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• Lack of government action holds open banking back, fintechs say
• Trade body reiterates push for third-party access in pre-budget consultation

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As open banking struggles are becoming more apparent in Canada, the fintech industry is calling on the government to renew its commitment to open banking.

Fintechs Canada the government for progress on open banking and payments modernisation in a submission to the House of Commons Standing Committee on Finance (FINA).

“The government of Canada can make the financial sector more competitive, secure and affordable for Canadians by completing payments modernisation and all phases of open banking,” wrote the association.

In 2021, the government committed to launching open banking by the beginning of 2023.

Since then, it has introduced reforms to privacy legislation to enable Canadians to transport their data and appointed Abraham Tachjian as open banking lead to implement that right in the financial sector.

Tachjian is expected to deliver a final report in September, which will mark the end of his mandate as open banking lead.

The fintech association now says that although it commends “the government for taking these steps”, it is concerned that the implementation of open banking is being delayed.

“Canadians can’t afford delays.”

“Nor can the financial sector, as its integrity and resilience will be at risk for as long as data sharing in the financial sector isn’t subject to stronger oversight and common standards,” the says.

It urges the government to complete the implementation of an open banking system by publishing a code for data sharing in the financial sector and by communicating its intent to strengthen the governance and oversight of the system in 2024.

The push comes amid increasing anxiety in the fintech sector that interests from the government to implement open banking have stalled recently.

“It's not entirely clear how much buy-in there is from political leaders that this is worth doing,” one source told VIXIO.

Lack of government action holds open banking back, fintechs say

Canada’s financial landscape is unique in the sense that it is historically dominated by five large banks, some of which might view open banking as a competitive threat.

Currently, financial data sharing is governed by bilateral data access agreements between banks and third parties. However, third parties often have little choice but to sign these agreements with the terms and conditions set by the bank.

Those agreements are “completely opaque” for end users who have little knowledge of which data is subject to data sharing and what are the terms of the sharing, Steve Boms, executive director of Financial Data and Technology Association (FDATA) North America, told VIXIO.

It is also the bank that chooses which third parties can or cannot access the data.

Boms said FDATA members do not see this as "open banking". Instead, they would like to see a different kind of open banking which is more akin to the ones adopted in other countries.

Several countries, including the UK, Australia, Brazil, Singapore and India, have succeeded in adopting open banking in recent years.

The government has played a central role in setting up these frameworks by establishing consumers’ right to share their financial data with third parties and defining when the data can be accessed.

“If open banking is going to become a reality in Canada, the government is going to have to play a central role in delivering it,” Boms stressed.

Accordingly, FDATA members hope to see a clear action plan from the government with clear timelines as soon as Tachjian delivers his report in September, Boms added.

That means “not in the next few years but in the next few months”.

Payment modernisation ‘rife with delays’ too

Fintechs Canada has also urged the government to “deliver on its commitment to complete payments modernisation” in the 2024 budget.

This includes supporting the launch of a new real-time payment system and allowing fintechs to access the public payment systems.

The government committed to payment modernisation in 2021 but there have been continuous delays in the programme.

The Real-Time Rail (RTR) was initially planned to go live in 2022 but the rollout was several times, most recently in June, when Payments Canada did not set a planned timeline for the launch.

The association now argues that the delay means higher costs for consumers and businesses, and asks the government to support the launch of a new real-time payment system.

It also urges legislative changes that enable fintechs to get direct access to the central payment infrastructure, an initiative that has widespread support in the industry.

In December, Payments Canada and a number of bank and fintech associations an open letter to Chrystia Freeland, Canada's finance minister and Deputy Prime Minister to advocate for third-party access.

The association now says this would promote more competition and innovation in financial services and drive down fees for consumers and businesses.

Money transfer costs have dropped significantly for fintech app users in other countries that opened up their payment infrastructure to third parties.

Previously, Brigit Carroll, Wise’s policy and campaigns manager for North America, told VIXIO that Wise could cut 20 percent of its fees and reduce transfer time from 15 minutes to two seconds after it became a direct participant in the UK’s Faster Payments.