Senate Open Banking Report Calls for Swift Government Actions
On June 19, 2019, the Standing Senate Committee on Banking, Trade and Commerce released the report Open Banking: What it Means for You (the Report). The Report examines the potential regulatory role of the federal government in respect of open banking, as well as the benefits and challenges of open banking in a Canadian context. The Report recommends, among other things, swift government actions to place the Financial Consumer Agency of Canada (FCAC) in an interim oversight role for screen scraping and open banking activities and provide immediate funding publicizing research on the benefits and risks of open banking.
The Report also contains a number of longer term recommendations. The authors recommend the government “swiftly enact changes to modernize the Personal Information Protection and Electronic Documents Act (PIPEDA) and align it with global privacy standards”. The report further recommends the development of a principles-based open banking framework in conjunction with industry, to “urgently advance” open banking in Canada.
Open Banking Framework
The Report recommends developing a principles-based framework for open banking, to be developed by industry stakeholders and integrated with existing financial and privacy legislation. The Report anticipates such framework would cover:
- the scope of data that would be accessible by financial services providers;
- how the payments sector will be included within the framework;
- timelines for implementation; and
- the financial services providers that would be participants.
The Report identifies industry stakeholders as representatives from federally and provincially regulated financial institutions, financial services providers, consumer advocacy groups, Payments Canada and any other relevant groups.
The Report also suggests coordination between the federal and provincial governments to facilitate initiatives related to an open banking framework, including creating (i) a registry of accredited third-party providers for open banking and (ii) an innovation sandbox to allow new third-party providers to safely test and develop open banking technology.
FCAC Oversight of Screen Scraping
Screen scraping is a method by which third-party applications access a customer’s banking data. In essence, a user provides an application their username and password and then the application “prints” their information from a screen capture in order to obtain information. The third party then has access to the customer’s account information and transaction history. According to the Department of Finance, approximately 4 million Canadians use apps which use screen scraping as a method of accessing personal financial data.
The Report recommends quick action to tackle the risks posed by screen scraping, including designating an oversight body to be in charge. The Report suggests that the FCAC be given this role “immediately” with a review by the federal government every six months until a final regulator has been identified. While FCAC has oversight of screen scraping and open banking the Report expects it to be responsible for:
- conducting ongoing research on the benefits and risks for consumers of screen scraping and open banking activities and informing the public of that research on a periodic basis;
- organizing the federal government’s public advertising campaign, in cooperation with Fintech companies and the banks, to educate consumers about screen scraping, which would include advertisements on government websites, social media, television, print media and public advertising spaces;
- responding to complaints and questions from the public with respect to screen scraping and open banking activities; and
- coordinating its efforts with respect to the oversight of screen scraping and open banking activities with the approaches of the relevant provincial and territorial consumer protection regulatory authorities.
In addition, the Report recommends funding consumer protection advocacy groups to bring awareness to the benefits and risks of screen scraping. However, the Report does not specify how much funding is appropriate or what consumer protection advocacy groups would be deserving of taxpayer dollars.
Financial Sector Legislation Amendments
The Report also recommends that the federal government introduce any relevant legislative changes to financial sector legislation to (i) prohibit of the use of consumer banking data for insurance underwriting purposes, (ii) ensure the continued stability of the Canadian financial sector system (including as a result of the impact of any of the big technology companies entering the financial services sector), and (iii) implement any necessary bank-specific consumer protection measures (such as requiring transparency of algorithms, providing consumers with the ability to track the sharing of their data and providing consumers with deletion rights in respect of their data when consent to share such data is withdrawn).
The Report takes privacy concerns into account by recommending that the federal government “swiftly” modernize PIPEDA to align it with the General Data Protection Regulation 2016/679 (GDPR) as a global privacy standard. The suggested changes to PIPEDA include:
- Allowing individuals to direct that their personal information be moved from one organization to another in a standardized format. This is commonly referred to as a “data portability right”;
- Requiring explicit, meaningful plain-language consent, which would be separate from any service contract, that describes the intended use of the information and which third parties will have access to the information; and
- Enhancing the Privacy Commissioner’s enforcement and oversight powers, including order-making powers in the form of cessation and records preservation orders as well as increasing the scope and range of fines. The Report envisions the Privacy Commissioner of Canada and the Canadian Commissioner of Competition as co-regulators of open data frameworks