Yesterday’s Fall Economic Statement (FES) unveiled new details of a proposed open banking framework, confirming the suspicions of many observers in the Canadian FinTech space that progress toward a consumer-driven financial system would be stalled yet again.
The Consumer-Driven Banking Framework, first introduced in Budget 2024, now includes details on accreditation and tiering rules, increases the proposed rollout budget to the Financial Consumer Agency of Canada (FCAC) to $44.3 million over three years, yet punts its launch to 2026.
“There have been so many announcements that we’ve lost count of them all. But there have only been a few instances of follow through.”
Alex Vronces
Fintechs Canada
In last year’s FES, the feds said that this framework would hopefully be implemented sometime in 2025, but the update pushes that date to 2026. However, this timeline is contingent on whether the current Liberal party can amend the associated legislation.
FinTech leaders have been calling for a consumer-directed finance system for years, a measure that they say will improve financial service competition and lower prices for Canadians. Open banking would establish a secure way for customers to share their financial information with third parties, making it easier to switch financial institutions.
“There have been so many announcements that we’ve lost count of them all. But there have only been a few instances of follow through,” said Alex Vronces, executive director of Fintechs Canada.
After the release of Budget 2024 in April, Nicholas Schiavo, director of federal affairs for the Council of Canadian Innovators said that though the steps toward establishing an open banking framework were positive, the “devil is in the details.”
Now that more details are available, FinTech leaders say they’ve confirmed their worst suspicions. Andrew Escobar, a former FinTech executive at US-based MX and former member of the Canadian Internet Registration Authority, said in a LinkedIn post that the lack of tiered accreditation will hamper the impact of open banking, “perhaps severely.”
Companies seeking accreditation must apply to the FCAC with their organization’s governance structure, operational standards, and financial liability measures. This system will be uniform for all applicants, though the government announcement said a tiered system could come later. Third-party providers of API tools such as authentication and consumer consent must gain FCAC approval and pass a national security check.
“This approach will exclude many FinTechs and non-FinTechs,” Escobar wrote. “This will delay large enterprise teams and scrappy indie [sic] developers from participating.”
Advocates say a tiered accreditation approach might feature different FCAC approval requirements based on the data needs of the applicant. This would allow for FinTech startups and smaller entities to gain access to the system without an onerous application process, Escobar argued, and hold larger entities like Plaid and Flinks to a higher standard.
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The new rules also give the Minister of Finance—a role filled in the interim by public safety minister Dominic LeBlanc—the authority to designate a provincial regulator to oversee aspects of open banking within its jurisdiction, such as provincial credit unions. The provincial regulator will be responsible for security, privacy, liability, complaints, and consumer protection. National security, accreditation, and fines will remain under FCAC’s purview.
The proposed framework would also effectively ban screen-scraping, an insecure way of consumer data sharing, once the framework is operational in 2026. Many FinTech startups rely on the practice, which requires consumers to input their banking data manually to use financial services.
According to Abraham Tachjian, former open banking lead at the Department of Finance, this would force accredited third parties to join a legislated framework.
“Such a course of action forces data requestors to join a legislated framework, contributing to network effects which are critical to the growth of a data sharing ecosystem,” Tachjian wrote in a LinkedIn post.
Vronces pointed out that the announcement did not include information about regulation or real-time rail (RTR), an update to Canada’s payment infrastructure that will allow instant money transfers. Payments Canada told BetaKit that industry testing for RTR would only begin in 2026, despite the feds having delayed its launch several times since 2019.
“Without launching the RTR, competition in banking won’t be boosted, and Canada’s big banks won’t be compelled to work harder for Canadian consumers and businesses,” Vronces said.
Canada remains the only G7 country without official open banking and RTR frameworks in place. In October, the US Consumer Financial Protection Bureau finalized rules for an open banking system.
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All of this is contingent on whether the current Liberal government can pass associated legislation. To write these new provisions into law, the government would have to amend the Consumer-Driven Banking Act and the Financial Consumer Agency of Canada Act.
Following the surprise resignation of Deputy Prime Minister and Finance Minister Chrystia Freeland, as well as intra-party leadership challenges to Prime Minister Justin Trudeau, it is unlikely this will be implemented before an election is called.
Given the political circumstances surrounding the FES, some are uncertain these amendments will come to pass. In response to the FES, Scotiabank vice president Rebekah Young said items requiring legislation would depend upon “breaking the current Parliamentary stalemate under a minority government and securing enough support from other parties,” an outcome that seems “increasingly unlikely.”
Feature image courtesy Pixabay. Illustration by Mohamed Hassan.
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