In last year’s federal budget, Canada’s Finance Minister committed to studying the merits of Open Banking. Understandably, his decision triggered intense discussion among industry insiders and policymakers but we are now gradually seeing a broader conversation take place in the media. As a supporter of Open Banking but also an industry insider, I believe broad public engagement in this potentially game-changing framework is an absolutely crucial next step in its possible adoption. Like others, I anxiously await the report from the Advisory Committee on Open Banking to understand the advice the Minister is receiving on moving this project forward.
Since the Minister’s announcement, many forums have discussed Open Banking, offered use cases, looked at case studies from other countries, and examined the challenges in embarking on this journey. My big-picture view is the deeper you look, the more compelling the case for adopting the principles of Open Banking in the Canadian financial services industry.
How will Open Banking benefit our country? Equitable Bank examined the possibilities in preparing our submission to the Minister and our conclusion is that Open Banking has the ability to help Canadians in all walks of life, from individuals to businesses, including the small business sector that is the lifeblood of our economy and a key client constituent of my bank.
For Canadians with fewer financial resources, Open Banking could help them to fully access their government benefits. For Canadians with deeper resources, Open Banking may help them to better manage their affairs with a number of financial services providers. Regardless of economic station, advice would be easily provided in an Open Banking environment where everyone’s financial position can be easily consolidated and viewed from a single perspective, and financial literacy could also be improved.
For small businesses, the ability to integrate multiple banking services with accounting systems has real potential to dramatically improve cash flow forecasting and reduce administrative burden, allowing entrepreneurs to focus on their core mission of servicing their customers.
As we look around the world, the impetus for Open Banking seems to come from two main drivers: fundamental policy issues around consumers’ rights to their own data; and a desire to create a more competitive environment for financial services.
Although Canada has yet to lay out a clear public policy rationale for Open Banking, it is easy to see how Canadian society can benefit both from a dialogue related to data rights and greater transparency on pricing and products in what, by global standards, is a concentrated financial services sector.
As the conversation on Open Banking has evolved, it is clear that there are as many different views as there are well-meaning people who have thought about the issues involved. Some, for example, put a lot of emphasis on the cyber-risk created by Open Banking while others see it as a solution for migrating four million Canadians away from the inherent risks caused by their use of screen-scraping technology to a safer approach to consolidating data. Wildly different views are even expressed by people working in the same financial institution, which only proves that perspectives on Open Banking differ depending on the seat you occupy.
I believe there is a bigger risk in doing nothing than there is in creating a properly controlled environment using APIs to give more security over customer data. Change is always hard, but Open Banking seems like change that is well worth making as we try to move Canada forward to an advanced digitally-enabled society. Other powerful advancements being made in payments modernisation and developments in digital identity will also improve the utility of the banking system.
At Equitable Bank, and through our digital EQ Bank platform, we expect Open Banking to allow us to deliver new approaches that will really make our customers’ lives better. I do not expect adoption of Open Banking to be quick, but believe that over a 10-year period it will be a game changer that fundamentally improves the financial services sector in Canada.
Finally, there is debate about the role of government in advancing the Open Banking agenda. While industry needs to be involved and engaged in the process, success will only be achieved if there is a concerted political and regulatory effort applied in leading the way.
Without such an effort, it will be hard to get the nation’s financial institutions together to agree on complex technical matters like data standards for APIs. A combination of the insight from industry experts and a clear-eyed view from regulators with the authority and the force of will to push the industry to adopt appropriate solutions is required to make this national project successful.
Equitable Bank is a challenger bank offering residential lending, commercial lending and savings solutions in Canada. It is a wholly owned subsidiary of Equitable Group.