The recent 2024 budget release from the Canadian federal government is stirring up excitement in the fintech and banking industry.
With the recent announcement from the Federal Government on building the framework for consumer-driven banking (open banking) in Canada, Vice President of Service Delivery, Deborah Moore, wanted to share some details from Celero’s perspective on what this means for the credit union system.
In the federal budget release on April 16, 2024, the government announced a $5.1 million dollar investment in consumer-driven banking over the next three years, beginning with a $1 million dollar investment this year to set up the Financial Consumer Agency of Canada (FCAC) as the regulator for the consumer-driven banking framework and to develop a consumer awareness campaign.
The other $4.1 million dollars will be for the Department of Finance to complete the policy work to establish and maintain oversight, which will include implementing safeguards to the framework.
What Does This Mean for Credit Unions?
There are a few key takeaways for credit unions from this announcement:
Readiness:
This is the most significant announcement on consumer-driven banking we’ve had from the Federal Government in the last few years, and it signals the government’s readiness to prioritize consumer-driven banking in Canada.
Policy Objectives of Framework:
While the specific framework hasn’t been established, the Federal government indicated that it would follow three policy objectives:
- Safety and Soundness
- Protecting Canadians’ Financial Well-Being
- Economic Growth and International Competitiveness
Oversight and Role:
The selection of an existing regulator to oversee consumer-driven banking rather than the creation of a new regulator will likely reduce overlap and redundancy in the development and management of the framework.
Currently, the FCAC only regulates federal credit unions and banks. The FCAC does not have direct oversight over provincial credit unions; that remains the authority of the appropriate provincial regulator, according to the Federal Government’s paper Budget 2024: Canada’s Consumer-Driven Banking Framework. However, with its expanded mandate into regulating the consumer-driven banking framework, the FCAC will have a governance model to allow provincial credit unions to opt-in to participate in the framework.
The expanded role of the FCAC will include ensuring that participating financial institutions are exposing their APIs and that accredited data recipients can access permissioned consumer data.
Accreditation:
The Federal Government has stated the consumer-driven banking framework will include a formal accreditation process for all organizations participating in providing consumer-driven banking services. The framework, once finalized, will have the process and criteria for participating. Participants who meet the criteria will be part of a central registry that consumers can access to view who is an accredited participant.
Funding Model:
The FCAC’s consumer-driven banking regulation function will be funded on a cost-recovery basis by participants.
Timing:
The Federal Government didn’t provide as many details as anticipated, including the timing for when the framework would be launched. This is likely because of key legislation that needs to be passed before consumer-driven banking can become a reality.
Two pieces of consumer-driven banking legislation will be introduced in 2024, specifically legislation will be introduced in Spring 2024 to expand the FCAC’s role, including governance, scope and process for the technical standards, followed by the introduction of legislation on the remaining elements of the framework later this fall. It’s anticipated the legislation will be in place before the next Federal election.
It’s also important to note that Bill C-27 is a necessary pre-cursor for the operationalization of consumer-driven banking in Canada as it is centered around consumers’ rights to data mobility; it is currently under consideration in the House of Commons after two readings.
How Can Credit Unions Prepare for What’s Next?
Until the consumer-driven banking framework is established, the accreditation criteria are in place and consumer-driven banking legislation has passed, it’s difficult to begin taking real action towards enabling consumer-driven banking within your credit union.
However, there are preparedness activities that we recommend undertaking, specifically:
Maturing Your Operational Standards
Based on the framework’s policy objectives, it’s clear that security and privacy controls will be part of the accreditation criteria. Ensuring you have the policies, controls and systems in place to demonstrate a high degree of control is a critical step. Celero can assist you with these activities.
Determining Your Data Management Needs and Structure
The Federal Government will have data and privacy compliance requirements as part of the framework, and credit unions will have to determine how best to manage the flow of data across your system, maintain a consent database and establish guidelines for privacy and revocation. Celero is focused on enablement of consumer-driven banking to provide solutions that deliver a secure mechanism for accessing and connecting data between your banking services, managing consent and maintaining member privacy.
Budgeting for Consumer-driven Banking
The details provided by the Federal Government announcement say that participants need to be prepared to fund the FCAC regulation function, have a high degree of structure, governance and processes in place to protect consumers and be willing to go through an accreditation process. While these costs are unknown, if your credit union intends to be a consumer-driven banking participant, it’s prudent to set aside investments for the 2025 fiscal year
Preparing for Member Engagement
The announcement that the FCAC will be developing a consumer awareness campaign means your members may contact you with questions. This is a great time to assess member awareness and understanding of consumer-driven banking as you develop your own engagement strategies.
Celero and Consumer-driven Banking
Celero is actively engaged in consumer-driven banking conversations with partners across the system, and we are committed to enabling consumer-driven banking readiness for our clients in alignment with the FCAC’s consumer-driven banking framework.
With the Federal Government’s announcement, the CCUA Open Banking Collaboration Committee (OBCC) is set to meet at the beginning of May prior to the CCUA Conference. Celero is part of this committee, which advocates for the credit union system with the Federal Government on consumer-driven banking.
We will continue to provide insights, guidance and services that will prepare you to take advantage of a new era of banking in Canada, including any actions from our ongoing participation in the OBCC.
Have questions about how our experts can help your credit union prepare for open banking? Contact us or your Celero Account Executive and we can discuss this further with you.
