Law Times

LAW TIMES COVERING ONTARIO'S LEGAL SCENE | MARCH 11, 2019 11 www.lawtimesnews.com BY MARG. BRUINEMAN For Law Times P rivacy and security con- siderations loom large as Canada explores the open banking concept that has al- ready been adopted by the Eu- ropean Union and the United Kingdom, say lawyers. The idea behind open bank- ing is providing a framework for customers to give access to financial institutions and third parties to safely share informa- tion allowing them to develop products. "The [federal] government is starting to basically join the cho- rus of the other countries that have already gotten on board," says Ronak Shah, whose practice with Torys LLP in Toronto focus- es on privacy law, data manage- ment and technology contracting. He points out that Australia, too, is in the process of develop- ing the means to adopt the open banking concept. "They understand that to en- sure that the financial industry remains competitive and to pro- vide more choice to consumers and to be more innovative they need to provide some guidance," he says. In releasing its consultation paper in January, the federal fi- nance department emphasized the need to balance a globally competitive financial sector that provides consumer choice while ensuring privacy and security are protected. That was followed by consultations that closed in February in its review of open banking. Open banking is described in the paper to have the poten- tial for consumers to consent to sharing their financial transac- tion data with third-party finan- cial service providers, allowing them to benefit from a broader range of financial products and services. The point of the consulta- tions is to gauge Canadians' views on the benefits of the con- cept, whether they want it and how the consumer protection, privacy, cybersecurity and fi- nancial stability risks should be managed. According to the paper, there are some limited services in place, but they don't allow for a single access point of the vari- ous products provided through different providers. There is also concern that those who current- ly use "account aggregation" ap- plications offered by non-banks are trading off security and pri- vacy protections. Shah sees open banking as a new paradigm in the financial services sector with its focus on consumer data portability and an openness around the data to provide customers more choice in terms of how they can get more services out of information that is already existing. But there are different models for Canada to explore. The Eu- ropean Union, with its recently enacted General Data Protec- tion Regulation, is looking at it as information that the consumer provides financial institutions, he says, whereas Australia's ap- proach includes the information that customers provide as well as the process. "I think we need to figure out what the right balance is and try to ensure that there's protection in the innovation these financial institutions have . . . by creating intellectual property but also giving consumers the right over the data," he says. The open banking frame- work needs to ensure that any data sharing is done in a secure way and only after the custom- ers have provided their permis- sion and after their identity has been authenticated, says Wendy Mee, a partner at Blake Cassels & Graydon LLP in Toronto. She believes there should also be assurances built in to confirm what the customer is agreeing to. There is currently no standard- ized process. "I think the open banking initiative is to look at how can we create the framework that has the appropriate security in place, has the appropriate pri- vacy protections in place and have it maybe standardized so all of those things are thought through and dealt with in an ap- propriate way," she says. Molly Reynolds, counsel at Torys LLP, says open banking is in some ways an extension of what is already happening. But a proper framework of how it should operate ensures the nec- essary protections are in place, she says. "There are smaller digital banks or lending organizations that have been leveraging tech- nology to try to get to many of the same objectives as what's being discussed in this consulta- tion paper," she says. One of the ways some financial organizations use technology is through screen scraping, in which a computer program extracts data from a screen. That allows those service providers to look at the various products and other fi- nancial information to determine eligibility for other products, she says. But the concern, she says, is that approach involves releasing log-in information. She expects that, as organi- zations continue to innovate, they'll look for ways to make the consumer experience simpler and faster to attract customers. Open banking, she adds, will help foster that innovation while standardizing the expectations for both the financial technol- ogy companies developing these new approaches and the larger financial organizations. The federal government's consultation paper acknowl- edges that these innovations challenge existing regulatory frameworks so there is a need to consider new ways to give Ca- nadians more control over their personal financial information while at the same time protect- ing them from the consequences Ronak Shah says open banking is a new paradigm in the financial services sector with a focus on consumer data portability. Open banking explored in Canada FOCUS The Canadian Lawyer InHouse Innovatio Awards is the pre-eminent award program recognizing innovation by members of the in-house bar within the Canadian legal market. These awards celebrate in-house counsel, both individuals and teams, who show leadership by becoming more efficient, innovative and creative in meeting the needs of their organizations. The Innovatio awards program draws on a panel of in-house counsel judges to determine the winners, based on a range of criteria. NOMINATIONS NOW OPEN NOMINATE AN INDIVIDUAL OR TEAM IN THE FOLLOWING CATEGORIES: • Law department leadership • Law department management • Legal operations • Diversity • Best practices in compliance systems • In-house M&A/Dealmakers • Working with external counsel • Litigation management • Risk management • Tomorrow's leader in innovation Accepting nominations from large, small and public sector/non-profit legal departments. NOMINATIONS CLOSE MARCH 29, 2019 For more information or to nominate visit www.innovatio-awards.com Questions? Contact Jennifer Brown | jen.brown@tr.com SIGNATURE SPONSOR BRONZE SPONSOR BRONZE SPONSOR THE E B O L G AND MAIL MEDIA PARTNER GOLD SPONSOR PLATINUM SPONSOR COCKTAIL SPONSOR SILVER SPONSOR Untitled-3 1 2019-03-05 1:58 PM See Learning, page 12

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