Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Regtech, Compliance, Governance
CSA Updates on Value-Referenced Crypto Assets Regulation
Crypto Regulation | April 25, 2024
Image: Freepik/frimufilms
Canadian Regulators Extend Deadline for value-referenced crypto assets (VRCA) Compliance to October 31, 2024
Canadian securities regulators recently updated their interim approach to the regulation of VRCAs, which are designed to maintain stable values by referencing fiat currencies or other assets. This update, important for both crypto trading platforms and investors, underscores ongoing efforts to harmonize crypto regulation across Canadian territories and provinces.
See: Canada to Enforce Cryptoasset Reporting by 2027
- VRCAs aim to achieve stability through backing by fiat currencies or a combination of other assets. These include fiat-backed crypto assets (FBCAs), which replicate the value of currencies like USD or CAD through adequate reserve holdings by the issuer.
- As per the Canadian Securities Administrators (CSA), registered crypto trading platforms, or those with a pre-registration undertaking, were initially set an April 30, 2024 deadline to comply with the terms allowing the trading of FBCAs. However, due to technical challenges expressed by platforms, this deadline has been extended to October 31, 2024.
In Closing
The CSA continues to caution investors about the inherent risks associated with crypto assets, even those meeting regulatory standards. They emphasize that compliance with interim terms does not equate to endorsement or a guarantee of safety.
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, artificial intelligence, 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 Investors Lead Class Action Against Binance Canada
Binance | April 23, 2024
Image: Freepik
Binance is facing a class action lawsuit from Canadian investors seeking damages and recission
- Binance (Binance Holdings, Binance Canada Capital Markets, and Binance Canada Holdings) is facing a class-action lawsuit in Ontario, Canada for selling crypto derivatives to retail investors without proper registration, a violation of local securities laws.
- On April 19, 2024, Ontario's Superior Court (a different 'OSC') published the motion and provided a detailed analysis of whether the sale of cryptocurrency derivatives by Binance constituted a sale of securities under the law, emphasizing the complexity and risks associated with these products.
See: U.S. Court Orders Binance CZ to Surrender Canadian Passport
- The motion highlighted that a large portion of Canadian crypto asset owners are retail investors, with over half owning less than $5,000 in the market, a vulnerable demographic to risks associated with non-compliance by platforms like Binance. The motion was certified as a class action, allowing it to proceed on behalf of all affected Canadian investors.
- The plaintiffs who initiated the lawsuit to be Christopher Lochan and Jeremy Leeder, are seeking damages for the losses incurred due to Binance’s alleged illegal activities. They are also asking for rescission of the transactions, which would effectively annul the contracts made under these conditions and potentially refund the investors.
"The sale of a cryptocurrency derivative has been held to be a sale of an 'investment contract' and, therefore, of a security within the meaning of section 1(1) of the OSA. A person or company must be registered under Ontario securities law to engage in the business of trading in securities unless an exemption applies."
What Happened?
The broader regulatory environment in Canada became more restrictive after the Canadian Securities Administrators (CSA) introduced new guidelines in February 2023 outlining enhanced investor protection expectations for crypto platforms. These guidelines were especially stringent regarding the handling of stablecoins, requiring crypto exchanges to obtain prior approval before allowing customers to buy or deposit stablecoins. The approval process involved due diligence checks that Binance was unwilling to do, citing the unfeasibility of these new regulations.
See: Binance Withdraws from Canadian Market due to Tightened Crypto Regulations
Following warnings from the Ontario Securities Commission (OSC), despite its significant market share and influence in the global cryptocurrency market, Binance announced its decision to exit the Canadian market in May 2023. Despite declaring an end to its services in Ontario, the platform remained accessible to some residents, leading to increased regulatory interventions.
In Closing
If Binance does not respond to the lawsuit, the court may issue a default judgment in favor of the plaintiffs. This would mean that the court accepts the claims of the plaintiffs as uncontested, potentially leading to a legal order for Binance to pay damages or fulfill other remedies sought by the plaintiffs without Binance’s input in the decision.
