Canadian FinTech companies launch open banking public action campaign as delays continue

Canada's open banking lead, Abraham Tachjian, will extend his tenure to the end of 2023.

A group of Canada’s largest FinTech companies is launching a public action campaign to push the federal government to move faster on open banking and payments modernization.

The Choose More campaign — co-ordinated by Wealthsimple, EQ Bank, Wise, Flinks, Xero Canada, Borrowell, industry group Fintechs Canada and more—aims to persuade Canadians that open banking and payments modernization could improve their personal finances, particularly at a time of high inflation, and create a more equitable financial system.

A briefing note on next steps to advance open banking in Canada was delivered to the Minister of Finance in July, according to an access to information request filed by BetaKit.

It calls on Canadians to “demand more from your [Member of Parliament] and government” by telling their MPs they want a digital banking system and data portability rights.

The campaign website highlights the benefits Canada’s financial system would receive through open banking and payments modernization, including reducing or eliminating “sky-high” banking fees for consumers and small businesses; granting Canadians the ability to use their rental history to build credit; and more choice and competitive pricing for consumers and small businesses.

“Everything is now at a complete standstill. We’ve been talking about this for years,” said Cathy Ly, vice-president of customer operations at EQ Bank, in an interview with BetaKit. “And if you look at what’s happening to everyday Canadians, after the challenges of the pandemic, we’re now faced with challenges of affordability across almost every economic class. We should really be looking as an industry, together with government and regulators, at the ways for us to reduce some of the structural [challenges] that contribute to this affordability issue. And open banking is really at the heart of that.”

Faye Pang, Xero’s country head for Canada, said in an emailed statement to BetaKit that the company’s own research has found Canadian small and medium businesses have seen stagnating sales and are waiting longer to get paid by customers. “Reforms such as open banking and payments modernization have led to lower fees, faster money movement, and provide better access to capital in other global markets,” she said. “It’s time we bring these same benefits to Canadian SMBs.”

The campaign launch comes days after the federally appointed leader of Canada’s open initiative, Abraham Tachjian, was intended to conclude his 18-month term.

On Oct. 3, Tachjian announced on LinkedIn that his term had been extended to the end of the year, hours after BetaKit contacted the Department of Finance seeking to confirm whether his term had ended. “When I started, I mentioned that my goal was to enable Canadians and businesses to gain greater control over their financial data and be better equipped to manage their finances,” Tachjian wrote. “I remain committed to this and will continue to work with all stakeholders to make it a reality in Canada.”

There is still no word from the federal government on the next steps for implementing a formal open banking system. It also comes just months after Payments Canada, the federal organization in charge of the payments clearing and settlement system, announced the third delay in two years to the roll-out of the real-time rails (RTR). RTR is the system that would enable Canadians to send and receive money within seconds. The association did not provide a revised timeline for the system’s launch.

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Ly emphasized that what FinTech companies are calling for is an additional financial right for consumers — and noted that many people already believe they already have that right. “I do a lot of research with customers, asking them to design their ideal banking experience, and people already think this exists, especially given how many new Canadians we have. In many jurisdictions, open banking already exists,” she said. “Consumers naturally expect this right, and it’s just that we haven’t put legislation around it, we haven’t structurally encouraged the big banks to actually work this way.”

Both open banking and payments modernization have faced numerous delays in implementation, and Canada is currently the only G7 country without either a formal open banking system or real-time payments.

Canada first began exploring an open banking system in 2018. The final report from the federal government’s advisory committee, setting out a blueprint for what the system should look like, was only made public in August 2021. The release of the document was itself plagued by multiple delays. Earlier this year, the federal government broke its election commitment to implement an initial version of open banking by early 2023, a timeline recommended by the advisory committee report.

As BetaKit reported in March, the timeline for open banking lead Abraham Tachjian to deliver his final recommendations to the finance ministry was pushed back until summer 2023.

