In March 2022, the government appointed Abraham Tachjian to lead the development of an Open Banking framework in Canada. His mandate is to consult with the industry, regulators, and consumer representatives. The objective of these consultations is to design and implement the key elements of an Open Banking framework.
The view on Open Banking has evolved in Canada. A few years back, the conversation may have centred around the challenges at play. However, in recent conversations with stakeholders, I have noticed the discussion shifting towards the opportunities Open Banking presents. This is encouraging. It signals that we are ready to leverage the opportunities presented by Open Banking to help Canadian consumers better their financial welfare. More importantly, we are ready to roll up our sleeves and get to work to materialise the potential.
Earlier this year, Minister Boissonnault began implementing the recommendations from the Advisory Committee on Open Banking (the Committee) through the initial step to name me as the Open Banking Lead. To that end, the Secretariat (Department of Finance officials) and I have been focused on delivering on the recommendations by the Committee on Open Banking, firstly by creating working groups to address the key pillars of an Open Banking system. These working groups focus on accreditation, liability, privacy, and security requirements. They meet frequently and include representatives from industry, consumer groups, and government regulators. The composition of these groups is intended to allow our work to progress efficiently, and we have nevertheless achieved comprehensive industry involvement and commitment. We also regularly engage with stakeholders more broadly to benefit from perspectives across the ecosystem. For those interested in following our progress or submitting input, I encourage you to visit the discussion guides and meeting outcomes which are publicly available on our Open Banking implementation page.
In parallel, with the support of the Open Banking Secretariat at the Department of Finance Canada, work is being done in the areas of system governance and technical standards.
Canada's vulnerable and isolated communities face a number of challenges accessing financial services, particularly in rural and remote areas. While Canada's banking framework aims to ensure all Canadians have access to basic bank accounts, some Canadians may be underbanked. Open Banking creates the opportunity for consumer-led banking, which gives consumers and businesses greater control and protection over their financial data, as well as more transparency on how it’s used. As digitalisation is more widely adopted by Canadians, Open Banking will enable greater virtual accessibility to more tailored financial products and services.
Open Banking offers a tremendous opportunity for banks and fintechs to develop and deliver innovative services to Canadians, which prioritise the consumer and their financial decisions. We are seeing active engagement from banks, credit unions, and fintechs through our working groups and broad discussions. In addition, while we have been working towards our Canadian framework over the past few years, the industry hasn’t remained idle, exploring bilateral partnerships to share data, and studying technical standards for APIs. The lessons from these initial efforts will surely act as accelerants for the broader regime we are working on once it goes live.
In Canada, consumer education is a shared responsibility between federal, provincial, and territorial regulators, as well as entities that sell financial products and services. As part of its mandate, the Financial Consumer Agency of Canada (FCAC) provides unbiased and fact-based information on different subjects, including Open Banking, to help Canadians make informed financial decisions. In its submission to the Committee, FCAC recommended a national awareness and education campaign to better educate Canadians on Open Banking.
Right now, data sharing is happening via screen scraping in Canada, which requires users to share their login credentials. Canadian consumers are exposed to significant security and privacy risks when using this method to access new financial and data-driven products. This practice is also inefficient and insecure for industry participants. Open Banking must move away from this practice to a more secure type of authentication, namely through technical standards for APIs. What are the strategic considerations for Open Banking in Canada in terms of API standards?
The Committee provided clear guidance on policy principles for technical standards by noting they should be accessible and inclusive for all accredited participants, provide a positive consumer experience, enable secure data sharing, capable of evolving, flexible for new product development, and interoperable with international standards. We are studying existing standards for their appropriateness through the lens of these policy principles.
As recommended by the Committee in their final report, liability should flow with the data and rest with the party at fault. We are discussing the liability model in the liability working group.
In June 2022, the Government of Canada introduced Bill C-27, an Act to enact the Consumer Privacy Protection Act, the Personal Information and Data Protection Tribunal Act, and the Artificial Intelligence and Data Act and to make consequential and related amendments to other Acts, which is currently making its way through Parliament.
Consent has been, and will continue to be, the cornerstone of an Open Banking system and a primary focus of the privacy working group. The topics discussed are in line with the Committee’s report, which suggested that the overarching rules of an Open Banking system should outline the consent management process and limits of consent, privacy management requirements, data mobility and deletion, and disclosure requirements.
Complaints and redress mechanisms must also be straightforward and accessible to the consumer, and these mechanisms have been discussed by the liability working group. The Committee recommended that the approach to complaints and redress be simple and clear for consumers to navigate.
We will consider the input from the working groups as we design the system.
Our goal is to establish a set of baseline security requirements that serve as a floor for entry into the Open Banking system to ensure consumer data is protected in accordance with best practices. To do this, the security working group is discussing issues such as data security and cyber security risks as well as reporting and risk framework requirements to identify the best way to protect consumers.
Both consent standardisation and the consent management process are topics of discussion in the privacy working group and they will be covered this fall.
We view accreditation as the process through which organisations will demonstrate their fitness to participate in the Open Banking system. The accreditation working group is looking at different criteria which are available on our Open Banking implementation webpage. These discussions, as well as outcomes from other working groups, namely with regards to privacy and security requirements, will support the development of the accreditation criteria for ecosystem participants.
There is significant enthusiasm among stakeholders, and we would like to continue leveraging our collective interest to form an Open Banking regime that delivers on the evolving needs of Canadians. That is: to realise consumers' right to data portability and to move towards secure and efficient consumer-permissioned data sharing in an Open Banking system. The Secretariat and I are committed to progressing the work to launch a made-in-Canada read-only model of Open Banking in 2023.
This interview has first been published in the Open Banking Report 2022. Click here to download the report.
Abraham brings a multidisciplinary approach that bridges the gap between banking, technology, and law. Over the span of his career, he has worked with financial institutions and regulators with respect to cutting-edge technological changes in banking, new business models and disruption from innovation.
The Department of Finance Canada is responsible for the overall stewardship of the Canadian economy. This includes preparing the annual federal budget, as well as advising the Government on economic and fiscal matters, tax and tariff policy, social measures, security issues, financial sector policy, and Canada’s international commitments.
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