Category Archives: Legal Issues and Regulation

Maureen Jensen to step down from OSC

Investment Executive | James Langton | Jan 21, 2020

Maureen jenson osc - Maureen Jensen to step down from OSCGrant Vingoe will take over as acting chair following Jensen’s departure on April 15

Maureen Jensen, the head of Canada’s largest securities regulator, is stepping down as chair and CEO of the Ontario Securities Commission (OSC) 10 months early.

The OSC announced that Jensen will leave the helm of the commission on April 15. She has headed the OSC since 2016, and was reappointed to a second term that began in 2018 and was to run until February 2021.

OSC vice chair Grant Vingoe will take over as acting chair in April.

Prior to becoming head of the OSC and its first female chair, Jensen was executive director and chief administrative officer of the commission from 2011 to 2016.

“It has been an honour to serve Ontario investors and market participants,” Jensen said in a statement.

“These past nine years have been the most meaningful in my career. I have enjoyed every moment working alongside my respected colleagues and leadership team, and contributing to Ontario’s vibrant, healthy and internationally recognized capital markets.”

As head of the OSC, Jensen championed improved retail investor protection. That effort culminated most recently with the adoption of the client-focused reforms (CFRs), which will be phased in over the next couple of years.

See:  OSC makes doing business easier for market participants

However, Ontario’s government has resisted regulators’ other major effort to enhance investor outcomes by eliminating deferred sales charge (DSC) mutual funds. Late last year, the rest of the Canadian Securities Administrators — excluding Ontario — said they planned to eliminate DSCs.

Jensen also led the OSC’s recent project to reduce regulatory burdens. In November, the commission published a report setting out over 100 recommendations for cutting the costs of compliance.

“The OSC is well on its way to becoming a more modern regulator, committed to continuously improving how we regulate,” Jensen said.

Jensen has also helped champion efforts to improve gender equality in corporate boardrooms and executive suites.

A geologist by training, she started her career in mining and spent 20 years in that sector before shifting to finance and regulation — including stints at the Toronto Stock Exchange, Market Regulation Services Inc. (RS) and the Investment Industry Regulatory Organization of Canada (IIROC).

“Maureen is an exceptional leader who has demonstrated integrity and dedication. She cares deeply about this agency and Ontario’s investors and capital markets, and leaves behind a strong legacy that will endure,” said OSC lead director Lawrence Haber.

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NCFA Jan 2018 resize - Maureen Jensen to step down from OSC The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Open Banking In Canada: Navigating The Future Of Money

Borden Ladner Gervais LLP | Stephen J. Redican, Robert Dawkins, Ross McGowan and Alexandra Nicol | Jan 9, 2020
Open Banking in Canada - Maureen Jensen to step down from OSCThe Canadian financial services industry is at the threshold of change. Regulatory overhaul, the ubiquity of online services, and technological innovation and disruption will affect all players—from banks to FinTech start-ups.

Open banking will introduce new opportunities and business models for the financial services industry and new services from FinTech entrants to the market—but these opportunities come with unprecedented risks and operational requirements for a banking system that prides itself on stability. Given Canada's unique financial system and constitutional structure, the implementation of open banking won't look the same as it has in the U.K., the EU or Australia, where its introduction is already underway.

See:  Why Canada must be open to open banking

We spoke with a diverse group of leaders from across the Canadian financial services industry to understand open banking's current and emerging issues: What do you see changing? How will your organizations fit into the new landscape? What might a made-in-Canada model of open banking look like for consumers and industry?

Roundtable Participants

Anne Butler
Chief Legal Officer and Head of Policy and Research, Payments Canada
"If there isn't trust in the security and integrity of the system, especially among consumers, open banking will not succeed."

Lisa Ford
Senior Counsel, RBC Law Group, Enterprise Payments and Open Banking
"Open banking has existed in some form since the turn of the century and now technology and other changes are fuelling a more public debate."

Andrew Boyajian
Head of Banking, North America, Transferwise
"A concept like, "We're a known bank, we've been around for hundreds of years and therefore we're better equipped," doesn't necessarily make sense. Instead, it comes down to the contents and adherence to risk policies, and the importance that institutions give to cybersecurity."

