Federal efforts to bring “open banking” to Canada are being welcomed by players in the industry — but there’s also criticism that, after years of waiting, any changes may not come fast enough to encourage innovation or allow smaller financial players compete with larger institutions.
Open banking lets consumers or business customers share personal and financial information between approved banks and other companies. For example, letting a budgeting app collect transactions from multiple bank accounts and compile them for you, or price comparison software that analyzes your shopping habits.
Recent moves by Ottawa are “definitely a game changer,” according to Parna Sabet-Stevenson, a lawyer specializing in financial services and tech with the Toronto law firm Gowling WLG.
She says promises in the latest federal budget would eventually allow Canadians to share their financial data safely and eventually let companies large and small to access customer data from competitors — encouraging them to come up with new products and services.
That access would only be with permission, and secure and standardized across Canada, which Sabet-Stevenson says addresses concerns raised by major financial institutions in the past.
Federal politicians have been mentioning open banking since at least 2018, but last week’s budget finally earmarked actual cash — $1 million for the Financial Consumer Agency of Canada by 2025 to begin preparing to oversee a new framework and system for open banking, with an additional $4.1 million over three years for the Ministry of Finance.
“Open banking means that you and not your bank are in control of your financial information,” said Hanna Zaidi, Toronto-based vice-president with the Canadian fintech Wealthsimple, which has been long advocating for open banking.
Zaidi says, with open banking, a Canadian applying for a financial product, such as a mortgage, may not have to manually collect all of their information for an application.
All of a consumer’s needed data, such as bank balances and existing credit limits, could be securely compiled through the promised open banking framework, which could also make it easier for Canadians to switch banks or compare financial products than it is today.
Lengthy wait
But fintech companies are frustrated that Canada has lagged behind similar countries in rolling out open banking, such as Australia.
“WTF is going on, Canada? Like, why can’t we do this?” said Andrew Dale, an executive with business-focused financial company Float.
Dale points out Australia took less than two years from first announcing a review in 2017 to…
Read More: Open banking could spur competition, but fintechs say Canada’s moving too
