Canada's banking sector just received a wake-up call, and it came from the regulator.
In February 2026, OSFI announced it would fast-track banking licence applications from fintechs and credit unions, starting in June, and commit to hard deadlines and a public dashboard to hold the process accountable. For an industry where a single licence application once took six years, this is a structural shift, not a minor policy tweak.
The numbers have been embarrassing for a while. Canada's Big Six hold 93 per cent of all financial assets. Those same banks generate some of the highest returns in the world from their domestic operations, not through superior innovation but through the structural advantage of an almost impenetrable competitive moat.
Getting a banking licence in Canada has historically required millions of dollars, years of patience, and a tolerance for ambiguity in processes that most well-funded fintechs simply do not have. Questrade spent six years navigating the system before Questbank launched in November 2025. Koho, one of Canada's most prominent challenger banks, has been in the process since 2021 and is still waiting.
OSFI has acknowledged the system wasn't working. The regulator said in a statement that its lengthy approval process "has discouraged some innovators." That is a significant admission from an institution not known for self-criticism.
The fast-track pilot is more structured than previous reform attempts. OSFI is committing to providing initial feedback within 4 weeks after a pre-application meeting, a 12-month timeline for making a formal recommendation to the Minister of Finance, and 3 months from ministerial approval to a new bank becoming officially operational. A public dashboard will track the status of all applications.
Importantly, the approach shifts from a universal checklist model to a risk-based assessment. OSFI will evaluate each applicant based on its specific risk profile, with a focus on credit exposure and anti-money laundering controls for bank-like fintechs. The regulator has also signalled its willingness to accept the orderly failure of a regulated institution, a meaningful change in posture from an agency that has historically treated any institutional failure as an unacceptable outcome.
The lawyer who has navigated more of these applications than most, Torys' Eli Monas, offered a useful caution: a banking licence brings credibility, but it also brings annual supervisory reviews, deeper scrutiny, and higher compliance costs. The fast-track does not make becoming a bank easy. It makes the path legible.
The fast-track announcement was not the only significant regulatory development coming from OSFI in February 2026. At the same industry day, OSFI presented:
A new Data Collection Modernization initiative replacing the legacy Regulatory Reporting System with a cloud-native platform built on the Regnology Supervisory Hub, rolling out from fall 2026 through spring 2028. The new system supports API-based automated filing and JSON submission formats and should dramatically reduce the friction of regulatory reporting for institutions with modern infrastructure.
A consolidated Credit Risk Management Guideline that will pull together Guideline B-20, various notices, and advisories on real estate secured lending into a single framework. For mortgage lenders, this simplification matters: it reduces interpretive burden and should make underwriting policy easier to maintain and audit.
Updated Liquidity Adequacy Requirements effective May 1, 2026, including cleaner deposit classification rules and simplified treatment for structured notes.
And a consultative process on Senior Leader Accountability, running through October 2026, which will formalize expectations for how executives at regulated institutions are held responsible for their decisions.
Taken together, this is not a single reform. It is a coordinated modernization of the regulatory environment in which Canadian financial institutions operate.
More licensed players in Canadian financial services means more competition for the same mortgage customers. That is obvious. What is less obvious is what happens to the operational baseline across the industry.
When well-capitalized, digitally native lenders can finally obtain banking licences and serve customers directly, the competitive pressure to process applications faster, reduce underwriting errors, and close mortgages more efficiently becomes a survival issue for slower-moving institutions. The question for every lender's CTO and CIO right now is not whether this competitive shift is coming. It is whether their technology stack is ready to compete on the terms the new entrants will set.
Legacy manual processes, siloed data, and slow decision cycles are liabilities in a concentrated market. In a competitive one, they become existential. The lenders who have invested in automated underwriting, fraud detection, and streamlined funding workflows will find themselves absorbing market share that slower institutions cannot hold.
OSFI is opening the gate. New entrants will arrive, and they will be digital-first by design. The institutions best positioned to compete are not the ones who will be surprised by this change; they are the ones who spent the last two years building infrastructure capable of moving at the speed the market now demands.
The harder question: if a better-capitalized, better-automated fintech could finally get a banking licence today, how long would it take to take your mortgage customers from you?