Canada’s Consumer-Driven Banking Framework Takes a Step Forward

Last week, the Canadian government made a significant step forward in the implementation of its Consumer-Driven Banking Framework. As part of its Budget 2024 address, the Canadian government shared that it will introduce the first of two pieces of legislation this spring that will outline governance, scope, and criteria, as well as a process for a technical standard for Open Banking in Canada. 

Establishing this open banking framework will give Canadians more control over their financial data and enable a more inclusive financial ecosystem. It also lays the groundwork for increased innovation and competition across the financial industry — both in Canada and beyond. 

As we’ve said before, we believe that financial data should be accessible and actionable for all consumers to better enable decisions, experiences, and outcomes. We also believe that increased competition, a level playing field, and increased digital innovation can help improve financial outcomes for consumers. 

Here’s a few key things you should know about this framework for consumer-driven banking in Canada: 

Scope of Data

In the initial phase, the scope of data that participants will be required to share at the request of a consumer will include data related to checking and savings accounts, investment products available through their online portals, and lending products, such as credit cards, lines of credit, and mortgages. This is a broader list than what the Consumer Financial Protection Bureau (CFPB) has proposed in the United States. The government will conduct a review three years from now to assess whether to add additional account types.

Covered Entities

The Canadian government will mandate participation for banks that meet a specified threshold for retail volume, which will include Canada’s largest retail banks. Smaller entities like credit unions will be able to opt-in to the framework. In addition, there will be clear requirements for how various entities such as fintechs can participate. It will require reciprocity – meaning data recipients must also allow consumers to share access to the data they hold about them — will be a requirement of participation in the system.

Oversight 

The Financial Consumer Agency of Canada (FCAC) will oversee the system and will be responsible for accreditation of third parties, administration, oversight, and enforcement, and supervision of technical standards. The Budget 2024 outlines additional funding to the agency to support and creates a new senior role to manage this work: the Senior Deputy Commissioner for Consumer-Driven Banking.

Third-Party Accreditation

Third parties will be required to receive accreditation from the FCAC to participate in the system. While there is no tiering for accreditation standards in the initial phase, there is a pathway laid out for eventual tiering of accreditation standards. The FCAC will levy fees on all stakeholders in the system to fund its work.

Liability 

The framework clearly articulates that a data provider should not be liable for a data breach for which it was not responsible. This liability structure is “based on the principle that liability moves with the data and rests with the party at-fault if anything goes wrong.” 

Interoperable Standards

The framework calls for a single technical standard that will be supervised by the FCAC but does not overtly name a standard at this time. In addition, the Canadian government articulates it intends to build an open finance system that is interoperable with the CFPB’s rulemaking in the United States under Section 1033 of the Dodd-Frank Act. However, neither framework is close to being finalized and this doesn’t mean each country will implement the same technical standards.