The recent Fall Economic Statement (FES) unveiled by the Canadian government has provided a mixed outlook on the establishment of a consumer-driven open banking framework. Initially proposed in Budget 2024, this framework aims to enhance competition within the financial services sector and streamline the process for customers to share their financial data with third parties. However, the timeline for its implementation has now been extended to 2026.
The government has increased the budget allocated to the Financial Consumer Agency of Canada (FCAC) for this initiative to $44.3 million over a three-year period. Yet, the timeline move, previously set for a 2025 launch, has drawn criticism from within the FinTech community. "There have been so many announcements that we’ve lost count of them all. But there have only been a few instances of follow through," said Alex Vronces, executive director of Fintechs Canada.
Despite the announcement of the new framework, which includes proposed accreditation and tiering rules, many industry leaders believe that significant legislative challenges must be overcome before real change can be realised. The existing Liberal government must amend the necessary legislation to facilitate the framework's rollout, and some experts are sceptical about the process being completed in time.
Nicholas Schiavo, director of federal affairs for the Council of Canadian Innovators, described the initial steps towards establishing an open banking framework as positive but cautioned that "the devil is in the details." This sentiment resonates within the sector as FinTech leaders express concerns regarding the framework's effectiveness, particularly the lack of a tiered accreditation approach, which Andrew Escobar, a former FinTech executive at US-based MX, described as a potential hindrance. He noted that this could "hamper the impact of open banking, perhaps severely," indicating that the current uniform application system may restrict participation from smaller firms and innovative startups.
The undertaken measures would require companies seeking accreditation to submit detailed applications to the FCAC, encompassing information about their governance, operational standards, and liability measures. The anticipated tiered accreditation could allow for different requirements based on the applicant's scale and data needs, a move many advocates argue would facilitate broader participation from new entrants in the market.
As for the regulatory supervision of the proposed open banking framework, the Minister of Finance has been granted authority to appoint a provincial regulator responsible for oversight within its jurisdiction, including overseeing provincial credit unions. This structure is intended to enhance security, privacy, and consumer protection, while matters of national security, accreditation, and penalties will remain under the jurisdiction of the FCAC.
The implementation of this framework is particularly significant as it aims to effectively ban the practice of screen-scraping once operational in 2026. This method, which currently permits consumers to manually input banking data to access financial services, has been criticized for its security implications. Abraham Tachjian, a former open banking lead at the Department of Finance, emphasized that forcing accredited third parties to adopt a legislated framework would promote essential network effects necessary for a robust data-sharing ecosystem.
While advocating for these changes, Vronces recognised that the FES failed to address critical components such as regulatory frameworks and the modernisation of Canada’s payment infrastructure through real-time rail (RTR) systems, which allow for instant money transfers. Payments Canada indicated that industry testing for RTR would not commence until 2026, despite delays since 2019. Vronces warned that without these advancements, established banks may lack the incentive to enhance their offerings for Canadian consumers and businesses.
As Canada continues to be the only G7 nation without a comprehensive open banking and RTR framework, industry stakeholders are closely watching the political developments surrounding these initiatives. The political landscape is complicated by the recent resignation of Deputy Prime Minister and Finance Minister Chrystia Freeland and leadership challenges within the Liberal party. Rebekah Young, vice president at Scotiabank, highlighted that successful implementation of legislative items hinges upon resolving the current parliamentary impasse and gathering sufficient support from other political parties, a prospect that appears increasingly remote.
Source: Noah Wire Services