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Industry groups representing banks, fintechs press Freeland for clarity on open banking

The letter, sent Nov. 2, asks the government to go beyond its general campaign promise to implement open banking by early 2023

MONTREAL — Three industry groups representing roughly 250 financial-services companies, from fintech startups to the country’s largest banks, sent a joint letter to Finance Minister Chrystia Freeland last week pushing for clarity on whether the government intends to adopt the recommendations made by its advisory committee on open banking.

The letter, which The Logic obtained from a source, was co-signed by the Canadian Lenders Association (CLA), the Financial Data and Technology Association of North America and the Paytechs of Canada Association, whose members range from emerging companies like Wealthsimple and Flinks to major international firms like Visa, Morningstar and Raymond James.

The letter is noteworthy for the broad range of companies its signatories represent and signals a growing impatience among some in the industry for progress on open banking.

“Our organizations represent 249 financial technology companies, including Canada’s fastest growing and most innovative firms,” the letter says. “We have come together united in support of the full implementation of the phase one and phase two recommendations of the advisory committee on open banking and to respectfully request your public support for the same.”

The Department of Finance didn’t provide a comment before The Logic ’s deadline.

While some stakeholders have issued similar calls in the past, the letter is noteworthy for purporting to represent a variety of financial-services companies with vastly different interests. Open banking is expected to make it easier for fintechs to compete with banks by allowing them to build services that use customer data held at financial institutions.

The letter itself notes that some larger firms have been skeptical of the move toward open banking, even as it names some of Canada’s largest banks, such as BMO and RBC, among the member companies listed at the bottom of the letter. According to CLA president Gary Schwartz, however, those member companies don’t necessarily endorse the letter’s contents.

“While we do not represent the specific goals and business strategies of each member, we agreed to support this letter drafted by our colleagues at [Paytechs of Canada] as our membership is deeply committed to open banking as a goal across the lending spectrum in Canada,” Schwartz told The Logic in an email. “Our members’ names should not have been individually referenced in the appendix as this was a CLA endorsement.”

Alex Vronces, executive director of Paytechs of Canada, said each organization was eager to sign on behalf of its membership. “We’re proud to have co-signed this letter with our fellow associations,” he said.

The letter, sent Nov. 2, asks the government to go beyond its general campaign promise to implement open banking by early 2023, pushing Freeland and Finance Canada for specific commitments that would expand third parties’ right to access financial data stored with banks.

Those commitments would include backing open banking with legislation, establishing a formal governance organization for open banking and building added technological capabilities into the system, such as third parties’ ability to initiate payments or create accounts at financial institutions.

In 2018, Finance Canada appointed four industry veterans to an advisory committee to study the issue of open banking. After consulting with the industry, the committee submitted a report , released publicly in August of this year, that included proposals for the system’s design and a recommendation to implement an initial version of it by January 2023.

The letter signals a growing impatience among some in the industry about the pace at which the government is moving. “As many of the world’s advanced economies transition toward modernized, inclusive and well-regulated financial systems, Canada faces a narrowing window to remain competitive,” the industry groups wrote in their letter.

Finance has yet to appoint a lead to oversee the initial implementation of open banking, even though the system is supposed to be up and running in just over a year.

The Logic previously reported that Finance had assembled a shortlist of candidates for the position, after canvassing the industry for months.

Dominique Samson, chief of staff at Flinks, a financial-data provider whose name is included on the letter, said he didn’t expect any movement until the government fills the position and tasks that person with implementing some or all of the advisory committee’s recommendations. But he’s among those eager for government to pick up the pace.

“As an industry, we need regulation to set a level-playing [field] between incumbents and new entrants,” Samson said.

Source: Financial Post