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, artificial intelligence, 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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The Battle for Privacy in the Digital Age
Privacy | April 22, 2024
Image: Unsplash/Bernard Hermant
Front Line of Digital Privacy Debates: FISA 702, U.S. Bank Secrecy Act, and IP Addresses
The landscape of digital privacy has seen significant legal and ethical transformations, raising critical debates about citizen rights and data security. Below we look at three debates in the that illustrate the ongoing battle for privacy: the U.S. Senate's controversial reauthorization of Section 702 of the Foreign Intelligence Surveillance Act (FISA), the U.S. Bank Secrecy Act's implications, ad the Canadian Supreme Court's landmark decision on IP address privacy. Each debate offers a unique perspective on the challenges and implications of maintaining privacy in a digitalized world.
1. The Reauthorization of FISA’s Section 702 in the U.S. Senate
The U.S. Senate's reauthorization of Section 702 of the Foreign Intelligence Surveillance Act (FISA) continues to ignite fierce debates over national security and privacy rights. Section 702 allows the government to collect and analyze foreign communications, often sweeping up information from U.S. citizens without a warrant. Although proponents argue this is critical for national security, critics fear the potential for abuse and the lack of safeguards against unwarranted surveillance. The recent legislative changes, which include a shorter reauthorization period for 2 years and some reforms, reflect ongoing tensions between ensuring security and protecting civil liberties.
See: Surveillance Capitalism: Policymakers must put an end to abusive practices
Proponents of Section 702 of the Foreign Intelligence Surveillance Act hold firm to the belief that it's an indispensable asset for the security of the United States. They argue that Section 702 is critical in preempting potential terrorist activities by enabling surveillance on foreign suspects' communications. Supporters underline the value of swift action, enabled by Section 702’s provision for surveillance without the time-consuming process of securing warrants. There are cited examples where intelligence gathered under Section 702 was instrumental in protecting national interests, reinforcing its perceived necessity.
Conversely, the opposition to Section 702 voices significant concerns about the implications for personal freedoms and the potential overreach of surveillance practices. A major concern is the incidental capture of communications involving U.S. citizens, which often occurs without their knowledge or consent, potentially leading to privacy infringements. Detractors argue that Section 702 operates with inadequate oversight, creating a fertile ground for misuse of power. There's a unnerving worry that the collected data could be exploited for non-security purposes, including political surveillance or other inappropriate activities.
The tug-of-war over Section 702 fuels demand for stricter regulations to ensure more robust oversight and a better balance between security imperatives and privacy rights. The discussion around surveillance practices has the potential to reduce trust in governmental institutions and intelligence operations. The global reach of Section 702 can strain international relationships, especially concerning data privacy and human rights standards.
2. The U.S. Bank Secrecy Act: Financial Privacy Under Scrutiny
Image: Freepik/wirestock
In a recent article by the Cato Institute title 'The Bank Secrecy Act Is a Bigger Threat than FISA' debates the the U.S. Bank Secrecy Act (BSA), which was originally enacted to combat money laundering and financial fraud, has evolved into a tool with profound implications for privacy and civil liberties. Critics argue that the act's requirement for financial institutions to report detailed information about their clients' transactions creates a surveillance environment that infringes on individual privacy. This extensive data collection, intended to protect against financial crimes, raises concerns about the potential misuse of sensitive personal information and the risk of government overreach.
See: Opinion: The Financial Surveillance System May Be Less a Tool for Crime Prevention than a Means of Bureaucratic Ass Covering
Advocates of the Bank Secrecy Act (BSA) argue that it serves as a fundamental safeguard for the financial system by helping to detect and prevent illegal activities like money laundering and fraud. The BSA requires financial institutions to maintain detailed records and report large cash transactions, which helps law enforcement identify and stop illicit financial flows. Supporters believe that the BSA enforces discipline and accountability in the financial sector, promoting transparency and trust in the financial system. The act is seen as a critical tool in the broader context of national security, aiming to prevent criminal organizations and terrorists from exploiting the financial system.
Critics of the BSA contend that the act leads to excessive government surveillance of individuals' financial transactions, infringing on personal privacy rights. The compliance requirements can be onerous and costly for financial institutions, particularly smaller ones, potentially stifling innovation and growth. Further, there is skepticism about the effectiveness of the BSA in stopping financial crimes, with some suggesting that it might be used disproportionately against smaller, less significant cases rather than larger criminal enterprises.
Calls for reform are growing, with some advocating for changes to make the act less invasive and more focused on genuine threats. Canadian AML/KYC laws have recently undergone a major overhaul published in 2023 with a raft of more changes being announced in the 2024 federal budget to combat financial crime. Financial institutions must navigate the complex landscape of compliance, which can influence their operational strategies and the services they offer. The debate also touches on larger issues of civil liberties, questioning the balance between security and the right to privacy in the financial domain.
