Torys via Mondaq | Brigitte Goulard, Konata Lake, Marissa Daniels, Mohammed Muraj and Robin Asgari | Jan 25, 2023

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Although many were hoping for the launch of the first phase of open banking in January 2023, as initially promised in the final report of the advisory committee on open banking, this date no longer appears achievable. However, progress continues to be made on open banking, with the first phase expected to launch this year.

• As the open banking steering committee and working groups continue their important work to create an open banking framework in Canada, the larger financial services community is preparing to integrate open banking for businesses and ultimately for consumers.

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• Accreditation:  there was consensus that the Australian model is preferable. The Australian model allows participants to determine the adequacy of the insurance or comparable guarantee that they require by assessing factors such as the (1) nature of products or services to be provided; (2) nature of Consumer Data Right (CDR) likely to be managed; (3) volume of CDR data held; (4) financial resources; (5) scope; (6) policy limit; (7) persons covered; and (8) exclusions.
• The liability working group focused on three themes: (1) liability as it pertains to consumers; (2) traceability and transparency; and (3) liability between participants.  However, in order to govern the legal relationship between participants, there was no agreement on whether the regime should prescribe a deemed contract under statute, as is the case in Australia, or to follow the non-legislative U.K. approach.
  • Discussed redress for consumers, with most agreeing that the redress process should begin at the complaints desk chosen by the consumer (either the data recipient or provider) and that the data recipient should be the automatic guarantor, who must pay out automatically to the consumer and then resolve compensation with the corresponding party through an alternative dispute mechanism.

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• Privacy: There was consensus that revocation of consent will be deemed where the consumer closes their account or if the purpose for which the data was collected changes.
  • There was also general agreement that the consent approach should align with the existing financial services industry standards and that the disclosure approach found in the Bank Act consumer protection provisions provide a solid baseline for disclosure principles to be applied to open banking.
• Security:  The working group is not responsible for developing the principles and technical standards of the API, which is a crucial piece of open banking that will facilitate the data exchange between financial services providers and open banking platforms.
  • A majority of the participants agreed that the National Institute of Standards and Technology (NIST) framework provided the best balance to serve as a baseline requirement to address data security risk, providing flexibility and prescriptive requirements.
• Governance:  The one elephant in the room that has not been discussed is the “governance” of Canada’s open banking initiative. Although the report recognized that “in all open banking approaches, effective governance of the system is central to success”, it does not appear as if any decisions have been made as to how the government plans on tackling the governance of Canada’s open banking framework.

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• In addition to the open banking steering committee, other groups are also working to advance Canada’s open banking framework. One such group is the CIO Strategy Council. In November 2022, the council published its national standard for consumer directed finance.
• 2023 should yield pivotal developments in the implementation of open banking in Canada. This will provide clarity to industry members as to how open banking will impact their businesses and services.

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