Canada took another step toward its long-awaited open banking system today with the release of proposed regulations.
The news: The Department of Finance published draft open banking regulations on Friday that would govern how the long-awaited financial data-sharing system would work in Canada. The proposed rules, which outline how FinTechs can participate and what data banks would be required to share with them, are open for a 60-day public consultation period.
Under the proposed system, which aims to give consumers more control over their financial information, banks and other financial institutions would be required to share data like account numbers, product and service terms and fees, past balances, and other transaction data upon request. This would theoretically eliminate the need for FinTech companies that offer products based on this data to use the insecure practice of “screen-scraping,” which the feds are considering banning.
From the source: Abraham Tachjian, Canada’s former open banking czar and chief regulatory affairs officer at Brim Financial, told BetaKit he was “pleasantly surprised” by the regulations’ wide scope.
“It justifies the terminology of our system being more open finance than open banking,” he said, referring to how the regulations govern data associated not just with bank accounts, but payment products, investment accounts, and lending accounts. “I think it sets us up to leapfrog other jurisdictions.”
Following the thread: The feds are proposing several ways for FinTechs to participate in the new system, including a “streamlined” accreditation stream for payment service providers (PSPs) who are already registered under the Retail Payments Activities Act (RPAA). These registered PSPs, which include FinTech companies Koho, Venn, and Wealthsimple, are already subject to certain reporting requirements and consumer safeguards, broadly in line with these new regulations. Some advocates, including industry association FDATA, had pushed for a “sponsored” accreditation system, where larger companies could assume regulatory responsibilities for smaller entrants, which was not included in the regulations.
Final thought: Canada’s FinTech industry has long advocated for an open banking system amid multiple delays on the file. How long they’ll continue to wait is still unclear. The proposed rules don’t indicate a specific date for when companies can expect to officially participate in the system. However, a news release notes that some requirements would only come into effect within a year of publishing finalized regulations, with consultations closing in August.
Feature image courtesy François-Philippe Champagne via LinkedIn.
