Budget 2024 promises open banking, but timelines remain hazy

Timing gap leaves companies in limbo

Budget 2024 promises open banking, but timelines remain hazy

The recent federal budget has unveiled initiatives aimed at open banking and lowering bank fees, but details on when Canadians will see those changes remain unclear.

The proposed open banking system, also known as consumer-driven finance, promises to enable customers to securely share financial data between institutions and apps, offering them greater loan options and potentially lower costs.

While the government promised legislation this year and set the Financial Consumer Agency of Canada (FCAC) to oversee open banking, there was no target launch date.

"We would have liked to see a formal launch date for the open banking framework," EQ Bank chief executive Andrew Moor said, expressing hope for greater investment to ensure the system's success.

Timelines and challenges

The government's $1 million in funding for the FCAC this year, along with $4.1 million for the Finance Department over three years, aims to complete necessary work.

Utilizing the existing FCAC instead of setting up a new agency could save resources, said Saba Shariff, chief strategy, product and innovation officer at Symcor Inc.

However, Shariff noted that the lack of specific timing creates preparation challenges for companies involved in the open banking framework:

"Every organization that's going to participate in this framework needs to know how many months they're dealing with," Shariff told The Canadian Press.

Similar delays exist with planned caps on non-sufficient fund (NSF) fees at $10 and additional consumer protections. While the government promised draft regulations in the coming months, no target implementation date was given.

Despite the uncertainty, anti-poverty group ACORN Canada welcomed the news, with leader Alejandra Ruiz Vargas stating, “At last, low- and moderate-income people are getting a break from corporate gouging."

Additional measures

The budget also mentions negotiations with banks, overseen by the FCAC, to widen access to low- or no-cost accounts and include more services.  However, details remain vague.

Additionally, advocates still await previously announced changes, like reducing the maximum allowable interest rate for payday loans. While draft regulations were published in December, a firm timeline for implementing a lower rate remains unclear.

Read next: FSRA increasing focus on mortgage suitability in 2024

The budget further pledges to enhance protection against predatory lending practices by lifting a requirement for the Attorney General to approve prosecutions. 

Collaboration with provinces with significant jurisdiction over payday loans is promised to cap insurance costs, improve pricing transparency, and enhance data collection.

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