By Kevin Landry

On November 9 2023, Bill C-365, An Act respecting the implementation of a consumer-led banking system for Canadians (“C-365”), short titled as the ‘Consumer-led Banking Act’ was read in the House of Commons.

C-365 follows several other recent developments in the fintech and payments space in Canada, namely the release of the Retail Payment Activities Regulations, and the Retail Payments Activities Act.^[1] Importantly, it is a push toward implementation of open banking in Canada, which has been moving slowly forward in past years.

C-365 is not a plan for open banking in Canada; it calls for the implementation of a plan for open banking in Canada within 30 days of coming into force (or ten days after the start of the next session of the House). It would also require the Minister of Finance to table a report setting out reasons for any delay in the implementation of a bill on open banking if not tabled within six months of C-365 coming into force.

Background

In March 2022, the Federal Government named Abraham Tachjian as the open banking lead, and was mandated to develop a ‘made in Canada’ regime based on the recommendations in the final report of the Advisory Committee on Open Banking. Although progress on implementation is ongoing, no implementation plan has been released to date.

Open banking is currently in use in Australia and the United Kingdom. There have been several phases to this discussion in Canada, and more information on past activity and future steps is available online.

What is open banking?

Currently in Canada most fintech apps operate via ‘screen scraping’- a user provides their banking log-in information to a third-party application who enters the users online banking, takes applicable data and uses it for purposes of the app. This poses obvious security risks and can give fintech companies access to passwords, transaction information and other sensitive data. Sharing passwords in this fashion can also leave consumers in breach of bank terms of service and at fault for fraudulent activities of nefarious fintech actors.

Open banking is a system that allows ownership of financial data by the user in some form. It would allow banks to securely share users’ financial data with an app on the user’s behalf using a secured online channel. It would no longer be necessary to provide banking passwords and credentials to access fintech products and services.

This update is intended for general information only. If you have questions about the above, please contact the author(s) to discuss your needs for specific legal advice relating to the particular circumstances of your situation.

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[1] Stewart McKelvey had previously written about these here, here and here