Canadian ecosystem lauds Finance Minister’s plans to ‘make Open Banking a reality’

The Canadian banking, Open Banking and fintech industries have reacted positively to the government’s inclusion of legislation to “make Open Banking a reality” in the Fall Economic Statement (FES), calling it a “significant step” towards consumers’ and SMEs’ financial empowerment.

On 21 November, Canada’s Deputy Prime Minister and Finance Minister Chrystia Freeland promised to deliver the framework legislation for consumer-driven banking in Budget 2024.

Since then, the Open Banking, payments and fintech ecosystems have been reacting, following months and years of campaigning. 

Steve Boms, executive director at FDATA North America, said: “The inclusion of consumer-driven finance in the FES marks a significant step for the financial empowerment of consumers and for small and medium-sized enterprises, for fostering a more innovative Canadian financial services marketplace, and for promoting a fairer and more inclusive financial services ecosystem.

“It reflects a global trend towards consumer-centric financial services, and brings Canada in line with the regimes established by nearly every other G7 nation.”

For Eyal Sivan, vice president, Open Banking and Smart Data at Raidiam, the statement from Minister Freeland “exceeded expectations”.

“The inclusion of SMEs and the explicit call for a government-led entity to handle accreditation, as well as a central registry, were particularly noteworthy,” Sivan said.

“But the single most important word was ‘Budget’. It could not have come at a better time, as the tension in the Canadian community had built to feverish levels and absolutely had to be released. A big congratulations to Abraham Tachjian and his amazing team at the secretariat.”

Co-founder of Wealthsimple, Michael Katchen, wrote on LinkedIn that Open Banking will “dramatically improve” financial services for consumers “through innovation, convenience and competition”.

“It will reduce costs for Canadians without compromising on privacy or security,” he added.

“Wealthsimple has been pushing and preparing for Open Banking for years. We welcome the federal government’s support for this critical effort, and we’ll continue to help drive the process forward however we can.”

Faye Pang, Canada country manager at Xero, also noted the benefits to SMEs of implementing Open Banking and described being “incredibly energised” by the language used in the FES.

“A fair, fast, and efficient Open Banking system can not only open up new avenues of capital, but help small business owners focus on what’s important: running their business,” Pang added.

Credit Unions

In light of the FES announcement on consumer-driven banking, a collective of 10 large credit unions led by the Large Credit Union Coalition (LCUC) chose Caspian One as their “preferred partner” to deliver a customised Open Banking platform.

In a statement, the LCUC said: “We are committed to having the Open Banking platform fully operational and available for use by the time the Open Banking Framework is implemented, or earlier if there are delays from the government.”

The organisation added: “Embracing Open Banking is crucial for competitive parity and enhancing member experiences.”

Staying on the Credit Union track we also caught up with Nez Aquino, interim president and chief executive officer of Vancity, who said: “We believe Open Banking will be an important opportunity for Canadians to have more control when it comes to their finances and their relationship with their financial institutions.

“It also provides financial institutions like Vancity with the ability to further deepen our relationships with members and better support their financial health and wellbeing with products and services tailored to their specific needs.”

Aquino added: “It is imperative, however, that Open Banking is implemented in a manner that maintains a level playing field among Canadian financial institutions of all types and sizes, and that all Canadians have access to the financial literacy they need to make best use of this opportunity.”

The ‘devil is in the detail’

Earlier this month, the Council of Canadian Innovators (CCI) joined Open Finance Network Canada, Fintechs Canada and the Conservatives in calling for the Finance Minister to “reaffirm her government’s promise to enact Open Banking”.

In response to the FES, Nicholas Schiavo, director of federal affairs at the CCI, said: “We are pleased the Minister heeded the calls from entrepreneurs, policy leaders, and experts, and has embraced a regulatory framework that will drive competition, innovation and consumer choice with essentially no cost to taxpayers.”

However, he added: “The devil will be in the details, and Canadian innovators stand ready to work hand-in-glove with the government on developing the specific protocols and regulations between now and the 2024 Budget, but based on what we’ve seen… the government deserves credit for making the right decision.”

In her Economic Statement, the Finance Minister confirmed that Canada will mandate a “government-led entity” tasked with supervising and enforcing the framework.

Roy Kao, board member of Open Finance Network Canada, told Open Banking Expo that while the structure of the governance entity is to be determined, “membership and representation will be interesting and critical”, adding that “‘government-led’ appears to indicate participation of government and non-government representatives”.

The FES also confirmed that the Canadian government will mandate the use of a single technical standard, which Kao noted is “very interesting, as it has been a lightning rod for concerns and potential criticisms for fintech and smaller participants if the implementation and compliance bar is set too high”.

Regarding the timeline set out in the FES, Kao said: “Once read into the Budget in 2024, the goal is to adopt legislations and the fully implemented governance framework by 2025 – but not necessarily operational in 2025, allowing the government room and flexibility to operationalise the consumer-driven banking framework.”

Register your interest in Open Banking Expo Canada 2024, which takes place on June 11 in Toronto.