MONTREAL — As the federal government begins its push to implement open banking, the long-awaited framework for data-sharing between financial institutions and third parties like tech companies, critics say Ottawa should take lessons on what not to do from the challenges faced by another of its efforts to modernize the country’s financial system.

The Logic reported this month on allegations that the development of the Real-Time Rail, a new national network for faster consumer payments, has fallen four years behind schedule in part because Payments Canada, the organization building it, doesn’t have enough independence from the country’s big banks. Payments Canada rejects those allegations.

In conversations with government, fintech lobbying group Paytechs of Canada has pointed to the delays in modernizing the country’s payments infrastructure as a case study for how not to implement and govern the country’s open banking system, said executive director Alex Vronces.

“If the financial sector is left to its own devices, open banking will face the same challenges that payments modernization is facing,” Vronces said in an interview with The Logic. “What we’ll end up with won’t be consumer-directed finance. It will be big-bank–directed finance.”

The Department of Finance took a key step last week toward rolling out open banking by appointing Abraham Tachjian, a consultant at PwC Canada, to lead its work on the file. One of Tachjian’s first tasks in his new role will be convening businesses to discuss how to implement the open banking system, and setting up working groups to determine various aspects of its design.

The working groups may prove yet another forum for banks and fintechs to outline their differing visions of how to implement open banking. Influential voices—including former finance minister Bill Morneau, who kicked off the government’s study of open banking in 2018—have argued that the government should take a more hands-off approach.

However, to avoid a repeat of the challenges with the Real-Time Rail, fintech advocates want to see the government become more involved with driving the process forward. To some, that means charging Tachjian with a specific plan to deliver, rather than relying on stakeholders to figure it out.

“A clear lesson from the past few years is that open banking isn’t going to happen by itself,” said Andrew Graham, the CEO of the Toronto-based fintech Borrowell. “The federal government needs to play an active role in its creation and implementation. So I hope that the new open banking lead is given real authority to convene all of us who are involved.”

Others believe the next step in the open banking rollout should be an opportunity to engage more deeply with new voices in the market. In an interview with The Logic, NDP finance critic Daniel Blaikie said that in the past the Liberal government has been too deferential to the interests of the country’s big banks, and should consider how its payments-modernization efforts got bogged down as it looks towards open banking. 

“Government should be looking proactively at that as an example to figure out how we don’t end up in a situation six or seven years from now where we’re talking about how the open banking initiative stalled out,” Blaikie said. “This is a time for government to be prioritizing the feedback of some of those other industry players who say, ‘We want in, we’ve got something to offer.’”

The Canadian Bankers Association, a lobbying group, has said that it supports innovation and competition in financial services, and welcomes dialogue about open banking with all parties, including fintechs. “Banks in Canada are trusted custodians of data and will continue to put their customers at the centre of trusted innovation. Preserving the interests of customers in a digital environment and protecting the security and privacy of their data will be paramount,” spokesperson Mathieu Labrèche said in a previous statement to The Logic.

Earlier this month, Blaikie sent a letter to Finance Minister Chrystia Freeland calling for the government to amend the Canadian Payments Act to give more companies, including fintechs, access to Canada’s payment infrastructure. Consultations on amending that legislation are expected to take place this year, and Finance Canada has included payment-system modernization and governance in its 2022–23 departmental plan.

Finance Canada didn’t respond to a request for comment on Blaikie’s remarks before The Logic’s deadline, but in an email last week, Finance Canada spokesperson Alexandra Bernier said modernizing Canada’s payments technology is a government priority. “Updating regulations and expanding access to payments systems must be done carefully and balance responsible innovation that benefits Canadians with the safety and integrity of the financial system,” she said.

One area where the push toward open banking could differ from the payments modernization effort is in the governance of the organization that will eventually oversee the system. When it was tasked with developing the Real-Time Rail, Payments Canada had already been operating as a bank-run non-profit for decades. In contrast, after getting open banking up and running, Tachjian is expected to yield oversight to a new entity created specifically for that purpose.

Borrowell’s Graham said it’s important that the new entity’s governance include representation from a variety of stakeholders, and that no group should be able to take control of the process. Still, he said, balancing oversight with open banking is in some ways easier than it was with payments, since many of the rules will be brand new.

“We have an existing payments system used by many different companies every day. So any change impacts lots of people,” Graham said. “With open banking, we have an opportunity to build something from scratch.”