Blanc Labs and Altitude Consulting dug deep into successful models of adoption of challenger banks and found five key areas that will make or break your open banking strategy.
Gain access to our findings for advancing in the open banking race while regulators are working hard to finalize the remaining details.
When we attended the CLA Lenders Summit a few weeks ago, it seemed like everyone was ready to sign the death certificate for Open Banking in Canada. Very little, if any, material progress had been communicated on behalf of the government to create a regulatory framework or policy mandate to make good on the promise or timelines defined by an Advisory Committee on Open Banking Report which became the mandate of Abraham Tachjian, who was appointed as Canada’s Open Banking lead, by the Liberal government in 2022.
Aside from a snazzy rebrand of the open banking moniker, the policy statement on Consumer-Driven Banking outlined the goal of “adopting legislation and fully implementing the necessary governance framework by 2025”. It would seem from the update, part of the government’s motivation for moving ahead with consumer-driven banking is a focus on the affordability crises facing many Canadians. The Consumer-Driven Banking policy statement was listed under the header of āMaking Life More Affordableā in the economic update.Ā The update for Canada now seems to be following a similar path to how policy is being shaped and implemented in the US.
Our Take:
As long-term believers in the benefits of Open Banking, we are thrilled to learn of the renewed commitment to making consumer-directed banking a reality in Canada.Ā While there is still a lot of work to be done as well as the additional hurdle of newĀ legislation being tabled during an election cycle, we are committed to the potentialĀ benefits of Consumer Directed Banking for banking customers and the significant opportunity for innovation and collaboration in the Canadian financial services sector.
You can read the full Fall Economic Statement here but if you are short on time, ChatGPT did a pretty good job of summarizing the statement in bullets, below.
Introduction to Consumer-Driven Banking:
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- Allows secure transfer of financial data via API.
- Aims to replace unsecure screen-scraping.
- Enables access to data-driven financial services.
Benefits of Consumer-driven Banking:
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- Consumers gain secure access to innovative financial tools.
- Greater control over financial data for improved outcomes.
- Small businesses experience reduced administrative burden.
Policy Objectives:
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- Safety and soundness of the financial sector.
- Consumer financial well-being and protection.
- Economic growth and international competitiveness.
Core Framework Elements:
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- Governance: Oversight and management of the system.
- Scope: Types of data, participants, and expansion pace.
- Accreditation: Requirements for participating in data sharing.
- Common Rules: Privacy, security, and liability guidelines.
- Technical Standards: Establishment and oversight of data flow.
Course of Action (Legislation in 2024):
-
- Phased approach to scope, oversight, and screen-scraping elimination.
- Key elements codified in legislation.
- Mandate to a government-led entity for supervision and enforcement.
Governance (Effective Oversight):
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- Government-led entity to supervise and enforce the framework.
- Model for provincial entities to “opt-in” to governance.
- Strong governance framework to ensure compliance.
Scope (Phased Implementation):
-
- Initial phase includes federally-regulated financial institutions.
- Opt-in option for credit unions and third parties.
- Reciprocal access for all entities to promote data portability.
Accreditation (Trusted Data Sharing):
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- Formal framework for entities collecting consumer data.
- Regular reporting for accreditation maintenance.
- Exemption for federally-regulated banks and credit unions.
Common Rules (Transparent Foundation):
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- Privacy, security, and liability obligations.
- Compliance as a condition for data access.
- Complements existing legislation.
Privacy (Protection Measures):
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- Participants must comply with legislative frameworks.
- Specific privacy rules for financial data sharing.
- Consent dashboards for real-time consumer control.
Liability (Clear Structure):
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- Statutory contractual relationship between participants.
- Liability moves with the data and rests with the party at fault.
- Internal policies and procedures for complaint handling.
Security (Protecting Consumer Data):
-
- Clear security requirements for accredited entities.
- Oversight of security standards in legislation.
- Ongoing reporting obligations for data protection.
Single Technical Standard:
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- Mandate for a single technical standard.
- Legislation to outline principles and oversight.
Next Steps for consumer-driven banking:
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- Department of Finance aims to implement the framework by 2025.
- Ongoing engagement with industry stakeholders.
- Legislative framework development and phased implementation.
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