Latest budget a big step for Canada’s financial services ecosystem

More than six years ago, the government announced in the 2018 federal budget its intention to design and implement an open finance regime in Canada. The minister of finance created the Advisory Committee on Open Banking, which, over 18 months, crafted detailed recommendations laying out a government-led approach to facilitating a consumer-centric Canadian financial services framework in which the consumer or small and medium-sized enterprise (SME) would have full control over their data and could choose from a broad range of financial products, tools, and services that best meet their needs. However, as other countries moved forward with such commonsense systems, Canada lagged behind. Finally, through its detailed plan to create an open finance framework in coming legislation, the government will advance Canada towards consumer-driven finance. Budget 2024 marks a significant step for the financial empowerment of consumers and Canada’s financial services ecosystem. Once passed, the implementing legislation will bring Canada in line with jurisdictions like Australia, the United Kingdom, the European Union, New Zealand, and Singapore, where established and legally protected consumer financial data rights already significantly benefited competition and empowered consumers and SMEs to access the financial services providers of their choosing more easily. In the U.K., for example, open banking has seen its payment transactions double by the end of last year, and the number of new accredited financial service providers available to consumers and SMEs has increased by nearly 25 per cent in three years. The Canadian government’s decision after six years to implement a similar regime in Canada will unquestionably deliver these same competitive benefits at home. Steven Boms is the executive director of the Financial Data and Technology Association of North America. Photograph courtesy of Steven Boms The government’s consumer-driven banking framework in Budget 2024 presents an important advancement in financial services, particularly in its comprehensive scope and the push for interoperability. By including a diverse array of financial accounts—from savings and chequing accounts to investment products and loans—it ensures that the benefits of open finance are extensive and inclusive. This approach is not only progressive, but also practical, as it acknowledges the complex financial needs of today’s consumers and SMEs. However, there is a crucial need to expand the scope of this framework to explicitly include SME accounts. Given the significant role small businesses play in the Canadian economy, equipping them with the same data-driven tools and services as consumers is essential for their growth and resilience. The framework’s alignment with the United States Consumer Financial Protection Bureau’s regulatory push towards open banking—and the Canadian government’s announced intention to build a system that is interoperable with the U.S.—is a commendable strategy. This synchronization promises to streamline the financial operations across borders, enhancing the efficiency and scope of financial services available to Canadians. This cross-border interoperability is crucial for maintaining competitive parity with international standards and for fostering a financial ecosystem that is robust, secure, and consumer-centric. There’s certainly a lot to like in what the government proposed. On the other hand, the government’s proposed design of the country’s open finance framework, which provides the Financial Consumer Agency of Canada with primary oversight of the system, will have to ensure that the agency retains the technical expertise required for this important role. A key lesson learned from the experiences of other jurisdictions that have led the way in advancing their own open finance regimes is that purpose-built entities that are neutral, transparent, accountable, and endowed with the authority to make swift, definitive decisions are required to deliver and maintain a well-governed system on behalf of consumers and SMEs. Execution will be vitally important as the government works to implement the framework announced in Budget 2024. The government should be commended for finally delivering its plans to promulgate open finance in Canada in the most recent budget. Competition in the financial sector will benefit from it, and consumers and SMEs will be better served for it. Steven Boms is the executive director of the Financial Data and Technology Association of North America. The Hill Times

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Latest budget a big step for Canada’s financial services ecosystem

The government will finally advance Canada towards consumer-driven finance when it tables legislation signalled in April’s budget.

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