FDATA proposes model to ensure smaller fintechs can participate in Open Banking in Canada

Source: FDATA

The Financial Data and Technology Association (FDATA), a trade association representing more than 30 financial technology companies and consumer-permissioned data access platforms, has submitted a formal proposal to the Department of Finance and Bank of Canada recommending the creation of a Sponsored Fintech Model (SFM) under the Consumer-Driven Banking Act (CDBA).

The proposal addresses a gap in Canada’s emerging Open Banking framework. Absent a process to enable smaller fintechs and customer-facing applications, which may not be able to bear the costs and technical requirements required under the system’s forthcoming accreditation requirements, many smaller fintechs could be shut out of the framework from which they were intended to benefit.

“The Consumer-Driven Banking Act is a transformative milestone for Canada’s financial sector, but its success will be measured by how many players can participate, not just how secure the infrastructure is,” said Steve Boms, executive director of FDATA.

“Without an alternative pathway, smaller fintechs face an impossible choice: seek full accreditation at costs disproportionate to their scale, operate outside the framework in violation of the law, or exit the Canadian market entirely. None of those outcomes serve consumers or small businesses.”

The proposal highlighted the following key elements of the Sponsored Fintech Model:

• Tiered participation: Accredited aggregators or data intermediaries would serve as sponsors for smaller fintechs, providing the API infrastructure, consent management and compliance oversight that the CDBA requires.
• Maintained consumer protections: Sponsored fintechs would still be subject to regulatory obligations, including national security screening, data minimization commitments and independent audits.
• No new legislation required: The model is rooted in the CDBA’s existing legislative framework, including the Governor in Council’s broad authority to make regulations respecting accreditation criteria, fees, liability and classes of participating entities.
• International example: The model draws on established Open Banking frameworks from the UK’s Financial Conduct Authority agent model, Australia’s CDR principal-intermediary framework and the US broker-dealer sponsored access model.

The accreditation framework being developed now will determine who can participate in consumer-driven banking in Canada. Without a sponsorship model, the compliance burden risks concentrating participation among large incumbents, undermining the competition and innovation the framework was designed to promote.

FDATA looks forward to continued engagement with the Department of Finance and the Bank of Canada as the accreditation regulations are developed.

FDATA is an Industry Partner of Open Banking Expo UK & Europe 2026, which takes place on 13-14 October at the Business Design Centre in London. Click here to find out more.

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