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In June 2019, the Standing Senate Committee on Banking, Trade and Commerce (BANC) released its report on open banking following hearings it held in the spring of 2019. The federal government, which has been conducting its own consultation into open banking, has yet to issue a report.

For those who have not been following discussions around this issue, ‘open banking’ refers to a framework that enables consumers to share their personal financial data with financial services providers in a secure manner. The anticipated benefits of open banking include providing consumers of financial services (both individuals and small businesses) with more and better financial planning and payment options, and stimulating innovation in the fintech sector. Open banking is no small undertaking. To work, it will require major financial institutions to adopt standardized formats for data. It will also require the adoption of appropriate security measures. A regulator will have to create a list of approved open banking fintech providers. There will also need to be oversight from competition and privacy commissioners. For consumer privacy to be adequately protected there will have to be an overhaul of Canada’s Personal Information Protection and Electronic Documents Act.

The BANC committee report reviews the testimony it heard and makes a number of recommendations. It begins by noting that approximately 4 million Canadians already make use of fintech apps to obtain financial services not otherwise available. These apps require users to provide their banking usernames and passwords in order to enable them to repeatedly access and screen-scrape financial data. It is a risky practice and one that may violate the terms of service for those customer accounts, leaving consumers vulnerable and unprotected. The Senate report notes that the legal and regulatory changes needed to implement open banking in Canada – as well as the necessary work on standards and interoperability – will take time. As a result, the first part of the report makes a number of recommendations to address, in the short term, the protection of Canadians who engage in screen-scraping.

The BANC committee notes that other countries – including Australia and the UK – are already further ahead than Canada in launching open banking initiatives. It expresses concern that Canada may be falling behind what is an international shift towards open banking, noting that “without swift action, Canada may become an importer financial technology rather than an exporter” (at pr. 14). The report makes a number of recommendations to facilitate the adoption of open banking in Canada, urging a “principles-based, industry-led open banking framework that would be integrated with existing financial sector and privacy legislation” (Recommendation III). The recommendations include work on developing standards, creating a registry of accredited providers of fintech services, legislating limits on the use of standardized and interoperable consumer financial data, creating a framework in which provincially regulated credit unions and caisses populaires can participate, improving broadband access for rural and remote communities, reforming PIPEDA, and creating appropriate regulatory oversight and enforcement mechanisms.

The BANC committee correctly links open banking to a broader data portability right. This portability right, which is present in the EU’s General Data Protection Regulation (GDPR), is one of the 10 principles articulated in the federal government’s new Digital Charter. The federal government’s recent discussion paper on PIPEDA reform also references data portability. Data portability is a mechanism by which individuals are given much greater control over their data – allowing them to ‘port’ their data from one provider to another. It also has potential to encourage competition and to stimulate innovation in the tech sector. However, for the BANC committee, consumer control is at the heart of open banking. The Committee clearly sees open banking as something that should benefit consumers. They characterize it as giving consumers more control over their personal financial information, and something that can provide them with a “more personalized, convenient digital banking experience” (at p. 37).

Indeed, the BANC committee report as a whole places consumer interests at the centre of the move towards open banking. As noted earlier, its first recommendations are oriented towards taking action to protect consumers who are engaging in screen-scraping to obtain the fintech services they want. It is also sharply critical of the federal government for not appointing a consumer advocate to its Advisory Committee on Open Banking, even though the Department of Finance indicates that it has consulted widely to obtain consumer and civil society input. The BANC committee expressed concern that not enough is known about the potential impacts on consumers of open banking, and recommends that more research be carried out as soon as possible on these issues, funded by the federal government.

 

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