Thoughts on Consumer-Driven Banking

2023-11-23- Andrew Escobar

Open banking is coming to Canada by 2025 as “consumer-driven banking.” The news is a huge win for Canadians — and a sigh of relief for those of us who have been advocating on their behalf for years. Two quick thoughts… (without addressing the Policy Statement, but more on that later!)

1. Open Banking is now Consumer-Driven Banking

While “open banking” is now an established term in financial services and fintech, it was never an ideal label. When polled, few Canadian had heard of the term and even fewer understood it — and calling it “open” can be confusing and concerning when it involves someone’s financial life. Moving away from that term may make it easier to communicate the security and privacy gains of moving away from screen scrapping and password sharing, towards standards-based data sharing.

The new label “consumer-driven banking” acknowledges that Canadians should be in-control of their finances and empowered to securely share their financial data. Will “consumer-driven banking” poll any better in a few years? No. Will Canadians be talking about their favourite “consumer-driven banking” apps? Nope. But I do think they will be talking about new products and services that have been largely absent from the Canadian market for years.

2. Open Banking is now an Affordability Issue

There was a prevailing sentiment within Canada’s fintech community that a lack of political will (at the highest levels) was holding back open banking, or that little progress had been made this year. I did not agree with that sentiment and knew the opposite to be true, but that criticism was understandable. While Ottawa was working towards open banking and while that work was not just limited to the Department of Finance, there had been no recent public signals from this government that open banking remained a priority — until this week.

It is now clear that there is both a political will to get open banking launched and a pathway (or two) to get it legislated.

Budget 2024

The 2023 Fall Economic Statement delivered by Minister Freeland suggests that the framework legislation for open banking will be introduce in the next federal budget. It also frames open banking not only as “consumer-driven banking” but also as an affordability issue (rightfully so) under the header of “Making Life More Affordable” in the economic update.

Bill C-27

Minister Champagne recently appeared before committee to champion a fundamental right to privacy proposed in Canada’s Digital Charter. Digital privacy is much more than locking down your data though; it requires having control of your data, transparency of its use, and the ability to share it. A right to data mobility (established by the Digital Charter) is therefore foundational to open banking. As I suggested in July and again in September (through an awkward inclusion in The Logic) Innovation, Science, and Economic Development Canada (ISED) has been diligent in considering how a “data mobility framework” would apply to banking and financial services. This was confirmed in tweet by Senator Colin Deacon: “Open Banking will be the first use case of the data mobility right included in Bill C-27: The Digital Charter Implementation Act.”