The U.S. must serve as a cautionary tale for Canada as it aims to lead the way on open banking.Andrew Kelly/Reuters
Steve Boms is executive director of the Financial Data and Technology Association.
In the United States, open banking is unravelling. In the absence of a clear legal right for consumers and small-business owners to access and share their financial data with third-party providers of their choosing, the system has become fragmented, uncertain and increasingly hostile to innovation.
Large banks and the Trump administration are asking a federal court to overturn a regulation that gives consumers control over their financial information. U.S. state regulators are advising investment professionals to steer clear of data aggregation. And now, the largest financial institution in the U.S. is threatening to impose punitive fees to allow its customers to use a third-party fintech tool to help them manage their finances.
This dysfunction is unfolding in real time as a result of the Trump administration’s about-face on open banking. And unless Canada takes a different path, it could happen here too.
While Canada has spent years thoughtfully engaging stakeholders on consumer-driven banking, the framework is not yet ready for deployment. If the country doesn’t move quickly to implement the right safeguards and structures, it risks importing the very problems now plaguing the U.S. market.
To avoid that outcome, the government must take several decisive steps.
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First, consumers and small businesses must have a legally binding right to access and share their data. That means amending the Personal Information Protection and Electronic Documents Act to establish a cross-sectoral data right that applies not only to traditional banking products, but also to credit, investments, insurance, pensions, utilities and telecom accounts. A modern financial system cannot function if consumers do not have comprehensive control over the digital record of their financial lives.
Second, Canada needs a tiered and proportionate accreditation system. It must allow a wide variety of firms – from large incumbents to small fintechs – to participate in the consumer-driven banking system based on the nature of their services and their size. Many smaller fintechs are already supervised by the Bank of Canada under the Retail Payment Activities Act. Burdening them with duplicative, misaligned compliance regimes would limit innovation and undermine the very competition this framework is meant to promote. What good is consumer-driven finance if nobody can actually use it?
Third, the scope of participation must be expanded. Small-business accounts must be unequivocally included. These businesses employ a large percentage of working Canadians and often struggle to access tailored financial tools because of data restrictions. At the same time, the framework must include provincially regulated financial institutions, which represent a significant portion of Canada’s banking landscape. Excluding them would fragment the market and deny consumers and businesses in many provinces the benefits of innovation and portability.
Finally, the rules must include proportionate, evidence-based enforcement. That means defining penalties clearly, scaling them according to firm size and severity of any non-compliance, and establishing accessible appeals processes. Without fair and predictable enforcement mechanisms, many smaller firms may choose not to participate at all, depriving consumers of choice and competition, and continuing the years-long pattern of successful technology companies leaving Canada for other markets. These changes are not theoretical – they’re necessary. Other G7 countries have already moved ahead with comprehensive open finance frameworks that give consumers real control and spur market innovation. Meanwhile, the U.S. – long regarded as a global leader in finance and regulation – is now mired in litigation and uncertainty because of its failure to establish clear legal rights and operational standards early on, particularly before large financial institutions began exploiting the regulatory vacuum.
Canada still has the chance to lead. But it must move beyond consultation and deliver a system that works – one that empowers consumers, enables innovation and builds a more competitive and resilient financial-services marketplace. The longer we wait, the harder it will be to fix.
Let the U.S. serve as a cautionary tale. A modern, secure and inclusive financial-data framework is within reach – so long as Canada doesn’t wait until it’s too late.