Thought Leadership
By Kevin Landry
On April 15, 2024, the Canadian federal budget was released. Connected to the budget was an explanation of the framework for Canada’s proposed implementation of Open Banking (sometimes called consumer-driven banking).
This follows several other recent developments in the fintech and payments space in Canada, such as the Retail Payment Activities Regulations, and the Retail Payments Activities Act.[1]
Background
In March 2022, the Federal Government named Abraham Tachjian as the Open Banking lead, and was mandated to develop a “made in Canada” regime based on the recommendations in the final report of the Advisory Committee on Open Banking.
What was revealed about the expected open banking framework?
Governance
The Financial Consumer Agency of Canada (“FCAC”) will have an expanded mandate that includes oversight of Open Banking and responsibility for establishing foundational framework elements. The Department of Finance will retain its role in respect of policy and legislative or regulatory development.
Next steps- legislation
The government will introduce one or more pieces of legislation in spring of 2024 to implement the Open Banking framework. These statutes are expected to outline key elements, such as governance, scope, criteria, and process for the technical standard. Remaining elements of the framework will be legislated in fall of 2024.
Framework rules are expected to avoid creating duplicative or potentially conflicting requirements with existing legislation.
Multi-stage implementation
In the initial phase of implementation, the government will mandate participation for Canada’s largest banks and allow opt-in participation for other financial institutions desiring to participate (such as fintechs) and provincially regulated organizations like credit unions.
What data can be shared?
Data related to chequing and savings accounts operations, investment products available through their online portals, and lending products – such as credit cards, lines of credit, and mortgages – will be shareable in the initial phase.
Importantly for many participants, data that has been materially enhanced such that it offers the participant “significant additional value or insight” will not be required to be shared, which will protect many participants’ market advantage.
Standing prohibitions on the sharing of customer information for the business of insurance will remain in force.
How will data be shared?
Once allowed to access the framework, all accredited participants, when authorized by a consumer, are required to share consumers in-scope data in its unaltered, original format, free of charge, with other participants. This will be a requirement for continued participation in the framework.
Accreditation
The framework will set out specific criteria for data requestors to access consumer financial data. A list of all authorized participants will be publicly available in a central registry for transparency.
Participants will need to apply to the FCAC with information on their organization, operational standards, and financial capacity. Mandatory reporting of key information will be required to maintain accreditation.
Privacy
Although participants in the framework will continue to be required to comply with existing privacy legislation, additional privacy rules for financial data sharing will be introduced.
Some interesting features outlined in the disclosure are that participants will be required to “reconfirm” consent from consumers at regular intervals, and provide dashboards to ensure consumers have real-time knowledge of who has access to their data; the type of data they share; the accounts where the data is collected; what consents are granted and how to revoke them.
Liability to flow with the data
The framework establishes a statutory relationship between participants, eliminating the need for cumbersome bilateral contracts between participants for data sharing.
This expected liability structure will move liability with the data and place it with the party who is in control of the data, if anything goes wrong.
Any data provider’s liability toward a consumer for how the data is managed or protected ceases once it leaves the institution but the data provider maintains liability toward the consumer for data under its control.
Security
The legislation will establish the baseline security requirements for all participants to protect consumer data. Participants will also be required to complete ongoing reporting obligations and surveillance audits.
National security and the integrity of the financial system
The Minister of Finance will have authorities to refuse, suspend, or revoke access to the framework for national security-related reasons.
Single technical standard
Open Banking will move Canada’s fintech sector away from screen scraping to the use of application programming interfaces (APIs), enabling different products and services to communicate in a consistent manner.
To align with international best practices, the government will mandate the use of a single technical standard.
This update is intended for general information only. If you have questions about the above, please contact the author(s) to discuss your needs for specific legal advice relating to the particular circumstances of your situation.
Click here to subscribe to Stewart McKelvey Thought Leadership.
[1] Stewart McKelvey had previously written about these here, here and here
Archive
Perlene Morrison and Hilary Newman Municipalities in Prince Edward Island entered a new era when the Municipal Government Act (the “MGA”) was proclaimed into force on December 23, 2017. The MGA modernized the Province’s municipal…
Read MoreVasu Sivapalan and Meg Collins On May 5, 2017, An Act Respecting the Opening of Sealed Adoption Records (“Act”) received royal assent, leading to significant changes for birth parents and adoptees across the province. As…
Read MoreJennifer Taylor Recent amendments to the Nova Scotia Insurance Act are designed “to protect the financial interests of an innocent person when the person’s property is damaged by another person with whom that person shares…
Read MoreBrian G. Johnston, QC Cannabis legalization is coming. The legislation is expected to pass by July with legalization becoming effective by September. Employers should take notice because: 1. There is already a lot of cannabis…
Read MoreJanet Clark and Sean Seviour A recent decision from the Supreme Court of Canada clarifies determination of what is “reasonably foreseeable”: Rankin (Rankin’s Garage & Sales) v J.J., 2018 SCC 19. The case involved two…
Read MoreJennifer Taylor & Michelle Chai A recent Supreme Court decision tackled two issues that have proven complex in Nova Scotia law: summary judgment and limitation periods. The Plaintiff in Cameron v Nova Scotia Association of…
Read MoreBrian G. Johnston, QC The Arbitrator in Lower Churchill Transmission Construction Employers’ Association and IBEW, Local 1620 dismissed a grievance on April 30, 2018 concluding: The Employer did not place the Grievor in employment at…
Read MoreRick Dunlop and Richard Jordan Employers, and benefit providers on their behalf, make policy decisions as to what drugs or benefits (including monetary limits) will be covered by benefit plans. The Board of Trustees in…
Read MoreErin Best The decision of Justice Handrigan in Ryan v. Curlew is the first motor vehicle accident personal injury decision to come out of the Newfoundland and Labrador courts in quite some time. The case…
Read MoreRob Aske The arrival of spring should bring thoughts of renewal… to your privacy practices. Breach reporting under PIPEDA Canada’s federal privacy law known by the acronym PIPEDA (Personal Information Protection and Electronic Documents Act)…
Read More