3. The Canadian Supreme Court Upholds Privacy in IP Addresses
Image: Freepik/kjpargeter
In a defining move, the Canadian Supreme Court recently ruled that IP addresses should be considered private information, as they can reveal substantial details about an individual’s online activities. This decision, stemming from the case R. v. Bykovets, emphasizes that law enforcement agencies must obtain a court order before accessing IP address data. The ruling is a significant step in protecting online privacy and also sets a precedent for how digital information should be treated legally, reinforcing the notion that privacy rights must evolve with technological advancements.
See: 5 Billion Profiles: Class Action Lawsuit Accuses Oracle of Privacy Breach and “Global Surveillance”
Supporters of treating IP addresses as private information argue that these digital identifiers can reveal extensive details about a person's online activities, potentially exposing sensitive personal information. They believe that recognizing IP addresses as private information aligns with broader privacy rights, ensuring individuals' online activities are shielded from unwarranted scrutiny. The Supreme Court's ruling sets a significant precedent for digital privacy, establishing clear guidelines for how such data should be legally handled. Protecting IP addresses helps build trust in digital services, as users feel more secure knowing their online behaviors are not easily monitored or exploited.
Some argue against stringent privacy protections for IP addresses, mainly from operational and security perspectives. The need for court orders to access IP addresses could hinder timely law enforcement investigations, potentially allowing criminal activities to go unchecked. ISPs and other digital service providers often use IP address data to monitor for security breaches or abuse, and restricting access could complicate these efforts. Implementing stringent privacy measures for IP addresses might impose additional regulatory burdens on businesses, increasing their operational costs.
This ruling prompts a shift in how businesses and law enforcement agencies operate, requiring adjustments in data handling and processing practices to comply with the new privacy standards. The decision highlights the ongoing challenge of balancing individual privacy rights with broader security and operational needs. As a precedent in one of the world's most digitally integrated societies, this ruling could influence international norms and practices regarding digital privacy.
In Conclusion
Privacy debates from the U.S. and Canada highlight a global struggle to balance privacy with security and transparency in the digital age. The battle for privacy is not just about protecting personal information but is also a broader fight for individual freedoms and democratic values in the 21st century. This discussion encourages policymakers, legal experts, and the public to consider how laws and regulations can be shaped to safeguard privacy while addressing the legitimate needs of security and governance.
Some links you may like:
2023 Data Privacy in North America – Year in Review
AI and Children’s Privacy and Consent
Can Privacy and Financial Regulation Co-exist?
ChatGPT Faces Investigation by Canadian Privacy Commissioner
Unveiling the Massive Taxpayer Privacy Breach: Senators Demand DOJ Probe
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, artificial intelligence, 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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Canada to Enforce Cryptoasset Reporting by 2027
Crypto | April 21, 2024
Image: Freepik
Canada to enforce cryptoasset reporting by 2027 to align with global standards and enhance financial transparency
The Canadian government declared in the 2024 federal budget its plans to adopt the Crypto-Asset Reporting Framework (CARF), which was approved by the OECD in August 2022. The framework was developed by the OECD at the request of the G20 back in April 2021 and was designed to covers a broad range of digital assets and is designed to close the information gaps that tax authorities face with the increasing use of digital currencies and other crypto-assets in the global economy excluding specific types such as central bank digital currencies (CBDCs). The CARF, supported by 48 countries, outlines strict guidelines for reporting that Canada’s framework will mirror.
The framework covers a broad range of digital assets and is designed to close the information gaps that tax authorities face with the increasing use of digital currencies and other crypto-assets in the global economy.
See: UK Leading Charge in Global Crypto Tax Crackdown
- Regulations are set to take effect in the 2026 calendar year, so all cryptoasset transactions over $50,000 USD will need to be reported to financial authorities, with the first data sharing exchange occurring in 2027.
- This gives entities nearly three years from now to comply with the new standards such as capturing and reporting detailed customer information, such as names, addresses, dates of birth, and taxpayer identification numbers.
- The major challenge will be the technological overhaul required to track and report crypto transactions efficiently. This presents opportunities for regtech companies specializing in compliance software, which could see significant growth over time.
Why This Matters
As digital assets and digital currencies become increasingly mainstream, these new reporting measures will help mitigate risks associated with tax evasion and also enhance the stability of the financial market while in alignment with global standards.
