Why Canada Needs Open Banking ?

Today, more than four million Canadians hand over their banking information to fintech companies to carry out financial tasks online, such as applying for a loan or mortgage, connecting their accounts to a budget app or opening a bank account. As consumers, we feel secure during this process because we trust our banks. We want a more personalized, convenient, and fast digital banking experience that empowers us to do more with our money. Today’s model for achieving this experience is called screen scraping, which restricts growth and comes with inherent risks to consumers that expose them to vulnerabilities and data breaches. Open banking offers a more secure and innovative environment for the financial industry to evolve and empower consumers in managing their finances.

Open banking allows fintechs and financial institutions to leverage consumer consented data for personalized financial products and services. Open banking creates a trust framework for consumer-directed banking to evolve, and it also:

  • All transaction and participation within open banking ecosystem are private by design for maximum security
  • The framework also foster the speed for innovation and faster market adoption
  • Engages regulators to ensure that safeguards are in place to protect consumers, banks, fintechs and SMEs
  • Establishes regulatory controls that qualify and govern third parties and their use of consumer financial data
  • Sets a foundational standard that advances our financial ecosystem and strengthens our economy
  • Fosters domestic fintech’s and make them export ready for international financial market

CONSUMERS

Open banking equals more choice, control and security for Canadians’ to empower their finances. It places consumer’s unique and diverse financial needs as a priority and offers:

  • Simple access to personalized financial products and services
  • Complete control over their financial data such as passwords, credit scores and transaction information Opportunities to be incentivized to share data through monetization or other points of value
  • Recognition that they are valued as the life force of the financial services industry
  • Confidence and trust in using regulated financial apps and services

BANKS

Canada’s financial institutions, (FIs) are already trusted custodians of financial data, so they’re well-positioned to meet customers’ changing expectations in an open banking framework. Opportunities for FIs include:

  • Monetization of enriched consumer data
  • Customer-centred and personalized solutions,
  • New customer segments and growing market share
  • A dynamic ecosystem of innovative vendors and partner organizations built upon consumer-permissioned data
  • Efficiencies that can help reduce operational costs
  • New financial models protected by a robust regulatory framework to reduce risks such as fraud and money laundering

FINTECHS

Open banking is an opportunity for innovative fintechs to build new products and services and create key partnerships with FIs for long-term growth. Benefits of open banking for fintechs include:

  • Access to enriched financial data to better understand what drives consumer behaviour, anticipate what consumers want and empower them with personalized financial products and services ey collaboration with other regulated players in the financial services industry to remain competitive and relevant
  • Opportunity to expand customer base
  • New business models for technical service providers (payments, gateways, data and regulation)

GOVERNMENT

Open banking is a framework for innovation that protects Canadian values and rights, including privacy, human and democratic rights. Within this framework, federal and provincial governments can ensure that:

  • Privacy laws reflect the changing realities of the digital economy
  • Compliance with the PIPEDA Act
  • Compliance with  OPC as the co-regulatory and enforcement authority
  • Strict regulation of third-parties , including the power to impose fines for non-compliance
  • A robust model for digital identity is incorporated
  • A trusted mechanism is in place for dispute management between consumers, banks,fintechs and SMEs

INDUSTRY EXPERTS

Experts in key areas of banking, regulation and compliance are a crucial element of the open banking ecosystem in Canada. Ideally, they will work together with governments, financial institutions and fintechs to establish and maintain:

  • A legal framework that puts privacy issues related to consent, transparency and accountability at the forefront
  • A central registry of third parties permitted to access the open banking technical standard
  • The consumer, bank and fintech dispute management system
  • A market-driven regulatory framework that nurtures industry growth while protecting all stakeholders

THE END OF SCREEN SCRAPING

When consumers agree to use a third-party’s product or service , they are providing permission for that third party player to have access to their financial data. Fintechs do this by using an unregulated third-party service via a process called “screen scraping”. Screen scraping essentially scans and scoops consumer’s banking history so that they can get the personalized experience consumers have come to expect, but it leaves consumers’ data vulnerable to hackers and data breaches. nce consumers have given consent, they can’t control how long these third-party players have access to their banking information.

Open banking provides consumers with a secure banking ecosystem that allows them to selectively share their financial data with regulated third parties . Consumers can then choose who can access their financial data, where they can use it and when they can no longer see it.

Open banking in Canada is truly a force for good. It is ultimately consumer-directed banking that places consumers where they should be when it comes to their finances: in the driver’s seat.