It seems that everywhere you look in business circles, everyone is talking about Artificial Intelligence (AI). Rapid innovations in the technology’s use and potential over the past couple of years have not gone unnoticed by companies, consumers and governments.
The result is that a number of governments are now seeing cultivation of a strong, and well regulated, AI sector as key to economic growth. The US and UK are two of the most notable examples of this, and now the Canadian government is getting onboard.
Prime Minister Justin Trudeau unveiled the Canadian federal budget on 16 April, with a heavy focus on reducing living costs. Some aspects of the budget had already been unveiled, however, and a substantial investment in AI has caught the attention of the country’s tech and fintech sector.
“It’s a positive step to see the federal government invest in Canada’s AI sector and bolster our domestic industry,” Nick Schiavo, Director of Federal Affairs at the Canadian Council of Innovators (CCI), told Payment Expert..
“That being said, we are cautiously optimistic because we need to see the details and the execution of how this rolls out.”
In one of many pre-budget speeches in early April, Trudeau mapped out plans for funding into Canadian AI to the tune of CA$2.4bn (£2.4bn/USD$3bn). The technology, the PM said at the time, will be a ‘gamechanger’ for Canada’s economy.
Like many other Western nations, Canada’s economy is still recovering from the impact of the COVID-19 pandemic. Consumers are also, as Trudeau noted, struggling with costs of living, a problem shared in other economies such as in Europe.
AI can play a vital role in driving economic growth forward, the government believes, for similar reasons given in other countries – saving costs by automating processes, preventing losses through fraud, and potentially exporting AI products and solutions to other markets.
For Schiavo, based on his experience of Canadian business, for the government’s plans to work, a ‘fundamental’ area that needs to be addressed first is adoption. Companies may need some encouragement to implement AI across respective business models.
“Canadian companies are slow to adopt AI in their businesses compared to US companies – about half as many,” he explained.
“There is a real need for the economy and businesses to adopt AI and drive productivity, which is lacking in Canada. But it’s too soon to say if we can get there.”
As with other Western nations Canada is home to a diverse economy, In recent decades, financial services and banking have played an increasingly important role in this economic mix.
The Toronto Stock Exchange (TSX) is the world’s 10th largest exchange and the third largest in North America. The country is also home to some notable names in North American payments, and in markets further afield, such as Nuvei and KOHO Financial.
“In 2024 every company is a tech company, every company is using advanced technology and has large sets of data.”
Nick Schiavo
When announcing the investment, Trudeau did not mention fintech as a target sector. In particular, a $200m fund will be directed towards AI adoption in agriculture, health care and clean technology.
However, as the fruits of Canada’s AI investment become clearer – with the investment having only been announced lately we can only project what may happen at this point – the impact will likely be felt across the country’s economy.
Schiavo shared his view on the matter: “Typically when we talk about AI we talk more about our traditional tech companies. Firms operating in cybersecurity, healthtech, clean energy, financial technology.
“But traditional industries must also adopt AI, such as agriculture, manufacturing and natural resources – areas that are integral to the Canadian economy.
“In 2024 every company is a tech company, every company is using advanced technology and has large sets of data that can be very valuable. How we help them harness that, and improve on that is integral. AI will cut across all industries and sectors and make them more productive.”
However, Schiavo added that, when it comes to fintech and financial services, the opportunity AI poses is hard to ignore. He explained: “If AI can create new products and services that can give more choice and control to Canadians, then that is a win. It’ll be interesting to see that develop over the next few years.”
AI has been one of the biggest talking points in paytech and fintech over the past year, and Trudeau’s administration is not the first Western government to explore how the tech could bolster its economy.
“Open Banking, in conjunction with AI, can create products and technologies to help consumers and families save money, as well as Canadian businesses.”
Nick Schiavo
Over on the other side of the Atlatnic, the British government, particularly under finance industry proponent Rishi Sunak, is keenly supporting AI. UK political leadership has mapped out its own funding plans, to the tune of £500m in tech funding in the Autumn budget, and has commented openly on responsible AI development.
Open Banking has also been an area of focus for the UK government though, as seen by the Future of Payments Review. In Canada, the possibilities Open Banking presents has also not been lost on political, economic and business stakeholders.
In an interview with Payment Expert late last year, Schiavo shared his views on the significance Open Banking can have for Canada, pointing to cost savings on payments and offering greater choice for consumers, among other areas.
Five months later, he believes there is yet more opportunity to be found in linking this with AI. Trudeau’s funding plans come at an exciting time, he said, as Canada is ‘on the cusp’ of Open Banking. The details of the Consumer-Driven Banking Framework, expected to ‘get up and running’ as Schiavo put it, in 2025, will hopefully drive this forward further.
“We’re less than a year away from seeing that online, and I think Open Banking, in conjunction with AI, can create products and technologies to help consumers and families save money, as well as Canadian businesses. There’s a lot of potential over the next few years, but we’ll have to see.
“There are studies that show that more competition in financial services actually increases overall productivity, which makes sense. There is a direct link between competition, innovation, AI and how it will impact Canadians’ wallets.”
In addition to the sector specific $200m commitment, Trudeau outlined another focal area of funding – responsibility. The government plans to direct pump $15m into the creation of an AI Safety Institute, again mirroring developments in the US and UK.
Turning back to Britain once again, Sunak has been a keen proprennet of safe and responsible AI development, having made his views clear at the inaugural AI Safety Summit last year.
Following through, the government later sponsored the creation of a UK AI Safety Institute, a development which then occurred in the US. The duo have since signed a cooperation agreement, and the CCI expects a similar path to unfold with Canada.
“Canada is already engaging with the US and UK on harmonising global AI frameworks and innovation projects, and having that cooperation continue, particularly in the context of responsible AI development, is integral,” Schiavo added.
“We’d love to see this Institute be at arm’s length to the government and of course nonpartisan to make sure it’s independent.”
The Canadian government’s $15m pledge signifies that it too is committed to responsible development, Schiavo said, adding that this will also support companies in their own responsibility to develop AI products and tools with clear guidelines.
“Responsibility, safety and security has to be at the heart of any public policy around artificial intelligence, as well as any products or technologies that are developed using AI,” he continued.
“We’ve been vocal in wanting to see the Artificial Intelligence and Data Act passed. The origins of this legislation date back to 2020, it’s been a long time coming. It may not be 100% perfect, but it has a made-in-Canada regulatory framework that puts trust back in Canadians hands, with the technologies being developed safely and securely with no bias.”
The potential of AI for various industries is widely discussed and, in many cases, eagerly anticipated. For finance, fintech and payments, one of the most widely touted benefits is fraud prevention, for example.
However, concerns have also been raised. In traditional industries like manufacturing, for example, worries have been expressed over potential impact on employment, surrounding a fear of human employees being supplanted by technology.
“We want to make sure we are getting this policy right, we need to make sure domestic scale-ups are at the table.”
Nick Schiavo
As Canada develops its own AI frameworks and industry, the government must ensure that domestic businesses are supported, whatever sector it may be, Schiavo emphasised.
This approach must factor in a focus on homegrown scaling of domestic firms, protection of intellectual property to ensure investment stays in Canada, and effective commercialisation of any Canada-developed AI products. So far, CCI is interested with the government’s AI plans, he said, but more work is on the horizon.
“Our first step is focused on our own backyard,” he concluded. “We want to make sure we are getting this policy right, we need to make sure domestic scale-ups are at the table. We need to focus on our homegrown industry, on IP and commercialisation.
“Once we have that in place we want to make sure we are aligned with other jurisdictions and so that Canadian companies can export and compete. There will be a lot of engagement with the federal government in the months to come.”