Oscar Roque
AVP, Innovation, Research & Emerging Solutions, Interac Corp.
"...it's not just about the security of the technology, but also governance structure, accreditation, and making sure that the proper controls are in place so that it's not just anybody accessing that system."

Tanya Postlewaite
VP Compliance and Governance, Corporate Secretary, Chief Compliance Officer and CAMLO, Concentra
"We hope open banking will bring FinTechs into the same realm of regulation as other financial institutions, to ensure everyone is operating on the same playing field and that the integrity of the entire system is protected."

Andrew Boyajian, TransferWise

Andrew Boyajian is the Head of Banking, North America, for TransferWise, an international money transfer service headquartered in the U.K.

For a FinTech like TransferWise to grow in the Canadian market, we needed to address both operational and regulatory issues. From our experience in other markets, we find Canadian payments infrastructure can be a bit guarded. And this is a challenge not only to us, but to the entire FinTech ecosystem. As an example, in Canada only a select group of financial institutions can participate in payment systems. But Canada also goes one step further. To be a direct clearer, the current rules require financial institutions to handle a specified percentage of the gross payment volume in Canada. While this is slated to change, it can limit the system to a few big banks and financial institutions. For a company whose primary role is to provide payment services to customers, this is a challenge. First, we need to find a bank that's willing to actually onboard us as a customer. And second, we're going to rely on that banking relationship as part of our business continuity.

See:  Big Tech takes aim at the low-profit retail-banking industry

Fortunately, we've seen some progress overseas with central banks becoming more open to including non-traditional financial institutions in payment systems. TransferWise was one of the first non-banks in the U.K. to hold a settlement account with the Bank of England, which supported our direct participation in the Faster Payments Service. And more recently we learned that the Bank of England is considering even broader access rights for non-banks, in terms of holding deposits. We're seeing some progress in Canada, too, where Payments Canada is considering roles like associate memberships in the payment schemes, including the proposed real time rail. All of this movement is good, but until it's a reality there is an over-reliance on financial institutions to properly support FinTechs and their customers.

On the regulatory side, some laws and regulations are antiquated. In general, frameworks are written with the idea that businesses are physically present, with face-to-face settings for their customers. Unfortunately, we don't always see policymakers thinking about how to modernize these regimes for digital companies. But when they do look to modernize frameworks, it's important that they do so in a way that is technology agnostic. So, instead of references to specific file types, ".pdfs" as an example, we encourage policymakers and regulators to think about principles that transcend today's technology to future-proof them as much as possible.

One example of regulation that is already changing for the better is the move to safeguard customer funds held by payment service providers. It's a protection that doesn't currently exist for Canadian consumers. If you hold a balance with a FinTech, there isn't a live regulatory framework to ensure that the balance is protected, set aside, and guaranteed for the consumer. It's in a similar vein to CDIC or provincial schemes to protect deposits at financial institutions. Fortunately, the Department of Finance, as part of their overhaul of the retail payment system, saw this gap and is taking steps to put in place safeguarding methodology for Canadian consumers. It will mean protection and transparency for consumers, so they can know they're getting the same level of service from FinTech providers as they are with banks.

Often banks or regulators may feel that money transmitters, payment service providers, or FinTechs pose a higher risk for money laundering. But if we think about the topics of money laundering or financing of terrorism, those can occur through any channels — whether it's a FinTech or a bank. So, we don't think the argument of higher AML risks is a reason to exclude FinTechs from direct access to payment systems. The challenges in addressing AML are the same for FinTechs as for banks — laws do not really differentiate between the type of provider.

See: Inflection point:Seven transformative shifts in US retail banking

We can see more validity in the argument that keeping a smaller number of entities with that clearing access could promote stability. Generally, a regulator should be thinking about sound capitalization or business models and then the operational risk policies that entities have. Those concepts are broad and universally applicable. If one institution or entity is capable of meeting them in the same fashion that a defined depository financial institution is, we really don't see the difference and need to create a division in access rights between the two.