RELATED: Amid questions on progress, Canada’s open banking lead says implementation “absolutely” remains on track

A briefing note on the “next steps to advance open banking in Canada” was delivered to the Minister of Finance in July. The vast majority of the document, obtained by BetaKit through an access to information request, was redacted under a section of the Access to Information Act that allows advice to the government to be withheld. However, the briefing document’s background notes for the minister highlighted that the federal government has made “numerous public commitments to implement open banking in Canada in 2023.”

Industry “remains deeply interested in the government’s approach to open banking, timelines, and next steps so that they may advance their own work to implement open banking. Clarity on the framework is critical to the timely implementation,” the document read.

Industry groups also raised the alarm in the spring after the 2023 budget contained no mention of open banking, and after this summer’s federal cabinet shuffle seemed to boot open banking off federal mandate letters. Former associate finance minister Randy Boissonault is now the minister of employment, workforce development and official languages, and no one was slated to replace him.

“There are rumours in Ottawa that Finance Minister Chrystia Freeland may receive a new mandate letter due to the cabinet shuffle. Rumours suggest that open banking might be removed from it,” Canadian Council of Innovators president Ben Bergen wrote on LinkedIn in September. “If this is the case, it would indicate the government’s lack of commitment to the innovation economy and misreading the economic future of the banking system.”

RELATED: Open banking working group failing to address critical governance, standards issues

Legislation that would grant Canadians the right to control their financial data, a key component of a future open banking system, is currently under consideration by the standing committee on industry and technology. It received a second reading in the House of Commons in April this year, after its first reading in June 2022.

The launch of real-time rails, meanwhile, was delayed for the third time in June, which Payments Canada said was due to “current delivery delays, unrelated to the exchange technology components,” and announced the second review of the RTR in under a year.

Payments Canada awarded contracts for the development of the system in 2021. Interac was given the contract to develop the RTR’s exchange component, and Mastercard’s Vocalink was chosen to create the system’s clearing and settlement solution. Tata Consultancy Services has been tasked with integrating the system.

The rails were initially supposed to be operational in 2022. Last year, Payments Canada delayed the launch twice, first pushing the timeline out to mid-2023 and then, in October 2022, not providing an updated timeline.

RELATED: Canadian FinTech leaders press Government of Canada for progress on open banking

During a panel at Elevate Festival in Toronto last week, Hanna Zaidi, Wealthsimple’s chief compliance officer for payments, said there needs to be “political will” to get the rails up and running. “In [other] jurisdictions you’ve had governments take the position, ‘We’ve seen this around the world, this is going to be to the betterment of our citizens.’ And they’ve had to push through a lot of challenges in getting that to market,” she said, referencing jurisdictions like Brazil, the European Union, and the United States that have real-time payments.

Beyond the development of the RTR itself is the need to ensure that all financial sector players have equal access to the rails. This summer Fintechs Canada, Payments Canada, and multiple other financial sector players called on the federal government in their 2024 pre-budget submissions to amend the Canada Payments Act to expand Payments Canada’s membership to include payment service providers and credit union locals. The move would grant FinTech startups direct access to the real-time rails once the system is operational. The submissions follow a joint letter in December 2022 from 14 financial industry associations and FinTech companies calling for the same.

To date, just banks and some credit unions have direct access to existing payments system infrastructure and FinTechs and local credit unions must partner with a direct participant in order to use the system.

Interac announced plans last week to expand direct access to its e-transfer system to include money-service businesses regulated by federal financial intelligence agency FINTRAC and investment dealers regulated by the Canadian Investment Regulatory Organization (CIRO). Before the announcement, only federally regulated financial institutions, provincially regulated credit unions, and some challenger banks were direct participants.

Despite the number of countries around the world that now have some form of open banking, Canadians’ awareness and understanding of the concept is low. A June survey from the Financial Consumer Agency of Canada found just nine per cent of survey respondents had heard of open banking. Awareness was higher among respondents aged 18 to 44, new immigrants, and men.

After hearing an explanation of open banking, more than half of respondents said they weren’t interested in participating; just shy of one-third wanted more information before participating, and only 15 per cent said they would be interested in using such a system.

Image courtesy of Pixabay

Kelsey Rolfe

Kelsey Rolfe

Kelsey Rolfe is an award-winning freelance journalist who covers tech, mining, work, and finance.

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