Canada’s Department of Finance Advisory Committee recommends steps towards open banking
Canada’s Department of Finance Advisory Committee on Open Banking has issued its final recommendations report, marking a pivotal step in the nation’s journey towards embracing Open Banking.
This much-anticipated report outlines a strategic roadmap for the integration of Open Banking in Canada, a move that promises to reshape the landscape of financial data management and service delivery for Canadians and small business owners.
At the heart of this initiative is the introduction of an “Open Banking Lead”. This role, crucial in the transition to Open Banking, involves leading industry working groups, crafting proposals, and establishing technical standards and an accreditation framework. Over an 18-month timeline, the Open Banking Lead will lay the foundation for what will eventually become a government entity, serving as Canada’s authoritative body in Open Banking.
The report delineates clear guidelines for participation in the Open Banking system. Federally regulated banks would be required to engage in this new framework, while provincial financial institutions would have the option to join voluntarily. Moreover, the inclusion of new entrants is contingent upon meeting agreed-upon accreditation criteria.
In its initial phase, Open Banking in Canada will focus on read-only activities. Finally, all data currently accessible to consumers and SMEs through online banking platforms would be included within the scope.
An important aspect of this framework is the reciprocal sharing of data, which hinges on consumer consent, thus ensuring that banks cannot unilaterally demand access to consumer data held by FinTech companies.
Despite the comprehensive roadmap laid out, the report leaves some critical questions open, especially regarding the inclusivity of all stakeholders in the new Open Banking system. Concerns remain about how to effectively govern and safeguard consumer interests, particularly in areas such as privacy, data security, and liability. These issues are crucial for the integration and acceptance of FinTechs and other new market entrants in the Open Banking ecosystem.
Canada is poised to join the ranks of countries like the United Kingdom, Singapore, Australia, and Brazil, which have already made significant strides in open banking. The advisory committee’s recommendation for implementation by 2022 underscores Canada’s ambition to quickly adapt and remain competitive in the global financial arena. The report is also seen as a catalyst for broader discussions on inclusive financial services systems and the potential of Open Banking to drive innovation and economic growth.