In the U.K., while TransferWise has been in a position where we have advised policy makers relating to the implementation of open banking deriving from PSD2, we have instead focused more on transparency in fees. That said, we can certainly see areas where there are benefits. For example, with any payment method other than payment cards — like direct debit — there is quite a bit of information that could be obtained about a customer to help inform a merchant whether or not those funds are actually going to settle, as well as the overall risk profile of the individual with whom they're engaged in business. One of the benefits that I can see in open banking is the ability for consumers to share that information in a standardized way.

Some technology already exists through a screen-scraping service, where a consumer might choose to enter an online bank ID and password in a third-party application. That application essentially logs in to that customer's online bank account and scrapes the screen to obtain this data and then provides that data back to a platform. But that's brittle. If a bank decides to change its interface or implement two-factor authentication, for example, that could easily break the service. Also, depending on the bank, that could be a violation of the terms of use for the account because the account owner has granted access or authorization to a third party. Open banking can be a way to simplify these protocols and allow that same data set to be universally applied. And, more importantly, it gives consumers an active role in deciding with whom and how to share that information.

In today's world, where digital information is increasingly being passed through digital channels, cybersecurity is an area that we need to deal with. And the payments industry saw that with payment cards — as things began to move from point-of-sale to card-not-present, the idea of security and how these payment instruments are being authenticated and validated became important. It's a matter of the market adapting to understand how data is being stored and transmitted, identifying where the vulnerabilities are, and knowing that responsibility is not housed within any particular provider or role in the payment chain. Instead, it's universal.

See: How Jack Ma’s $290b SME credit engine is changing Chinese banking

Whether the industry is using cloud services or their own infrastructure, they're all susceptible to possible attacks by any type of bad actor. That's not something that's exclusive to a FinTech. So, all entities need to have robust plans for fraud, cybersecurity, and data protection. Meanwhile, regulators should understand that these aren't always challenges defined by entity type, but rather by entity preparedness. A concept like, "We're a known bank, we've been around for hundreds of years and therefore we're better equipped," doesn't necessarily make sense. Instead, it comes down to the contents and adherence to risk policies, and the importance that institutions give to cybersecurity.

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NCFA Jan 2018 resize - Maureen Jensen to step down from OSC The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Canadian Securities Regulators Publish Additional Guidance for Facilitating Crypto Asset Trading

CSA |  Jan 16, 2020

CSA logo - Maureen Jensen to step down from OSC

Montreal - The Canadian Securities Administrators (CSA) today published Staff Notice 21-327 Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets, to help these entities to determine situations where securities legislation may or may not apply.

“The evolving landscape of the industry prompts us to clarify our regulatory framework so as to better support fintech businesses seeking to offer innovative products, services and applications in Canada,” said Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers. “As we continue to consider the comments and responses to the consultation we launched last year, the staff notice published today will help platform operators to determine whether their activities are subject to securities legislation.”

The notice describes situations where securities legislation will and will not apply. For example, securities legislation may apply to platforms that facilitate the buying and selling of crypto assets that are commodities, because the user’s contractual right to the crypto asset may itself constitute a derivative, a security or both.

The relevant determination will depend on the facts and circumstances, including the obligations and intention to provide immediate delivery of the crypto asset. The notice provides guidance on what constitutes immediate delivery, together with a detailed example of a situation where securities legislation does not apply.

See:  IIROC Announces Crypto-Asset Working Group Members

The CSA and the Investment Industry Regulatory Organization of Canada (IIROC) continue to review the comments and responses to Joint CSA/IIROC Consultation Paper 21-402 Proposed Framework for Crypto-Asset Trading Platforms. We anticipate publishing a summary of comments and responses along with guidance on the regulatory framework applicable to crypto-asset trading platforms that are subject to securities legislation later this year.

CSA Staff Notice 21-327 Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets is available on jurisdictions’ websites.

The CSA, the council of the securities regulators of Canada’s provinces and territories, co- ordinates and harmonizes regulation for the Canadian capital markets.

