This content was recently presented by our friends at FDATA North America to one of the big 5 Canadian banks.
How Consumer Financial Data Access Works Today
- Credential-based authentication – “screen scraping”
- Some FIs restrict or block access
- Messy, uneven consumer experience
- Limited visibility into the ecosystem for FIs and regulators
- But the only way for Canadians to reliably use third-party tools today
What is Open Banking?
For an open banking framework to deliver on its benefits, it must secure customer trust by ensuring appropriate privacy safeguards and consumer protection as well as support the safety and soundness of the financial sector.
- Guaranteed data right for consumers
- Consent and authentication flows
- Liability modeloInteroperable technology to consume data
- Regulatory oversight of third parties
The consumer is fully empowered.
Why Open Banking?
- Under an open banking framework, consumers and businesses are empowered to share their financial data with a broader range of financial service providers.
- Open banking systems incorporate effective safeguards that ensure the stability of the financial system, protect consumer privacy and rights, and ensure the security of consumers’ financial information.
- Open banking holds the potential to reduce consumer costs, improve their ability to manage financial services, and gain access to the wider range of services in the ecosystem while ensuring protection, proper regulation, and stability of the financial ecosystem.
- FDATA NA members today provide ~3.5 million Canadians with aggregation-facilitated access to third-party technology tools.
Benefits of Open Banking
Consumers will receive better customer service, personalized intuitive financial products at lower prices and improved financial health.
Businesses will be able to use technology to streamline financial operations, improve cash flow and financial management and gain better insight into their customers by understanding how, when and where they will spend money.
FinTechs and innovators will revolutionize how people and businesses spend, manage, and understand their finances. oOpen banking provides a wider range of marketplace participants with access to consumer financial data that can be leveraged to develop products and services that are more tailored to consumer and small business needs.
Banks will reimage their business model to generate new revenue, provide a broader suite of products and services without the burden of building and maintaining proprietary solutions, and deliver better customer service by leveraging data insights.
Regulators will leverage technology and innovation to improve effectiveness through tools like automation, artificial intelligence and predictive analytics. oAs the number of fintechs grow and introduce new business models and techniques into the ecosystem, regulators can rely on open banking to adapt to those new models and ensure regulatory compliance. oRegulatory oversight is needed to understand how existing policies apply to the changing financial environment and account for new risks.
The Global State of Open Banking
- Policymakers are realizing the open banking regime enables significant innovation and consumer benefit.
- Various markets around the world are considering, adopting, and/or implementing laws and regulations to support open banking systems.
- This movement is the result of advocacy by consumer champions, fintechs and other engaged stakeholders.
- Successful regimes focus on the importance of protecting customer interests and their rights to data, while delivering in a way that promotes a secure and safe ecosystem.
Open Banking Flourishing in the UK
- 2 million users
- 200 regulated providers
- 204 third party providers + 76 account providers
- 92 regulated entities with at least one proposition live with customers
Status of Open Banking in Canada
- Four million Canadians have signed up for “screen scraping services”
- First introduced in Budget in 2018
- Finance Canada’s Initial Consultation on Open Banking Finished:
- FDATA North America engagement in roundtable discussions
- FDATA NA submission was published informal consultation
- FDATA North America Discussed the Benefits of Open Banking:
- Educated and engaged with regulators, parliamentarians, and representatives from Canadian financial institutions on the importance of open banking and a well-controlled system of permissioning financial data access following the introduction of the consultation report
- After a brief hold due to COVID-19 pandemic, Finance Canada resumed virtual consultations in November and will continue engagement through the end of year
Consumer-permissioned data is the lifeblood of financial technology tools so we’ve featured some of the top open banking movers and shakers here!