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, artificial intelligence, 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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Small Step Forward As Feds Publish Straw-man Open Banking Framework
Consumer-Driven Banking | April 17, 2024
Image: Freepik
2024 Budget Announces Next Steps on Canada's Consumer-Driven Banking Framework But Lacks Clarity on Launch Date
The 2024 federal budget announcement of Canada's Consumer-Driven Banking Framework takes another step towards implementing a 'made in Canada' Open Banking regime with a strong emphasis on security and consumer rights. Although the framework lacks a definitive launch date that adds a shadow of uncertainty over its practical rollout. This lack of clarity raises questions about the capacity to keep up with global digital finance initiatives with the aim of delivering timely benefits to Canadian consumers and businesses.
See: Canada’s Open Banking Framework 2024 Preview
Key Announcements
The key announcements made in Canada's 2024 Consumer-Driven Banking Framework as outlined in the federal budget document include several important elements aimed at establishing and guiding the implementation of open banking in Canada:
- Legislative Timeline --> The government plans to introduce two key pieces of legislation, one in the spring and another in the fall of 2024, to lay down the regulatory and operational groundwork for open banking.
- Financial Consumer Agency of Canada (FCAC) Oversight --> The FCAC has been designated as the primary regulatory body for overseeing the open banking framework. This includes enhanced responsibilities and the establishment of a new Deputy Commissioner for Open Banking to provide managerial oversight.
- Funding Allocations --> The framework includes specific budgetary allocations for the preparatory and oversight work related to open banking:
- $1 million to the FCAC to help prepare the regulatory environment for open banking.
- $4.1 million up to 2026-2027 is being allocated to the Department of Finance (itself) for policy work on open banking. This funding is intended to support the development and refinement of policies governing the open banking ecosystem.
See: Open Banking: Revolutionizing Financial Data Sharing
- A formal review of the Consumer-Driven Banking Framework is scheduled to take place three years after the initial implementation, no earlier than 2027. This review will assess the effectiveness of the framework and make necessary adjustments based on the operational experiences and emerging technological and market developments.
- The introduction of a structured accreditation process for financial institutions and fintech companies wishing to participate in open banking. This process aims to ensure that all entities meet stringent security and operational standards.
- Commitment to the development of a unified technical standard for data sharing across the financial sector to ensure compatibility, security, and efficiency in the exchange of consumer data between banks and third-party providers.
- The framework emphasizes the importance of robust consumer protection measures, including clear consent mechanisms, privacy safeguards, and rights to data portability. These measures are designed to empower consumers while ensuring their financial data is handled securely and responsibly.
These announcements collectively outline the Canadian government’s strategic approach to implementing a secure and consumer-focused open banking system that aligns with international best practices and addresses the specific needs of Canadian consumers and the financial services market.
Now a Few Questions and Concerns
- Implementation and oversight timeline -->"The government will review Canada’s Consumer-Driven Banking Framework after three years”. Our interpretation is that implementation will happen within 3 years, with a post-implementation review happening after 3 years. So, technically the review will happen no earlier than 2027, and there are 'no guarantees or specific launch date' which is concerning given the track record and could be interpreted 'small step forward with exit ramps'. Even proceeding in 2027 puts Canada ten years behind Great Britain and eight years behind Australia and four behind the U.S. Not great for consumers; not great for small businesses.
- The framework includes a formal accreditation process for entities wishing to participate. This is crucial for ensuring that only qualified entities handle sensitive financial data. However, the rigidity and complexity of this process could potentially limit the number and diversity of participants, especially smaller fintechs that may not have the resources to meet stringent requirements. This could stifle innovation compared to more flexible systems in other countries.
See: Open Banking Insights: Decoding Canada’s Financial Future
- The expansion of the Financial Consumer Agency of Canada's (FCAC) mandate to include oversight of consumer-driven banking adds an additional layer of regulatory scrutiny. While this enhances consumer protection, it also introduces more bureaucracy and complexity given the scope and demands, which could slow down the pace of innovation and adaptation within the sector, especially when compared to regions with less stringent oversight.
- The framework grants significant powers to the Minister of Finance, including the ability to refuse, suspend, or revoke access to the framework for national security-related reasons. Not a bad idea but this broad authority could be seen as introducing a level of political influence or discretion that might not be as pronounced in other jurisdictions. It could raise concerns about transparency and fairness in how these powers are exercised.
