Canada Budget reveals plan for central bank to oversee open banking

Canada’s government has this week announced a new set of commitments on open banking, including a change of tack as to which authority will oversee it, as part of a landmark Budget.

The country’s progress on launching a legal and governance framework for open banking – often referred to in Canada using the term ‘consumer-directed finance’ or ‘consumer-driven banking’ – lags nations such as the UK, whose Open Banking Implementation Entity was set up more than eight years ago, and Australia, where Consumer Data Right legislation went live more than five years ago.

Canada’s ‘Budget 2025’, presented on 4 November, announces a government’s commitment to introduce legislation to ‘complete’ the Consumer-Driven Banking Act and provide a data-mobility right in the Personal Information Protection & Electronic Documents Act to facilitate economy-wide data sharing.

The Budget – the first under the government of Mark Carney, who was elected as prime minister in April – announces the government’s intention to delegate oversight of the Consumer-Driven Banking Act to the Bank of Canada, ‘building on’ the central bank’s oversight of payment service providers. Carney is a former governor of both the Bank of Canada and Bank of England.

The Bank of Canada will ‘retain up to CN$19.3 million [about £10.4m/US$13.7m] over two years on a cash basis from its remittances to the Consolidated Revenue Fund to support implementation,’ the Budget document states. The 2024 Budget included a commitment to expand the mandate of the Financial Consumer Agency of Canada (FCAC) to include oversight of open banking. The new Budget states that ‘remaining funding that had been previously allocated to the Financial Consumer Agency of Canada in the 2024 Fall Economic Statement will not be spent, amounting to CN$36.9 million [about £19.9m/US$26.2m] over two years.’

OPEN BANKING: EXPLAINED Open banking is being encouraged by governments worldwide, in different ways and at different speeds, as a means of boosting innovation and competition in financial services. It is a reference to users sharing their banking data with third-parties (for example, fintech companies). ‘Open’ refers to open application programming interfaces (APIs): software intermediaries that allow two machines to interact. ‘Open APIs’ are APIs made publicly available to software developers. 

Financial inclusion benefits

The 493-page Budget 2025 document (fully titled: ‘Budget 2025 – Canada Strong’) contains a section titled ‘Supporting Innovation and Global Competitiveness’ that summarises payments-focused initiatives and progress in Canada, including on open banking and related to Canada’s ‘Real-Time-Rail’ project – a new fast payments system that will allow Canadians to send and receive ‘data-rich’ payments in real-time.

The government states that it proposes to provide CN$25.7 million over five years, beginning in 2025-26, ‘and CN$5 million ongoing’, for the Canadian Security Intelligence Service and the Royal Canadian Mounted Police to support national security safeguards in the Consumer-Driven Banking Act.

It further announces that the government will ‘accelerate the next phase of consumer-driven banking, including legislating the ability to direct actions, such as switching accounts or making bill payments, or “write access”, by mid-2027, once [the] Real-Time-Rail project is live and in widespread use.’ Budget 2025 ‘reaffirms the government’s support for the launch of‘ Real-Time-Rail in 2026.

The document positions open banking as particularly helpful for financial inclusion, stating that ‘lower-income and financially stressed households are expected to benefit most through access to lower-cost products, clearer choices, and tools to manage debt and reduce financial stress.’

It is more than four years since Canada’s then-government released a report that proposed January 2023 as an ‘ambitious but achievable’ target date for launching an open banking system. The report, published in August 2021, was authored by an Advisory Committee on Open Banking, which had been tasked with exploring open banking’s merits in 2018.

RELATED ARTICLE Canada publishes long-awaited plan for open banking regulatory framework – a news story (17 April 2024) on measures in Budget 2024

FDATA: ‘real momentum’

The Financial Data and Technology Association (FDATA), which represents more than 30 financial technology firms and consumer-permissioned data access platforms across the US and Canada, welcomed the announcements.

“This announcement represents real momentum for consumer-driven banking in Canada,” said FDATA executive director Steve Boms. “By streamlining oversight of the fintech ecosystem under the Bank of Canada and committing to write access as the next phase of implementation, the government is moving closer to ensuring Canadians and small businesses have secure, reliable, and affordable ways to access and share their financial data – helping drive innovation and inclusion across the financial sector.”

“We look forward to working with the Department of Finance, the Bank of Canada, and the wider industry as Canada’s open finance framework moves towards implementation,” Boms added. Open finance is a broader concept than open banking.

Presenting the Budget, minister of finance and national revenue François-Philippe Champagne confirmed plans to create a new Office of Digital Transformation with a mission to lead the adoption of AI and other new technologies across government. In particular, the government will focus on deploying “made-in-Canada sovereign AI tools” for the public service to drive efficiencies and opportunity for domestic innovators.

Champagne said the government would also create “a modern, agile, and efficient public service”, with a focus on driving CN$60bn [about £32.bn/US$42.7bn] in savings over the next five years.

RELATED ARTICLE Canada Budget sets out plans to modernise government and create ‘leaner public service’ – a news story from our sister title Global Government Forum on Budget 2025

Stablecoin regulation on way

Budget 2025 also announces the government’s intention to introduce legislation to regulate the issuance of fiat-backed stablecoins in Canada. Stablecoins are cryptocurrencies designed to maintain a stable value by having their market value pegged to an external reference (typically fiat currency).

The legislation will require issuers to maintain and manage ‘adequate asset reserves, establish redemption policies, implement risk management frameworks, and protect the sensitive and personal information of Canadians,’ the Budget states, adding that the legislation ‘will also include national security safeguards to support the integrity of the framework so that fiat-backed stablecoins are safe and secure for consumers and businesses to use.’

To administer the relevant legislation, the Bank of Canada will retain CN$10 million over two years, starting in 2026-27, from its remittances to the Consolidated Revenue Fund, it continues. Administrative costs in subsequent years are projected to be $5 million per year and will be ‘offset’ from stablecoin issuers regulated under the act, it adds.

Amendments will also be made to the Retail Payment Activities Act to enable the regulation of payment service providers that carry out payment functions using prescribed stablecoins.

Separately, the government will ‘also explore options and work with the private sector to encourage the adoption of artificial intelligence in the financial sector in ways that advance innovation and build trust in its use.’

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