Those of us who practice payments law were eagerly anticipating the release of the Canada Federal Budget (the Budget). Various federal initiatives, such as the consultations on A New Retail Payments Oversight Framework (the Retail Payments Framework),1 and the renewal of Canada's federal financial statutes,2 as well as the Competition Bureau's recently-completed FinTech Market study,3 have signaled to practitioners a sustained, strong government interest in innovation and competition in the financial sector, including the payments space.
As we previously summarized, in its Retail Payments Framework, the Department of Finance (the Department) proposed opening up access to the retail payments system to a wide variety of new, non-deposit-taking players. The consultation document left quite a few details of the Framework unclear. The next steps articulated by the Department were proposed legislation to implement the new Framework. The Budget confirmed that intention once more, and linked the introduction of that legislation to the upcoming review of the Canadian Payments Act. The linkage is not surprising; a new retail payments system would likely be established and operated by Payments Canada, so amendments to its enabling legislation would be required and the Canadian Payments Act is required by law to be reviewed every five years. The Budget announced that such a review would ensure that "Payments Canada is well-positioned to continue to fulfill its public policy objectives of ensuring the efficiency, safety and soundness of its systems."4
With respect to fostering innovation and competition, the Budget made yet another bold step into the world of open banking, which the Government has described as "empowering consumers to share their financial data between their financial institution and other third party providers through secure data sharing platforms."5 The Government also stated that open banking has the power to provide Canadians with more choice and service, and increases transparency with respect to the products and services financial institutions offer.
Open banking is one of the central themes driving banking regulations internationally. In Europe, the Second Payment Services Directive (PSD2) came into force in January 2016, and open banking is at the heart of that regulatory framework. While the statements made in the Budget are a long way from implementing a PSD2-style regime in Canada, they provide another important signal that the Government intends to continue reviewing the merits of open banking in Canada.
Building on consultations carried out after Budget released in 2016 , the Government also announced its intention to introduce amendments allowing financial institutions greater flexibility in undertaking and leveraging FinTech activities. Consultation responses had indicated a need for legislation to facilitate greater partnering with the FinTech sector to deliver innovative products and services to consumers.
Finally, against the backdrop of the discussion of innovation, technology and competition, the Government reinforced Canadians' expectation for strong financial consumer protection. The Budget introduced the Government's intention to propose new legislation to strengthen the Financial Consumer Agency of Canada, which is charged with enforcing the consumer protection regime that applies to federal regulated financial institutions.
While the Government continues to advance the discussion with respect to modernizing the financial sector framework, few conclusions have been reached. Indeed, the stage has been set for a variety of additional consultations with stakeholders. The timelines for new legislative amendments remain unclear.
4. 2018 Canada Federal Budget at page 355.
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