For Investor inquiries, please refer to your respective securities regulator. You can contact them here

For media inquiries, please refer to the list of provincial and territorial representatives below or contact us at media@acvm-csa.ca:

View release here

Download CSA Staff Notice 21-327Guidance on the Application of Securities Legislationto Entities Facilitating the Trading of CryptoAssets


NCFA Jan 2018 resize - Maureen Jensen to step down from OSC The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Facebook is banning deepfake videos

Vox Recode |

deepfake Zuckerberg - Maureen Jensen to step down from OSCFacebook’s new rules will still allow controversial fake videos like the one of Nancy Pelosi that made her appear to be drunk.

Facebook announced late Monday that it would ban “deepfakes,” which are AI-manipulated videos that distort reality, often simulating real people in fake situations.

The social media giant announced the changes in a company executive blog post, saying it will remove deepfakes and other types of heavily manipulated media from its platform.

Specifically, the company laid out two main criteria for removing content under the new rules.

The first is that the company will remove content posted on Facebook if has been edited in ways that would “likely mislead someone into thinking a subject of the video said words that they did not actually say,” according to the post written by Monika Bickert, Facebook’s vice president of global policy management. Secondly, the platform will ban media if it’s the product of AI or machine learning that “merges, replaces, or superimposes content onto a video, making it appear to be authentic.”

Facebook came under fire last year for allowing a manipulated video of Speaker Nancy Pelosi that made it appear as though she was drunk by altering her speech to slur her words. At the time, Facebook said the video went through its fact-checking process, which does not require content to be true to be allowed on the platform. The company said it displayed a note with additional context about the video, telling users that it was false.

See:  Even Facebook’s Libra can’t escape the fintech establishment

Under its new rules, Facebook told Recode it still would not take down the Pelosi video, saying that it does not meet the standards of the new policy.

“Only videos generated by artificial intelligence to depict people saying fictional things will be taken down. Edited or clipped videos will continue to be subject to our fact-checking program. In the case of the Pelosi video, once it was rated false, we reduced its distribution,” the spokesperson told Recode.

Whether videos are deepfakes or not, they’re all subject to Facebook’s fact-checking system. If content is proven to be false, it can be flagged with a note labeling the content as such, and Facebook will deprioritize it in its News Feed.

In an email, Omer Ben-Ami, the co-founder of Canny AI (the Israeli advertising startup that last year helped artists produce a viral deepfake of Zuckerberg on Instagram, which Facebook opted to keep up) said Facebook’s new policy seemed “reasonable.” However, he cautioned that his company and others, “use this technology for legitimate reasons, mainly for personalization and localization of content.”

He said it was unclear why the policy only applies to content manipulated by artificial intelligence.

Overall, there are some exceptions to Facebook’s new rules: They don’t apply to videos that are parody or satire, nor do they ban videos edited “solely to omit or change the order of words” someone is saying.

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NCFA Jan 2018 resize - Maureen Jensen to step down from OSC The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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What is China’s Password Law and What it Means for the Blockchain Industry?

AiThority | Sudipto Ghosh | Jan 7, 2020


NCFA Jan 2018 resize - Maureen Jensen to step down from OSC The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Fintech Regulatory Developments: 2019 Year in Review

McCarthy Tetrault | Ana Badour | Jan 7, 2020

fintech regulatory roundup - Maureen Jensen to step down from OSCAs anticipated in our 2018 year in review, there were significant and notable developments in the Canadian Fintech industry in 2019. The following is a summary of some of the key Fintech developments in 2019 and some noteworthy regulatory developments to keep a watchful eye on in 2020.

WHAT WE SAW IN 2019

1. OPEN BANKING DEVELOPMENTS

  • Department of Finance Canada Consultation Paper on Open Banking: On January 11, 2019, the Department of Finance Canada released a consultation paper (the “Open Banking Consultation Paper”) seeking the views of Canadians on the potential benefits and risks of an open banking system in order for such feedback to be shared with and reviewed by the Advisory Committee on Open Banking (the “Open Banking Committee”). The Open Banking Consultation Paper defined “open banking” as “a framework where consumers and businesses can authorize third party financial service providers to access their financial transaction data, using secure online channels” (“Open Banking”). The Open Banking Consultation Paper sought feedback in relation to the benefits and risks of Open Banking for Canadian consumers and what role (if any) the federal government should play in the implementation of Open Banking in Canada.

