There’s smoke around open banking. The Ontario government endorsed it earlier this month, the Official Opposition is applying pressure in Parliament and lobbyists have mustered for another fight with those who prefer the status quo. 

But is there fire? Or is the heat coming from the friction that has kept this policy proposal from moving forward since its advocates managed to get it on the agenda some five years ago? 

The Council of Canadian Innovators (CCI), a lobby group that represents many of Canada’s fastest-growing tech companies, is worried it’s the latter. “We’re concerned the Liberals may be quietly abandoning their promise,” Nicholas Schiavo, the group’s director of federal affairs, said in a statement this week. 

Finance Minister Chrystia Freeland promised a plan in early 2023, but with Christmas around the corner, there’s still nothing. “The federal government is continuing its work on consumer-driven finance and will have more to announce in due course,” Katherine Cuplinskas, the minister’s press secretary, said in an email on Friday.  

The fall economic statement on Nov. 21 would be a natural place for an announcement. The country’s most pressing economic concerns are inflation and weak productivity, and open banking could be an answer to both. It would let consumers share their banking histories with anyone they wanted, levelling the playing field between the legacy banks and digitally native upstarts. Real competition would ensue, putting downward pressure on fees and lending rates, and upward pressure on service quality. 

Yet Ottawa’s interest in open banking has been fleeting. The telecommunications and grocery oligopolies have had a rough ride in Ottawa over the past couple of years, but the bankers have so far escaped politicians’ search for answers to the inflation crisis. 

In 2022, Freeland levied the big banks and insurers with a one-time tax of 15 per cent on taxable income above $1 billion, and Freeland used this year’s budget to require banks to pay tax on income from the dividends of Canadian companies. That’s real money, but nothing institutions that routinely record quarterly profits in excess of $1 billion couldn’t handle. 

An embrace of open banking, on the other hand, would cause the oligopoly material pain, as a regulatory regime that puts the customer first would alter the landscape. The government has been studying open banking since 2018, and said in a consultation document in 2019 that open banking could “promote a vibrant and more diverse ecosystem of financial-services providers in the financial sector, and offer useful and innovative services to consumers and small business.” In 2022, Freeland appointed Abraham Tachjian to lead the process. His appointment is scheduled to end on Dec. 22. 

More significant was Poilievre’s decision to mark open banking as an issue of interest for Conservatives. “The big banks control the data of their customers and that gives them a massive advantage over challengers trying to break into the market,” Poilievre told The Globe and Mail earlier this month when his party tabled a private member’s bill that would force the government to move ahead with open banking or explain why it was unwilling to do so. 

Maybe fintechs sensed an opportunity. The CCI posted an open letter to Freeland that calls on her to reaffirm her commitment to open banking and release a “clear roadmap” on how the government proposes to implement it. The chief executives of many of the country’s most prominent financial technology companies had signed, including Borrowell’s Andrew Graham, Koho’s Daniel Eberhard and Jobber’s Sam Pillar. 

Here’s the thing, though. None of this is particularly new. Maybe inflation scare has changed the politics, but Ottawa has long been willing to sacrifice innovation and lower fees at the altar of financial stability, going so far as to promote Canada’s “boring” approach to finance as a competitive advantage. That depends on what you are competing for, however. 

Canada “is a more closed industry,” former Citigroup chief executive Chuck Prince said in testimony to the Financial Crisis Inquiry Commission in 2010, when asked why no Canadian banks failed during the events that led to the Great Recession. “In the U.S. and the UK, it is more open to the market.” 

Missing from the open banking push has been a tailwind from consumer demand of the type that helped Amazon bulldoze brick-and-mortar retail and allowed Uber to disrupt the taxi industry. Gary Schwartz, head of the Canadian Lenders Association, said he doubts that’s changed, citing a poll by NTT Data that showed 60 per cent of Britons lacked an understanding of open banking, even though it’s been policy in the UK for five years. 

Schwartz thinks part of the problem is the name. “Open banking” is too abstract, and makes it sound like information that any reasonable person would want to protect would be open to anyone who wanted it. “Words do matter,” he said in an email. 

The federal government sometimes calls it “consumer-directed finance,” a more accurate description, but one that doesn’t exactly roll off the tongue. 

Schwartz has a better idea. He was chair of the Canadian Telecommunications Association’s mobile committee in 2007 when the federal government introduced wireless number portability, removing a significant barrier to switching mobile providers. 

Open banking amounts to the same thing. Schwartz thinks advocates and the government should reframe the policy as “financial data portability,” or FDP. He thinks that would penetrate the public consciousness the same way the right to our mobile numbers has. 

“Suddenly, consumers would understand the benefit of shopping for value,” Schwartz said. “There would be inbound calls to MPs asking for FDP and Ottawa would need to ‘reshape’ the sector.” 

Narratives are fundamental. They are how humans make sense of the world and even the best ideas will fail if they lack a good story. If Freeland and Poilievre are committed to open banking, they will do more than introduce plans and consult with industry—they will spin a yarn about how FDP will make our lives better.   

Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.