The Future Of Consumer-Driven Banking

Torys LLP


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Senior counsel Brigitte Goulard spoke with Canadian Lawyer following the federal government's introduction of the Consumer-Driven Banking Act (CBDA)...
Canada Finance and Banking
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Senior counsel Brigitte Goulard spoke with Canadian Lawyer following the federal government's introduction of the Consumer-Driven Banking Act (CBDA), draft legislation that outlines initial steps toward launching a framework for consumer-driven banking (also known as "open banking") in Canada.

"The simplest way to explain [open banking or consumer-driven banking]," Brigitte says, "is that consumers will have access to the data that is currently sitting in your financial institution, and you will be allowed to direct your financial institution to send that information to another service provider or app to help manage their money."

This is done through application programming interface (API) technology, Brigitte explains, which will allow financial institutions to provide third-party service providers access to their customers' banking data.

"That would allow consumers and small businesses to request their data relating to products and services be shared safely and securely with the entities of their choice," she says.

However, Brigitte notes that there will be phases to the legislation. Initially, it would only allow "read-only" privileges, meaning consumers could give a third party access to their data through an API, but the third party could not edit that data. Later this fall, the legislation will then address liability concerns and establish the requirements for privacy, consumer data protection and consent, she explains.

Read: Budget Implementation Act, 2024, No. 1: proposed legislative amendments relevant to financial services regulation

When asked about who will be able to participate in consumer-driven banking, Brigitte says "whoever wants to become a participating entity" will be able to do so. Large Canadian banks and other financial institutions that meet certain thresholds, however, will have to participate; "they won't have a choice," she says.

Other entities, like fintechs, securities dealers and credit unions, will be able to choose to join if they meet the standards and requirements. "If you decide to opt in, then you become a participating entity in the framework, and you must comply with the requirements of the framework, which are not yet determined, and subject to the oversight of the FCAC," Brigitte says.

She also points out that the government will need to consider the wide range of entities that will be participating. "You'll be getting some very large banks, sophisticated institutions that hold most of the information," she says. "Then you'll have small fintechs who want to use that information to create an app."

While it's still difficult to predict when consumer-driven banking will be in full swing in Canada, Brigitte sees this

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