Open banking in Canada: Navigating the future of money
Open banking will introduce new opportunities and business models for the financial services industry and new services from FinTech entrants to the market—but these opportunities come with unprecedented risks and operational requirements for a banking system that prides itself on stability. Given Canada’s unique financial system and constitutional structure, the implementation of open banking won’t look the same as it has in the U.K., the EU or Australia, where its introduction is already underway.
We spoke with a diverse group of leaders from across the Canadian financial services industry to understand open banking’s current and emerging issues: What do you see changing? How will your organizations fit into the new landscape? What might a made-in-Canada model of open banking look like for consumers and industry?
"If there isn’t trust in the security and integrity of the system, especially among consumers, open banking will not succeed."
"Open banking has existed in some form since the turn of the century and now technology and other changes are fuelling a more public debate."
"A concept like, “We’re a known bank, we’ve been around for hundreds of years and therefore we’re better equipped,” doesn’t necessarily make sense. Instead, it comes down to the contents and adherence to risk policies, and the importance that institutions give to cybersecurity."
"...it’s not just about the security of the technology, but also governance structure, accreditation, and making sure that the proper controls are in place so that it's not just anybody accessing that system."
"We hope open banking will bring FinTechs into the same realm of regulation as other financial institutions, to ensure everyone is operating on the same playing field and that the integrity of the entire system is protected."
Lisa Ford is the Senior Counsel, RBC Law Group, Enterprise Payments and Open Banking.
“Open banking” — clients giving access to third parties to their financial transaction data — is not a new concept in Canadian banking. It’s been happening for decades. Take business clients, for example. In the 15 years I’ve been at RBC, there’s always been a need for our business clients to give trusted third parties (like accountants and professional advisors) access to their accounts to bring holistic views and insights to their business planning needs. What is new, however, are technologies such as application programming interfaces (APIs) which we are exploring for these use cases.
There is a myth being perpetuated in some commentary that Canada has “lagged behind” other jurisdictions when it comes to open banking. I disagree — the financial services industry in Canada, which consistently ranks high in trust among consumers, is actually leading...Ultimately, the myth that Canada is lagging behind can potentially lead to overzealous calls for regulation. Critics of the Canadian system often point to jurisdictions such as the EU and U.K., where regulators felt the need to intervene and mandate open banking due to a general public distrust in banks after the financial crisis, and in order to foster competition and innovation.
This is simply not the case in Canada. Open banking has existed in some form since the turn of the century and now technology and other changes are fuelling a more public debate. The challenge for policymakers in these fast-moving areas stems both from the desire to “protect but do no harm” as well as from Canada’s fragmented regulatory environment that regulates based on the type of entities involved versus the nature of their business activities. This makes it difficult for regulators to establish comprehensive oversight when it comes to activities such as open banking, which involve a variety of different entity types.
The open banking ecosystem in Canada requires a collective and collaborative effort — one that will involve financial institutions, governments, third parties and consumers. Fortunately, the Canadian banking industry has a history of collaboration that has worked well in our regulatory environment. I think of a similar situation when banks launched chip and PIN systems in the card business. The industry got together and worked cooperatively with each other and the government to implement standards everyone agreed to follow. Open banking is similarly conducive to this type of approach, since all players have a vested interest to enable open banking while maintaining the safety and security of the financial system. Everyone ultimately has “skin in the game” and an incentive to work together for the common good of our financial system, evolving as the world evolves over time.
National Group Head, Specialized Business Law
National Group Head, Specialized Business Law
- Banking & Financial Services
- Financial Services Regulatory
- Credit Unions & Cooperatives
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