Canada could be a world leader in open banking
By: Open Banking Initiative Canada
Tags: Open Finance, Digital Identity, Open Banking, Canada, Venture Capital

The Open Banking Initiative of Canada (OBIC), a not for profit organization, has attended all sessions of the second consultation with Finance Canada. From attending these sessions, we wanted to share a summary of the opportunities, challenges, and additional insights from the consumer’s perspective. This is especially critical as the average Canadian is just $200 away from financial insolvency. As Canada moves forward towards enabling an open banking infrastructure, we need to envision a future where Canada becomes a world leader in open banking.

Canada is well-positioned to lead as we learn from first to market countries such as the UK, Australia, Singapore, Hong Kong, and Brazil. From these Open Banking leaders, Canada can build a world-leading ecosystem that can drive added VC investment in our fintechs, create new jobs, and help our economy have a fast recovery from the pandemic. With our uniquely diverse population, incredible education system and tech community, Canada has so much to offer the world regarding technology and innovation. As Canada continues to establish itself as the Silicon Valley of the North, an open banking framework will help set the stage for accelerated innovation, driving competition and investing in our economy’s future growth and success.

OBIC’S VISION FOR OPEN BANKING IN CANADA

All Stakeholders

OBIC is a centralized Canadian group of experts who have considered and assessed each stakeholder that will be impacted and benefit from the Open Banking Initiative in Canada.

Canadian-Driven

OBIC draws from its global partners’ standards and learnings, with a wholly Canadian body that ensures Canada can steer its own course and enable its citizens’ and consumers’ best interests.

Benefits for all Stakeholders

Open banking will unlock a significant wave of innovation that will provide new, modern banking options to consumers, new partners, opportunities and revenue channels for incumbent banks, as well as sustained economic growth for Canada.

Canadian Global Leadership

Canada has an opportunity to be at the forefront of global innovation, which will draw a significant influx of investment capital, high-paying jobs and economic growth that will persist well into our future.

Security

Sharing and access to banking data are not new. However, it exists today in a limited and insecure way. Open banking provides the security, privacy, speed and trust to enable consumers to access and share their data while ensuring everyone with access to it uses the highest modern security standards.

Scope

We need to keep in mind the purpose of open banking to ensure consumer welfare and economic growth by providing control over data sharing. Both Retail and Corporate banking should make up part of the scope under Open Banking.

Learning from the UK

Consumer UI/UX experience was problematic as banks did not integrate mobile into open banking from the beginning. Smartphones and tablets with 4G/5G provide easy consumption by consumers and result in a faster adoption rate. Every bank’s sandbox was different, even after using the same API specification. We believe that each banks’ sandbox should be an identical reflection of the production systems. The standard(s) should be followed consistently and accurately across all banks to ensure a consistent and predictable experience. Support for screen-scraping must continue until the APIs are fully available. The OBIE has a very limited mandate, making it challenging to deliver anything beyond the specific regulation. The standards and market capabilities also need to move beyond those minimums. There is a project underway to determine a future model in the UK due to this short-sightedness from the outset. We believe that the legislation should have a broad focus, and the implementation body should have the mandate to drive phased and continued implementation that can adjust to meet consumer needs over time.

Implementation

Implementing CDF needs to have separation of the governance bodies from the accreditation bodies. We need a tiered implementation that will not allow back-tracking, and screen-scraping should not be prohibited until API access is permitted. Forbidding screen-scraping would impact 4M Canadians’ access to financial tools today. Any Standards developed under CDF should be Open Source from the start as it makes public review and adoption easier.

Governance of the System

OBIC supports proposals of having separate implementation and accreditation bodies, in line with the principle of separation of duties. We believe that the system’s governance should be guided by the following principles: consumer welfare, competition and promoting economic growth. We support creating and implementing a rights-based approach to governance, where rulemaking is bound by consumer legislation. OBIC believes in an open and transparent governance system that always involves public comment. All rules should be consistent, whereby all participants will have the same rules applied to them, to avoid an imbalanced approach. OBIC will recommend a forward-looking rulemaking process rather than a process meant to capture business happening today. We believe that the governance body should also have rulemaking authority.

Consistent Experience

Regardless of who you bank with, consumers should have consistent opportunities and experiences regarding their service offerings to build trust and security (avoid phishing scams). Digital identity would improve the ease, efficiency and security of the consumer experience and help Canada become a global leader in open banking.

Aspects Lacking in Current Consultations

We believe that Write Access within CDF will empower consumers as it allows third parties to initiate payments on behalf of various utilities and services. This brings an alternative method to existing Card payments, which will also boost competition and investment in the Payments sector. Without Write Access, open banking will not deliver full benefits to consumers and will limit fintech innovation, which addresses all marginal use cases that incumbents don’t solve. We need to keep in mind the purpose of open banking: to ensure consumer welfare and economic growth and that consumers are in control of their data. For success, the scope needs to be comprehensive and broad, and use cases must be built around consumers’ overall financial well-being.

Conclusion

The decisions that will be made about open banking over the next 24 months will impact Canadian consumers and business owners for the indefinite future. As described above, the meaningful CDF framework envisioned by OBIC has the very real potential to kick start Canada’s economy as it would empower new entrants to capture new opportunities and address gaps that incumbents simply cannot.

It is more important than ever for a unified approach that puts the consumer first without conflicting commercial interests and supports an ecosystem that is more of an impartial government-led third party.

WHO IS OBIC?

Open Banking Initiative Canada (OBIC) is a non for profit organization that exists to develop a market-driven Open Banking framework in Canada that will make consumer empowerment possible in our country. We’re gathering great minds in finance, technology and regulation, creating a groundswell that will be a force for good, giving Canadian consumers choice and control over their financial data.

OUR MISSION

OBIC seeks to ensure that the Canadian open banking framework:

Captures all parties’ interests across Canada

Helps to develop a globally competitive market

Places the needs and interests of the consumer first

Committed to gender diverse board

Focuses on Leadership and Education

OUR KEY INITIATIVES FOR 2020