Lynn Johannson, Advisor, Sustainability and ESG
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Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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NCFA OpEd: Canada’s Open Banking Consultations: Let’s Get it Done!
NCFA Canada | Dec 3, 2020
Open banking is about giving Canadians control over their banking data to allow them to take advantage of data-driven financial services offered by third parties. But what exactly does that mean?
Imagine giving Canada Post the key to your house to deliver a parcel, rather than leaving it securely in a mailbox. The same situation may happen when sharing your banking data with a third-party. While some provide a secure mailbox accessed using an application programming interface, other require consumers to divulge their user name and password to a stranger. Open banking regulation would provide consumers with a secure and standardized way to share data and access valuable financial advice, products or services.
This week Finance Canada’s Open Banking Advisory Committee (OBAC) is holding the second phase of consultations. OBAC is meeting with banks and financial institutions, financial technology (fintech) companies, industry associations, and other stakeholders coast-to-coast. Five three-hour sessions take place from November 30 to December 17 to review the proposed framework, covering data standards, privacy, cybersecurity, accreditation, and more.
See: MOF: Consumer-directed finance: the future of financial services
This is welcome news after the almost two-year delay since the first consultations were launched in January 2019. Canada’s foot dragging continued despite the June 2019 recommendation from our Senate Banking Committee that “The federal government must give Canadians the means to share their financial data safely and securely by facilitating what’s called open banking”.
See: Senate of Canada, “Open Banking: Protecting Canadians’ financial information”, June 19, 2019, https://sencanada.ca/en/info-page/parl-42-1/banc-open-banking/#collapse-item3.)
The hold up continued through the COVID-19 pandemic, when Canadians turned to digital platforms to manage their personal finances as never before.
The OBCA understands the urgency to get this regulation in place. We agree. It is time to pass open banking legislation that provides access to innovative financial services while protecting consumer-welfare, similar to what exists in the EU, UK and Australia.
The National Crowdfunding & Fintech Association of Canada (NCFA) has long advocated for consumer-centric financial services that increase consumer choice. Canadians deserve competitive and transparent pricing. They deserve regulation that is proportionate to the risks and rewards. We support innovations that increase financial inclusion, address bias and discrimination, and create jobs. We want our fintechs to succeed at home and abroad, alongside other Canadian technology success stories.
The UK has been a leader, passing open banking legislation in January 2018 to increase competition and promote innovation in financial services. The Financial Conduct Authority (FCA) is the government regulator responsible for protecting consumers. The FCA has set open banking standards and publishes a list of approved providers. This agency has been proactive, for example targeting data brokers who aggregate and sell consumer data. The UK has set the model for Canada to follow.
See: Global Risk Institute Report: Discussing Open Banking Regulation for Canada
The OBAC will recommend Canada’s open banking solution to the Finance Minister. A successful launch will require one entity to be responsible for the roll-out. It will require harmonized rules across Canada to avoid a provincial patchwork. Licensing and compliance costs should encourage competition and not simply favour incumbents, in line with the February 2019 submission from Canada’s Competition Bureau.
Education and effective communication will be critical. Regulators cannot rely on consumers to educate themselves, which was tried and failed with equity crowdfunding. To boost public confidence, we need a public awareness campaign that highlights the benefits of open banking and the steps being taken to protect consumers.
Canada’s framework needs to recognise international standards and avoid being siloed. To this end, OBAC should incorporate the work of the Standards Council of Canada on industry-wide standardization strategies for data governance. We need a future-proofed framework that will support a globally competitive financial system.
The open banking train has left the station. Canada risks being left behind if we don’t act now. The greatest risk is inaction. Passing open banking legislation will allow Canada to advance to a financial future that puts the needs of consumers first.
Craig Asano is the Founder and CEO of NCFA Canada. Prof. Michael R. King is a NCFA Advisor and Richard Remillard is a NCFA Board Member.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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