The federal budget promotes open banking and low-fee measures

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TORONTO – The federal budget touted several banking sector initiatives, including open banking and lower fees, but little was said about exactly when the changes would take effect.

Open banking has been one of the most closely watched areas of the financial industry. Also known as consumer-based finance, it allows consumers to securely share their financial data between institutions and applications to use services such as budget management and broader credit options.

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Consumer advocates and fintech companies are pushing for faster adoption of the system, which exists in dozens of countries, for more choice and potential cost savings.

In the budget, the government committed to introducing some of the necessary legislation this spring and other elements in the fall, and appointed the Financial Consumer Agency of Canada to oversee it, but did not specify a target implementation date.

“We want to see an official launch date for open banking,” EQ Bank CEO Andrew Moore said in a statement.

He said the bank would like to see a higher level of investment in the system to ensure its success.

The federal government has committed $1 million this fiscal year to help get FCAC up and running and $4.1 million over three years to complete the necessary policy and oversight work for the Department of Finance.

Rather than creating a new agency, using an existing FCAC should save time and money, said Saba Sharif, business process services provider Symcor Inc. Chief Strategy, Product and Innovation Director of the company.

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“Naming it, I think, is a lot faster than installing something completely new,” Sharif said.

He said it was too expensive to set up a new agency when the UK rolled out a system costing hundreds of millions of pounds.

The lack of a specific timeline creates challenges for companies hoping to prepare for the new system, he said.

“Each organization involved in this framework needs to know how many months they are dealing with.”

The lack of a timeline for implementation is common to other banking initiatives.

The government has committed to capping insufficient funds fees at $10, down from the $45 to $50 the big banks typically charge. It also plans to introduce additional safeguards, such as warnings when a customer may be charged, a ban on multiple NSF fees per transaction and a ban on overpayments on wire transfers of less than $10.

The Budget said the government would issue draft regulations on the measure in the coming months, but there was no target date for when the new regulations would be in place.

Despite the lack of date, the news was welcomed by anti-poverty advocacy group ACORN Canada.

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“Finally, low- and middle-income people will get a break from corporate looting,” leader Alejandra Ruiz Vargas said in a statement.

Government efforts to expand free and affordable bank accounts are murky.

The Budget said the government plans to negotiate wider access to low-cost and no-fee bank accounts and add additional services to them. He said he would direct the FCAC to negotiate new agreements with providers, including major banks.

While the government has introduced new initiatives, advocates expect it to reduce existing ones, including lowering the maximum allowed interest rate from 48 percent to 35 percent per annum. Draft regulations were published in December, but it is unclear when the rate will drop.

In the Budget, the government announced it would remove the requirement that the attorney-general must approve prosecutions of illegal and predatory lending, pledging to continue to protect against what it calls predatory lending.

It also says it will work with provinces that have jurisdiction over much of the payday loan space to cover the cost of insurance, improve price transparency and improve data collection.

The Canadian Bankers Association said it is still reviewing the budget to assess its implications.

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