Fintech Leaders Cautiously Optimistic About #Budget2024 Open Banking Promises: ‘Devil is in the Details

The update in Tuesday’s federal budget regarding open banking was met with applause from FinTech leaders and industry associations. However, there remain unanswered questions regarding the technical standard at the core of the future consumer-driven finance system and the timeline for its launch.

The government announced that the Financial Consumer Agency of Canada (FCAC) would oversee the new system, with plans to introduce legislation in spring 2024 to expand the agency’s mandate. This legislation will include framework elements concerning the system’s scope and technical standard, with the remaining elements to be delivered in a second piece of legislation in the fall.Despite the announcement, the government did not specify a launch date for when the system would become operational for Canadians, although it previously targeted sometime in 2025. This lack of clarity regarding the go-live date has left some stakeholders feeling uncertain about the future implementation of open banking in Canada.

The consumer-directed finance system aims to enable Canadians to securely share their financial data with third parties, such as FinTech companies, facilitating easier switching of financial institutions. Currently, financial data sharing often occurs through insecure methods like screen-scraping, posing risks to consumers and potential violations of banks’ terms of service.Alex Vronces, executive director of Fintechs Canada, described the announcement as the most significant update the sector has received since the government began discussing open banking. He emphasized the potential of consumer-directed finance to address affordability issues by fostering greater competition in the financial sector.

However, the absence of an update on the go-live date raised concerns among stakeholders. While acknowledging the government’s progress, Vronces highlighted the need for clarity and certainty regarding the implementation timeline.

Nicholas Schiavo, as the director of federal affairs for the Council of Canadian Innovators, acknowledged the positive strides made with the introduction of the open banking framework. However, he emphasized the critical need for meticulous planning and effective execution to guarantee its success. This sentiment underscores the importance of thorough preparation and strategic implementation to address any potential challenges and maximize the framework’s impact on the Canadian financial ecosystem.

Hanna Zaidi, vice president of payments strategy and chief compliance officer at Wealthsimple, expressed appreciation for the update but called for greater clarity on the technical standard and data-sharing requirements. She emphasized the need for standardized rules to ensure consistency and interoperability across financial institutions.Despite these challenges, the government aims to establish a fair, open, and accessible technical standard aligned with public policy objectives. This alignment includes interoperability with the forthcoming American framework overseen by the U.S. Consumer Financial Protection Bureau, presenting opportunities for cross-border collaboration and expansion for Canadian FinTechs.

The governance structure for Canada’s consumer-driven banking system involves oversight by the FCAC and a tiered accreditation process for participating entities. While the FCAC’s role has been lauded for its consumer protection mandate, some stakeholders have raised concerns about the agency’s lack of a competition mandate and emphasized the importance of personnel selection for effective oversight.

Overall, while the announcement signifies progress towards open banking in Canada, stakeholders await further details and clarity on implementation timelines and technical standards to fully realize the potential benefits of the new system.