- The decision to use a single technical standard for data sharing is intended to promote security and interoperability. However, this approach can also be seen as restrictive, potentially limiting the framework's ability to adapt to new technologies or integrate with systems that might use different standards. This contrasts with more flexible approaches seen in other countries that may allow for multiple standards or more adaptive technical frameworks.
- Under the PSD2 (Payment Services Directive 2), the EU does not mandate a single data sharing standard across all member states. Instead, it sets the regulatory framework and allows different technical standards to develop. This has led to a variety of API (Application Programming Interface) standards emerging, such as the Berlin Group's NextGenPSD2 framework, STET, and others used by different banking groups across the continent.
- The US does not have a formal regulatory framework for open banking mandated by the government but is working on it: Open Banking Regulation in the U.S. Strikes a Chord. Instead, data sharing standards are largely driven by market forces and agreements between individual banks and fintech companies. This has resulted in a diversity of data sharing standards and protocols, including those developed by financial data aggregators and fintechs under frameworks like the Financial Data Exchange (FDX) and the earlier Open Financial Exchange (OFX).
- Although the UK initially implemented a single standard for open banking under the Competition and Markets Authority (CMA) order, it has seen broader data sharing initiatives that are not strictly limited to the open banking APIs. These include broader financial data sharing under frameworks like Open Finance, which contemplate a wider range of financial products and services beyond just banking.
- While the Consumer Data Right (CDR) in Australia started with open banking and has a primary standard, it is designed to be extended to other sectors (like energy and telecommunications) and allows for the development and endorsement of additional standards over time as the system evolves and as new sectors are brought under the CDR regime.
Outlook
Ultimately, while the framework for Consumer-Driven Banking in Canada lays a solid foundation for enhanced consumer protection and streamlined financial data sharing, its real success will hinge on the execution speed and adaptability of its policies. The framework's potential risks and slow implementation could impede progress, leaving Canada trailing behind its international peers in financial innovation. Moving forward, it will be crucial for policymakers to refine and expedite the framework's application, ensuring that it not only matches global standards but also actively promotes a competitive and innovative financial environment.
Learn More from NCFA Canada's thought leadership series titled "Canada’s Open Banking Journey"
Expert interviews and insights focused on establishing a made-in-Canada open banking regime. The series aims to contribute to shaping a system that will significantly change how financial services are created, distributed, and consumed in Canada over the coming decades.
Select Episodes
1. The Foundations of Open Banking
Jul 15, 2021: Interview with Simon Redfern, Founder of the Open Bank (Germany)
Episode: Explore the origins and impact of open banking standards globally with Simon Redfern. Learn how these frameworks can drive innovation and transparency in financial services. More
2. A Global Bank's Perspective
Sep 20, 2021: Interview with Carmela Gomez Castelao and Jose Luis Navarro Llorens, BBVA (Spain)
Episode: Discover BBVA's strategic approach to open banking across its global operations, highlighting the balance between innovation and customer security. More
3. The API Ecosystem
Dec 1, 2021: Interview with Huw Davies, Ozone API (UK)
Episode: Huw Davies explains the importance of robust API standards for fostering a secure and interoperable open banking ecosystem. More
4. Consumer-Centric Financial Solutions
Jan 15, 2022: Interview with Søren Nielsen, Subaio (Denmark)
Episode: Søren Nielsen shares how Danish fintech Subaio focuses on consumer empowerment through open banking, enhancing financial management tools. More
5. Fintech Integration and Innovation
Mar 22, 2022: Interview with Abe Karar, Fintech Galaxy (UAE)
Episode: Explore the integration of open banking with fintech ecosystems, highlighting innovations and new product development. More
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, artificial intelligence, 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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Canada’s Open Banking Framework 2024 Preview
Open Banking | April 16, 2024
Image: Freepik/vecstock
Will Canada's Open Banking Framework be tabled in the 2024 federal budget as promised?
As Canada stands on the cusp of adopting open banking, the financial sector and consumers alike await the specifics of the framework that will dictate the future of banking in the country. The answers to these questions will not only shape the regulatory landscape but also determine how effectively Canada can leverage technological advancements to foster a more inclusive and competitive financial environment.
What Questions Will Be Answered?
- How stringent or flexible will the accreditation criteria be for entities that wish to participate in open banking? There's a balance to be struck between protecting consumers and not excluding a broad range of market participants.