The Open Banking Consultation Paper specifically sought stakeholder perspectives on the following risks, in particular: (i) what specific consumer protection elements are needed for the sharing of financial transaction data under Open Banking; (ii) how to manage the risks or enhance the benefits that Open Banking may pose from a privacy perspective; (iii) how to manage the risks or enhance the benefits that Open Banking may pose from a cyber security perspective; and (iv) whether Open Banking presents new prudential risks to financial institutions, and how to mitigate to those risks.

See:  Recent Fintech Reports and Research

Following the release of the Open Banking Consultation Paper, Finance Canada engaged in a consultation process related to Open Banking.

  • Senate Open Banking Report: On June 19, 2019, the Standing Senate Committee on Banking, Trade and Commerce released its report entitled: “Open Banking: What it Means for You” (the “Open Banking Report”). The Open Banking Report examined the potential regulatory role of the federal government in respect of open banking, as well as the benefits and challenges of open banking in a Canadian context. The Open Banking Report: (i) recommended the development of a principles-based framework for open banking, to be developed by industry stakeholders and integrated with existing financial and privacy legislation; (ii) identified industry stakeholders; (iii) suggested coordination between the federal and provincial governments to facilitate initiatives related to an open banking framework; (iv) recommended that the Financial Consumer Agency of Canada (“FCAC”) be given oversight to regulate the risks posed to consumers by the practice of screen scraping; (v) recommended funding consumer protection advocacy groups to bring awareness to the benefits and risks of screen scraping; (vi) recommended that the federal government introduce legislation to establish the scope of open banking in order to ensure the continued stability of the Canadian financial system and protection of Canadian consumers; (vii) recommended the swift modernization of the Personal Information Protection and Electronic Documents Act (PIPEDA) in order to align it with General Data Protection Regulation (GDPR) as the global privacy standard; and (viii) recommended the Privacy Commissioner of Canada and the Canadian Commissioner of Competition as co-regulators of open data frameworks.

 

See:  Securities Exchange Commission’s Advocate for Small Business Capital Formation – Annual Report 2019

2. ANTI-MONEY LAUNDERING REGULATION DEVELOPMENTS

  • New Administrative Monetary Penalties Policy and New Tools in Respect of Compliance and Examination Process: On February 7, 2019, the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) issued a new Compliance Framework and Assessment Manual, as well as a revised Administrative Monetary Penalties Policy (together with sample penalty calculation) and a notice on Voluntary Self-Declaration of Non-Compliance. These new tools provide significantly more insight into the examination and penalty assessment process of FINTRAC and follow the 2016 Federal Court of Appeal decision in Canada v. Kabul Farms Inc. (and other similar decisions), where the court found that the use by FINTRAC of an unpublished formula to assess the amount of an administrative monetary penalty raised procedural fairness concerns.
  • Amending Regulations: On July 10, 2019, amending regulations (“Final Regulations”) were issued amending each of the existing regulations (the “PCMLTFA Regulations”) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “PCMLTFA”). These included changes to expand the applicability of the PCMLTFA Regulations to virtual currency activities, prepaid cards and foreign money services businesses. The primary aim of the Final Regulations was to improve the effectiveness of Canada’s anti-money laundering and counter-terrorism financing regime, close gaps in the regime and improve compliance with international standards.
  • Updated Guidance on Verifying the Identity of Individuals and Other Entities: FINTRAC updated its guidance on Methods to verify the identity of an individual and confirm the existence of a corporation or an entity other than a corporation effective October 2019. The updated guidance reflected the change to “authentic, valid and current” documentation and provides greater flexibility to businesses to effectively comply with identification requirements by allowing the use of new technologies to verify identity and authenticate documents.
  • Financial Action Task Force Guidance on Virtual Assets: On June 21, 2019, the Financial Action Task Force[1] (the “FATF”) released Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers as well as a Draft Interpretive Note to FATF Recommendation 15 addressing virtual assets (together, the “FATF Guidance”). The FATF Guidance clarifies a risk-based approach to virtual assets and virtual asset service providers for anti-money laundering and counter terrorism financing purposes (including the application of the travel rule to virtual assets). The FATF has provided member countries (which include Canada) with 12 months to adopt these guidelines, with a review set for June 2020.

