The Council of Canadian Innovators (CCI) is intensifying its campaign to persuade the Canadian government to implement open banking, an initiative it views as crucial not just for modernizing the financial sector but also for addressing wider regulatory and compliance issues.
Nicholas Schiavo, CCI’s Director of Federal Affairs, emphasized the campaign’s broader implications: “It’s not just about getting the government to fulfil an election promise. It’s about increasing consumer control, security and choice in Canada’s financial services sector.”
This call for action is supported by the Open Finance Network Canada (OFNC), Fintechs Canada, and the Conservative Party, who have jointly penned an open letter to Canadian Finance Minister Chrystia Freeland, urging her to “reaffirm her government’s promise to enact Open Banking”. The promise, a commitment of the Liberal Party during the 2021 federal election, seems to be on shaky ground, as Schiavo notes with concern: “As we near the end of the calendar year, we’re concerned the Liberals may be quietly abandoning their promise.”
Unbanked citizens
The collective letter, backed by numerous business and public policy leaders, points out that Canada’s financial sector is trailing behind Europe, the US, and the UK. It highlights the global trend where “new products make financial services more convenient, more widely available to unbanked citizens, and drive down costs”. The letter also warns of the growing cybercrime risks due to delays in adopting a modern financial infrastructure.
Open banking, which allows banks and third-party providers to access and share customer personal and financial data, shifts away from traditional banking methods, offering more control to consumers. This move is expected to spur innovation, heighten competition, and broaden consumer choices, ultimately making financial services more accessible.
Rob Mason, Global Relay’s Director of Regulatory Intelligence, said: “The open banking revolution has been embraced elsewhere and is viewed as a consumer benefit, though opposers are concerned about the sharing of financial data which could lead to fraud. With the main global financial hubs seeking to move forward (even the US), Canada risks falling behind them, becoming less competitive and losing ground.”
Mason added: “With appropriate oversight, open banking gives the option of a more tailor-made financial service to the consumer … if they want it.”
Finance-related crime
Yet the integration of open banking is closely intertwined with broader challenges in regulatory efficiency, especially in combating corruption, money laundering, and terrorism financing.
Pat Poitevin, Executive Director at the Canadian Centre of Excellence for Anti-Corruption, stresses the need for a comprehensive approach: “Canada needs to commit resources and political will to address the current gaps. This includes focusing on collective efforts to effectively combat financial-related crimes. Open banking could be part of the solution, but it must be integrated into a broader strategy of regulatory reform and enforcement.”
This perspective is reinforced, he says, by the findings of the OECD Anti-Bribery Convention Phase 4 report, which criticizes Canada for its slow progress in meeting anti-corruption commitments. The report’s findings resonate with the challenges faced in implementing open banking, as both are affected by the country’s current regulatory framework.
Poiteven says the slow adoption of open banking, in this context, not only hampers financial innovation but also impedes the tracking and sharing of information on bad actors, crucial for effective anti-corruption and AML/ATF efforts.
And he says while open banking offers significant opportunities for innovation and consumer empowerment in the financial sector, its successful implementation in Canada is crucially linked to the country’s broader commitment to regulatory reform. This includes addressing the gaps and shortcomings in combating financial crimes, as highlighted in the OECD report, and ensuring a comprehensive strategy that includes open banking as a tool for greater transparency and accountability.