Key Takeaways:
- Canada is set to launch an open banking framework in 2026, which will allow consumers to share their banking data with accredited third-party providers in a secure and consent-based manner.
- However, open banking alone may not be enough to achieve the desired goals of increased competition, productivity, and affordability, and a broader open finance framework is needed.
- Open finance would allow Canadians to move their verified financial history when switching providers for mortgages, insurance, investments, or business credit, promoting competition and inclusion.
- The success of open finance depends on clear governance and liability rules, as well as ensuring that accredited credit unions, fintechs, and other challengers can access data on fair terms.
- Strong consent rules and public debate are necessary to guard against the risks of data sharing and prevent new forms of market power and discrimination.
Introduction to Open Banking
The Canadian government has finally announced its plan to implement an open banking framework, which is set to launch in 2026. This framework will allow consumers to share their banking data with accredited third-party providers in a secure and consent-based manner, replacing the current practice of sharing passwords with third-party apps. This move is a significant milestone, and it reflects the result of years of consultation and advocacy from the small business sector. The OpenSME initiative, for example, demonstrated that delayed implementation of open banking carried real economic costs for small businesses.
The Limitations of Open Banking
However, while open banking is a welcome development, it may not be enough to achieve the desired goals of increased competition, productivity, and affordability. The current framework only applies to banking data, leaving other areas of the financial system untouched. For a typical household, the largest financial decisions are not about day-to-day transactions, but about mortgages, insurance, and retirement savings. Similarly, for small businesses, their most important data live in accounting systems, payroll, and receivables, not a single bank account. A narrow version of open banking risks entrenching a two-tier system where some data are portable and some stay locked, even though they all describe the same person or firm.
The Need for Open Finance
This is where open finance comes in. Open finance applies the same basic idea of secure, consent-based data sharing to a wider range of financial products. In practical terms, it would allow Canadians to move their verified financial history when switching providers for mortgages, insurance, investments, or business credit, not just when they want to use a budgeting app. Other countries, such as the United Kingdom and Australia, have already moved in this direction, with significant benefits for consumers and small businesses. The UK’s open banking body reports over 13 million active users, and tens of millions of open banking payments in a typical month. As switching costs fall, providers sharpen their offers, leading to increased competition and better prices.
Designing an Open Finance Roadmap
Canada has a window now to learn from these experiences and design an open finance roadmap that fits its own needs. Three choices will be particularly important. First, the scope of open finance should follow affordability. If the goal of open banking is affordability through competition, then the next stage should focus on the parts of household and business balance sheets where price and access issues are most acute. This means mortgages, insurance, and retirement savings for consumers, as well as working capital and payments data for small- and medium-sized enterprises. Second, governance and liability need to be clear. The new federal open banking framework begins to address this problem by creating an accreditation regime and setting rules for participants. An open finance roadmap should go further and spell out who is liable for what, whenever data move beyond the banking sector.
Ensuring Competition and Inclusion
Third, competition and inclusion must be built in. Much of the argument for open banking rests on the idea that it will boost competition in a market dominated by a small number of large banks. However, this will not happen automatically. Rules for open finance will have to ensure that accredited credit unions, fintechs, and other challengers can access data on fair terms and that technical standards do not become a barrier to entry. The risks of data sharing are already here, and policymakers will need to guard against simply shifting concentration from big banks to big technology. Strong consent rules for combining financial data with other digital footprints will be needed to prevent new forms of market power and discrimination.
Conclusion
In conclusion, the 2026 open banking launch is Canada’s first real step toward a more modern financial data framework. However, it should not be the last. By setting out an open finance roadmap now, focused on scope, governance, and competition, Canada can ensure that the next phase of reform delivers what budget documents have long promised: more choice, better prices, and a system that works for people and businesses, not just for institutions. As an accountant working with hundreds of small businesses and families, the author sees both the need and the opportunity for open finance to make a real difference in the lives of Canadians. With careful design and implementation, open finance can help to promote competition, inclusion, and affordability, and create a more modern and efficient financial system for all.