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NCFA Jan 2018 resize - Maureen Jensen to step down from OSC The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Why Canada must be open to open banking

The Globe and Mail | and | Jan 2, 2020

digitral open banking - Maureen Jensen to step down from OSCAdam Felesky is CEO of Portag3 Ventures. Andrew Moor is president and CEO of EQ Bank.

Canada is often said to be facing an infrastructure deficit, having failed to adequately invest in transit, roads and water systems. But the country is also encountering a financial services infrastructure deficit. That is to say we lack the infrastructure and related government policies needed to safely, efficiently and effectively enable financial data to be moved and shared by consumers.

Much like the physical systems required for transportation, financial services infrastructure improves national well-being and has the potential to bring benefits to all citizens. For those of us in the banking, payments and financial services sectors and in regulatory, policy making and consumer advocacy roles, the time has come to erase this deficit, which manifests itself in unnecessary costs for customers and their financial services providers, limited transparency for those providing financial advice and roadblocks to innovation.

See:  Open Banking Era Starts in Australia (Feb 2020)

Open banking provides the clearest opportunity to set Canada’s financial infrastructure on the right course and is already achieving success around the world. With 40 countries developing their own open banking plans, Canada needs to take bold action.

Where does Canada stand? The government first declared its interest in open banking in the 2018 federal budget. This interest was repeated in the 2019 budget. In 2019, the Senate produced a well-researched report urging decisive government action. In parallel, the Minister of Finance commissioned a report from an expert advisory panel. We hope this report will be released early in 2020.

Beyond this process, open banking has generated considerable interest from consumer advocates, the banking industry and emerging fintech players who have explored the benefits and risks. Among those who have thought seriously about the issues, our sense is that there is overwhelming support: open banking will keep financial information safer and provide more choice at a lower cost for Canadians.

There is general agreement with the Senate report that “consumers and small businesses would also benefit from increased competition and innovation in the financial sector.

Small and medium-sized businesses (SMEs) stand to gain significantly.

As a recent C.D. Howe report highlighted, Canada lags international peers in allocating capital to SMEs. Part of this deficiency is attributable to challenges that banks have in getting the information required to assess credit for SMEs – a problem that can be alleviated by open banking.

Given the widely held view that open banking is a good idea, why is Canada holding back? One reason appears to be a lack of political desire. Recent discussions with elected officials have suggested that their perception is there are no votes in open banking and this may hold back progress on this important issue. As more Canadians understand the benefits, we believe there will be votes for politicians who engage with the open banking agenda. Open banking is clearly an issue whose time has come. We urge one of the soon-to-be-announced parliamentary committees to truly understand the benefits.

See:  Monopoly-Friendly Canada ‘Does Not Treat Competition Policy Seriously’

That said, we are encouraged by Canada’s Digital Charter. Principle 4 of this charter espouses the core idea behind open banking: that consumers have rights to their data and can share it or transfer it. We would like to see the Department of Finance work more closely with the Ministry of Innovation, Science and Economic Development to bring these principles to life.

In banking circles, there is a debate about the relative prioritization of open banking and improving data security standards. Working on these two issues together is the only path to success. By their actions, customers are showing a strong desire to access their data in convenient forms. Absent open banking, consumers share passwords and access to their accounts with various providers, leaving them vulnerable to data breaches. It’s a compromise they should not have to make. Developing a secure financial services infrastructure, that is available to all credible participants and that keeps the entire system safe, is the only practical route forward.

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NCFA Jan 2018 resize - Maureen Jensen to step down from OSC The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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