In September of 2018, Canada’s Minister of Finance Bill Morneau established an Advisory Committee to explore the merits of open banking in Canada. On January 31st of this year, Morneau and his Advisory Committee released their first report.
The findings were informed by a number of public roundtables held across the country with a broad range of stakeholders that included everyone from banks and small business to Canadian consumers and international policymakers. There was also qualitative public opinion research conducted to support the review. This 9-month investigation yielded a clear result: open banking is the future of financial services in Canada and that setting this in motion is an imperative and pressing task for Canadian lawmakers.
More specifically, the findings of the Advisory Committee established that open banking is “a fundamental part of a much broader transformation”. Not only will it empower Canadian consumers and small businesses, it will also strengthen Canada’s financial services sector, innovation agenda and its overall economy.
Other findings and recommendations from the report include:
- Open banking should be called ‘consumer-directed banking’ as it more accurately captures what is being proposed.
- Canadian consumers are concerned about the security of their data and frustrated by the lack of clarity regarding how their information is used by all sectors. They want both control and protection.
- Canadian consumers expect data-driven services from their financial institutions. They want – and need – secure, rich, innovative and relevant applications to empower them in their financial lives.
- While some 4 million Canadians are currently consenting to screen-scraping to access technology to manage their finances and businesses, it exposes both them and their financial institutions to serious security and liability risks.
- Establishing a robust security framework for open banking must be guided by the interests of Canadian consumers in order to engender trust and foster innovation.
- Open banking will address the risks and controls related to data use and privacy in the financial services sector. This framework will also serve to support Canada’s successful transition to a data-driven economy.
- Open banking drives innovation across a vibrant ecosystem of firms and supports the growth of globally innovative and competitive companies.
- It is vital to establish how different participants would assume liability within the open banking framework, rather than financial institutions assuming all the risk or consumers unknowingly assuming it.
- This initiative needs to be market-led and supported by federal and provincial government bodies.
- The time to begin is right now or Canada could be surpassed by other countries and their financial technology and risk compromising the country’s financial sector and global competitiveness.
The report essentially rings the bell for the next second phase of the process. Starting this spring, the committee will work with stakeholders across Canada and deliver the results of its findings to the minister later this year.
In the meantime, OBIC is moving the initiative ahead at a steady pace as it creates a vibrant ecosystem of industry experts, technology partners, fintech and financial institutions. This ecosystem is a collaborative and fertile environment that offers strategic insights, education and training. It also offers trusted partnerships, not just with OBIC, but also across key industries. The ideal open banking framework for our Canadian market will emerge from this ecosystem of expertise and will serve to prepare our banking industry for the time when open banking becomes a legislated reality in our country.