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
Included in Discovery: Atlantic Education & the Law – Issue 12 By Jon O’Kane & Emma Douglas These days it seems no one is immune from the threat of anonymous keyboard warriors posting untrue and…
Read MoreIncluded in Discovery: Atlantic Education & the Law – Issue 12 By Dante Manna[1] Once known for recreational use, psychedelics are slowly gaining medical legitimacy as research emerges on possible therapeutic benefits for mental health…
Read MoreWe are pleased to present the twelfth issue of Discovery, Stewart McKelvey’s legal publication targeted to educational institutions in Atlantic Canada. Our lawyers provide insight on a number of topics facing universities and colleges including…
Read MoreBy Kyle S. Hartlen, Gavin Stuttard, and Colton Smith What is the Innovation Equity Tax Credit? The Nova Scotia Innovation Equity Tax Credit (“IETC“) is a non-refundable personal and corporate income credit intended to encourage…
Read MoreBy Deanne MacLeod, K.C., Burtley G. Francis and David F. Slipp In June 2022, Canada’s federal government enacted a number of changes to the Competition Act (the “Act”) as the first step in a comprehensive…
Read MoreThis article was updated on April 19, 2023. By Mark Tector and Ben Currie On April 12, 2023 Bill 256: Patient Access to Care Act received Royal Assent. Schedule B of the Bill is the…
Read MoreThis Thought Leadership article is a follow-up to our January 2023 article on the introduction of the Prohibition on the Purchase of Residential Property by Non-Canadians Act. By Brendan Sheridan On January 1, 2023, the…
Read MoreBy Kevin Landry and Jahvon Delaney Background On March 25, 2023, the Government of Canada released a Notice of Intent titled Consultation on potential amendments to the Cannabis Regulations. The Notice outlines that Health Canada is…
Read MoreBy Kimberly Bungay On April 1, 2023, the Nova Scotia government will proclaim into force Bill 226, which amends the Companies Act (the “Act”) to require companies formed under the Act to create and maintain…
Read MoreBy Chad Sullivan and Kathleen Starke Background A recent decision, Vail v. Oromocto (Town), 2022 CanLII 129486, involved several grievances including an unjust dismissal claim by a firefighter as well as a grievance filed by…
Read More