On January 11, 2019 the Government released a consultation paper entitled "A Review into the Merits of Open Banking" (PDF) (Consultation Paper).
The Consultation Paper seeks stakeholder views on the following questions:
• Would open banking provide meaningful benefits to and improve outcomes for Canadians? In what ways?
• In order for Canadians to feel confident in an open banking system, how should risks related to consumer protection, privacy, cyber security and financial stability be managed?
• If you are of the view that Canada should move forward with implementing an open banking system, what role and steps are appropriate for the federal government to take in the implementation of open banking?
This consultation follows the announcement in Budget 2018 of the Government's intent to undertake a review into the merits of open banking and the appointment of an Advisory Committee on Open Banking. The consultation is part of the first phase of the Advisory Committee's work, which involves an assessment of the merits of open banking. The second phase will involve an assessment of implementation considerations. Following the completion of the Advisory Committee's work, the Committee will deliver a report to the Minister of Finance.
Comments may be submitted until February 11, 2019.
The Consultation Paper defines open banking as a system that allows consumers and businesses to authorize third party financial service providers to access their financial transaction data, using secure online channels. This is in contrast to the current system in which such data is held and controlled by financial institutions. Open banking offers the possibility of allowing consumers and businesses to better access financial products and services and control their financial information.
The Consultation Paper states that the focus of the open banking review will be in respect of financial transaction data from banks. It also notes that open banking can involve payments, and invites input on whether payments initiation should ultimately form part of an open banking framework.
The potential benefits of open banking highlighted in the Consultation Paper include:
• improve consumers' control over personal financial information and allow them to leverage their own information for their benefit;
• a vibrant and more diverse ecosystem of financial services providers, including enhanced roles for FinTechs and small and mid-sized financial service providers;
• innovative and useful offerings for consumers and small business at low cost;
• improved access to financial services for Canadians who do not have standard financial needs;
• providing FinTechs and other new financial services providers with access to consumer financial transaction data that can be leveraged to develop tailored products and services; and
• improve innovation with a framework that is adapted to the digital and data-driven economy.
The Consultation Paper also addresses key risks relating to open banking.
• Financial consumer protection - this topic has received significant attention recently, and the Consultation Paper emphasizes that any potential open banking framework needs to be accessible to all and treat Canadians fairly, including by assuring that consumers have mechanisms for recourse and redress if something goes wrong.
• Privacy - open banking involves consumer control over their own information. Accordingly, it is critical that consumers are well informed and, that their consent is meaningfully and properly obtained.
• Cybersecurity - this is important given that open banking increases data sharing and contact points.
• Financial stability - the Consultation Paper notes that open banking may result in new patterns of financial flows, and seeks input on whether this presents new prudential risks to financial institutions, and related mitigants to those risks.