Progress on Canada's Consumer-Driven Banking Framework

I can't say there were many surprises, this is the logical evolution of the work and recommendations from stakeholders, industry, and numerous committees over the years. So, what's new or what has changed?

First and foremost, the government intends to introduce two pieces of legislation to facilitate open banking - spring of 2024 and fall of 2024.

The spring legislation is to include the following:

• Implementation of Governance – the introduction of a governing body.? The FCAC (Financial Consumer Agency of Canada) has been selected as the regulatory entity responsible for the implementation and operation of open banking in this country.
• Confirmation of Scope – what accounts and what data can be accessed and shared.
• Criteria and a process for selecting a Technical Standard – the API specifications.

The fall legislation will include the remaining elements:

• Criteria, standards, and process for Accreditation – what a data requestor and / or a data provider need to do to qualify to participate in open banking.
• Common Rules – this will be the details behind the liability policies, data privacy and security.
• National Security – This is a new item that will provide the Department of Finance with the ability to work with the FCAC and take action to protect the open banking ecosystem for national security reasons.

One item of note is the inclusion of language regarding the API standard and the public policy objective of “including interoperability with the coming American framework overseen by the U.S. Consumer Financial Protection Bureau.”

While there has been much discussion among stakeholders and industry about what API standard should be selected, it would only make sense that whatever we select is at the very least compatible with the prevalent standard in the US.? That would drive efficiencies for data requestors and data providers so that they don’t have to duplicate API infrastructure and governance for each side of the border.

The expectation is that the scope of consumer-driven banking will evolve iteratively over time.? We will have to wait for the legislation to show us the details about the ‘scope’ of open banking, who can participate, the accounts / data in scope and the functionality – again with the read & write access comments, argh!

Participation Scope: the intention was always to mandate the ‘big’ banks and make participation optional to other banks and financial institutions like credit unions, etc.? We now see phrasing about mandating “…participation for banks that meet a specified threshold for retail volume.” ?I don’t know if that will mean # of accounts or payment transactions or revenue??

We do know that service providers and data providers wishing to participate will need to apply to the FCAC and go through an accreditation process where they would need to meet certain requirements related to oversight, governance, security standards, data privacy, operational standards, and financials – such as balance sheets, liquidity, insurance, etc.

Data Scope: The initial phase continues to have a data scope that includes chequing and savings accounts, investment products available through online portals and lending products.?

What it doesn’t say is whether non-bank entities like insurance companies or wealth management companies that hold these types of accounts or products will be mandated to participate or will remain voluntary.

Unfortunately, we still will not have some of the capabilities that have been identified in other countries as bringing the most benefit or value – the ability to initiate payments or to open / change / close accounts or switch providers.? ?But hopefully we will see those functionalities included in subsequent phases where the scope is expanded.

Liability has been a big topic of discussion, and it looks like the concept of liability following the data will be established as a foundation of the Framework.? It will be interesting to see the details on consumer protections in the case of financial losses associated with data sharing.

There will no doubt be more discussion and review of the information released in the budget and we will all be eagerly awaiting the legislation and further information coming from our new open banking regulator!