- What measures will the government implement to ensure the security and privacy of consumer financial data? Comparisons may be drawn with other countries like Australia, which uses strong encryption and security standards.
- What technical standards will be adopted? Will Canada align with international standards to ensure global interoperability?
- What mechanisms will be in place to monitor and enforce compliance with the open banking rules? This includes who will oversee these rules and how they will do so.
- What will the structure of the governing body look like? Will it be an independent entity, a government agency, or a hybrid model involving various stakeholders?
- What level of regulatory oversight will the governing body have? How will it enforce compliance among participants?
- How will consumer interests be protected in the open banking framework? What mechanisms will be put in place to address consumer complaints and disputes? How will liability be addressed, particularly in cases of data breaches? Clear attribution of responsibility is crucial for maintaining trust in the open banking system.
- What role will the governing body play in educating consumers and businesses about the benefits and risks of open banking?
Open Banking Will Benefit Consumers and Businesses
Open banking is poised to transform the Canadian financial landscape by allowing banks and fintechs to share financial data securely and efficiently under a customer's consent.
See: Open Banking: Revolutionizing Financial Data Sharing
This system is designed to empower consumers, offering them greater control over their financial data, facilitating easier bank switches, and enabling innovative financial services.
Consumer Examples
| Product/Service | Example | Description | Gen Z | Millennials | Boomers |
|---|---|---|---|---|---|
| Personal Financial Management Tools | Mint | Allows users to consolidate financial data from various sources for better budgeting and financial planning. | High | High | Medium |
| Automated Savings Apps | Acorns | Rounds up purchases to the nearest dollar and invests the difference in diversified portfolios. | High | High | Low |
| Debt Management Solutions | Tally | Automates credit card debt payment, ensuring the optimal payment strategy to save on interest. | Medium | High | High |
| Credit Score Monitoring | Credit Karma | Provides free credit score updates and suggestions for credit improvement. | High | High | Medium |
| Bill Management and Optimization | Truebill | Helps users manage subscriptions and track bills, negotiating better rates on their behalf. | Medium | High | Medium |
| Robo-Advisors for Investments | Wealthsimple | Offers automated investment management based on personalized risk assessment. | High | High | Medium |
| Enhanced Loan and Credit Offerings | LendingTree | Aggregates loan offers from multiple lenders based on user’s financial profile for best rates. | Medium | High | Medium |
| Streamlined Mortgage Applications | Better | Uses real-time financial data to streamline mortgage applications and approvals. | Low | High | High |
| Insurance Premium Optimization | Metromile | Uses driving data and personal information to offer customized car insurance pricing. | Medium | Medium | High |
| Smart Wallets | Revolut | Manages multiple currencies and bank accounts, offering budgeting and cryptocurrency exchange. | High | High | Low |
Business Examples
We can categorize businesses into small, medium, and large enterprises and rank the importance of each service for these business sizes.
| Product/Service | Example Fintech | Description | Small Business | Medium Business | Large Enterprise |
|---|---|---|---|---|---|
| Cash Flow Management Tools | Float | Provides real-time cash flow forecasting and scenario planning for businesses. | High | High | Medium |
| Automated Accounting Systems | QuickBooks | Integrates banking data directly into accounting software for real-time bookkeeping. | High | High | Medium |
| Supply Chain Financing Solutions | Taulia | Offers supply chain financing options that enhance working capital management. | Medium | High | High |
| Business Credit Scoring | Experian Business | Utilizes real-time financial data for more accurate business credit scoring. | Medium | High | High |
| Payment Initiation Services (PIS) | GoCardless | Facilitates direct bank payments, reducing transaction fees and processing times. | High | High | High |
| Enhanced Fraud Detection Systems | Kount | Uses open banking data to enhance fraud detection and prevention systems. | Medium | High | High |
| E-Invoicing and Payments | Tradeshift | Streamlines invoicing and payments processes, improving cash flow. | Medium | High | High |
| Dynamic Pricing Models | Pricefx | Uses financial insights to adjust pricing in real-time, enhancing profitability. | Low | Medium | High |
| Employee Expense Management | Expensify | Integrates with banking data to track and manage employee expenses more effectively. | High | High | Medium |
| Customized Financial Advice and Products | Kabbage | Offers flexible lines of credit and other financial products tailored to business needs. | High | High | Medium |
Learn More from NCFA Canada's thought leadership series titled "Canada’s Open Banking Journey"
Expert interviews and insights focused on establishing a made-in-Canada open banking regime. The series aims to contribute to shaping a system that will significantly change how financial services are created, distributed, and consumed in Canada over the coming decades.
