
With the right financial tools, the difference is dramatic. “Being able to see and track revenue and the time it takes to collect it is really important for decision making,” Hoff said.
I have also seen small businesses waste countless hours on manual data entry and financial reporting when time could be spent growing their business instead. Emrah Eren, General Director Duco Mediaan Ottawa-based marketing agency, started with Excel files and created invoices in Word, then converted them to PDF. During COVID, preparing financial statements for funding applications took “hours and hours and hours.”
For businesses operating internationally, the challenges multiply. Hoffa's experience in receiving and making payments in multiple currencies created problems with platforms that did not handle foreign currencies well. Open banking will provide better integration with tools that can automatically track foreign exchange rates and convert them into Canadian dollars for profit and loss reports, which is critical for any business that operates internationally or deals with foreign suppliers and customers.
Entrepreneurs also need access to real-time dashboards where analytics are always at their fingertips. “Having these analytics at your fingertips is extremely helpful in making reliable decisions … being able to reliably look at the numbers and predict when it might happen,” Hoff said.
Open banking will make these features standard rather than premium.
The fintech community is ready to provide
I can tell you that fintech looking forward to this announcement. Companies across the ecosystem understand the barriers that our current closed system creates, and there is a strong sense of optimism about the potential for innovation once this structure is in place.
As a global company operating in open systems regions such as the UK, we at Xero know that open banking is a game changer. We stand ready to support implementation and provide enhanced services, and we stand ready to work with government stakeholders to make this a reality.
Realization will not happen overnight, but the momentum is already here. Fintechs and financial services companies are ready to collaborate and deliver results. Small businesses can look forward to a more competitive, efficient and secure financial ecosystem.
Xero is proud to be a leading voice for small businesses in this conversation as it works closely with government stakeholders to advocate for this progress. We are pleased to support the implementation of this framework as it moves forward.
To learn more about how open banking can benefit small businesses, visit opensme.ca.
Image courtesy of Xero Canada.
