A Senate committee wants the federal government to facilitate open banking in order to protect consumers and enable fintech growth.
The Standing Senate Committee on Banking, Trade and Commerce said in a report released this week that the government must create a framework for Canadians to safely share their financial data. Open banking allows consumers to direct banks to share certain financial data with other businesses, and gives consumers additional ways to make payments from their bank accounts.
The report said almost four million Canadians have financial services apps that use “screen scraping” to access their banking information. Consumers give the app banking login information to extract their data, the report said, but customers don’t control how the data is used or for how long.
The committee said the feds should work with the provinces to develop a registry of accredited third-party providers and create an “innovation sandbox” that would allow companies to test and develop open banking technology.
The senators also said the federal government should modernize the Personal Information Protection and Electronic Documents Act to align it with global privacy standards and to include consumers’ right to data portability.
Creating an open banking framework would enable fintech companies to grow in Canada, the report said. It cited robo-advisor Wealthsimple, which told the committee that consumers’ lack of ability to share financial data limits the types of products it can develop.
The Ontario Securities Commission told the committee that fintech companies will move to other jurisdictions with a more supportive regulatory environment if Canada doesn’t develop an open banking framework.
The Department of Finance launched a consultation on open banking in January that’s focused on financial transaction data held by banks.
The committee’s other recommendations include:
- designating the Financial Consumer Agency of Canada as the interim oversight body for open banking activities until a permanent regulator is established;
- facilitating a principles-based, industry-led open banking framework to be integrated with existing financial sector and privacy legislation;
- prohibiting the use of consumer banking data for insurance underwriting purposes; and
- designating the Privacy Commissioner of Canada and the Canadian Commissioner of Competition as the co-regulatory and enforcement authorities for open data frameworks.
Read the full Senate committee report here.