Select Episodes
1. The Foundations of Open Banking
Jul 15, 2021: Interview with Simon Redfern, Founder of the Open Bank (Germany)
Episode: Explore the origins and impact of open banking standards globally with Simon Redfern. Learn how these frameworks can drive innovation and transparency in financial services. More
2. A Global Bank's Perspective
Sep 20, 2021: Interview with Carmela Gomez Castelao and Jose Luis Navarro Llorens, BBVA (Spain)
Episode: Discover BBVA's strategic approach to open banking across its global operations, highlighting the balance between innovation and customer security. More
3. The API Ecosystem
Dec 1, 2021: Interview with Huw Davies, Ozone API (UK)
Episode: Huw Davies explains the importance of robust API standards for fostering a secure and interoperable open banking ecosystem. More
4. Consumer-Centric Financial Solutions
Jan 15, 2022: Interview with Søren Nielsen, Subaio (Denmark)
Episode: Søren Nielsen shares how Danish fintech Subaio focuses on consumer empowerment through open banking, enhancing financial management tools. More
5. Fintech Integration and Innovation
Mar 22, 2022: Interview with Abe Karar, Fintech Galaxy (UAE)
Episode: Explore the integration of open banking with fintech ecosystems, highlighting innovations and new product development. More
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, artificial intelligence, 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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The State of Cybersecurity in The Fintech Industry
April 11, 2024
Image: Freepik/DC Studio
Data theft, phishing scams, ransomware, and hacking are some of the many cybersecurity threats players in the fintech industry face regularly. They are becoming more sophisticated and damaging as the threat environment changes and the technology used to execute them evolves. With cybersecurity experts and players in the fintech industry trying to keep up and everything changing so fast, it is worth looking at the state of cybersecurity in this industry.
Technology Use is Increasing Threat Footprints
The fintech industry is usually one of the first to adopt new technologies, with mobile devices and apps, cloud computing, and artificial intelligence all a significant part of it now. While these technologies have allowed organizations to offer better services to customers, better manage internal processes, and stay ahead of their competition, they have also increased cybersecurity risks.
These risks present significant challenges, including increasing attack sophistication, regulatory compliance difficulties, and an increased need for collaboration.
With malicious actors leveraging machine learning, social engineering, and sophisticated ransomware, financial institutions must keep up and upskill their professionals. These additional challenges have made complying with set regulations a significant issue. Fortunately, solutions like using ISO 27001 software and being ISO compliant are making financial institutions better equipped to overcome them.
Sharing information in the financial sector has also become crucial because threats to any institution present a substantial risk to all of them. Financial institutions, startups, and governmental bodies must, therefore, work together to reduce these threats.
A Departure From Traditional Motives
In the past, the primary motive for many malicious actors was syphoning user data and holding it at ransom or selling it to the highest bidder. Sometimes they sold this data to different players who used it in different ways.
However, KPMG noted in a 2021 report that the motives of malicious actors are changing.
The report noted that fraud and extortion remain serious concerns in the financial sector. Unfortunately, both allow attackers to get “more bang for their buck” for each sophisticated attack, making them a more attractive option and motive.
The same report noted that reputational damage and hackers looking for notoriety for attacking secure infrastructure or accessing massive funds from well-known institutions are additional motivations for these actors.
Different nations are also known to target the financial institutions of their adversaries. They often do this for espionage or political reasons.
Cybersecurity Teams Changing Defence Postures
Understanding the state of cybersecurity in the fintech sector, cybersecurity teams are starting to take a more defensive posture. Instead of playing defence and being reactive, they are using the same tools malicious actors use to monitor, identify, and thwart threats before they become catastrophic problems.
They are also realising workers are often the weakest link in their security protocols. It is well-known hackers do not always have to rely on their hacking skills to gain access to an infrastructure but walk through doors left open by employees. Plugging such holes by educating employees on how to do so can lead to improved cybersecurity outcomes for all financial institutions.
See: Blakes: Cybersecurity Trends in Canada: A 2023 Perspective
The state of cybersecurity in the fintech sector might look grim due to how many threats it has to deal with. The good news is that professionals are staying ahead of these threats and stopping them before they happen. Even when they do, many institutions have measures to limit the damage malicious actors can do.
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