By granting consumers more control over their financial information, open banking has the potential to dramatically disrupt our banking sector in moving away from the current situation, where their data is securely held by Canada’s big banks. In its 2018 budget, the federal government announced that it was establishing a committee that will look into the merits of open banking for Canada, and in January of this year, the committee released a consultation paper. Questions were posed, such as: would open banking provide meaningful benefits to and improve outcomes for Canadians? In what ways?
There are many arguments in favour of open banking in Canada. For one, customers could benefit from greater transparency, as it would help them to make more informed decisions and better manage their finances. Having an aggressive open banking strategy also gives our country the potential to be a global leader in fintech innovation. By sharing data with other banks, banks will be able to grasp a fuller picture of their customers’ lives, which helps them to create a better customer experience through new products and services.
Several countries are at various stages of introducing open banking, including Australia, Japan and the United Kingdom. The United Kingdom is the furthest along with its mandatory system, and has seen progress since its launch in early 2018.
At the 2019 Western Workshop, the Open Banking panel opened by acknowledging the two panelists were there to speak as individuals and not on behalf of their financial institutions.
Open Banking is about financial institutions sharing data about customers’ transactions, which creates a world similar to where citizens share their data to gain beneficial services, explained Franklin Garrigues, Vice President of Digital Channels at TD Bank. He went on to explain how open banking already exists around the world, including in Canada. Banks from the United Kingdom have the highest level of regulations, compared to the United States where there is next to no regulation.
Is there a high demand for Open Banking?
In Canada, open banking is generating less buzz among consumers than it is in the U.S., noted the EY Open Banking Opportunity Index, with cybersecurity being cited as a major concern.
“Open banking will succeed only if customers trust that their data is safe, and many Canadians still need winning over when it comes to sharing their information online,” said Abhishek Sinha, EY Canada Open Banking Leader. “This is especially true of older generations, whereas millennials are more comfortable with the idea.”
Chair of IdentityNORTH Aran Hamilton, who moderated the panel, asked if there is a demand for Open Banking in Canada. “There is no demand because there is no clear understanding of what data will be shared and what will happen with it,” explained Sandi Boga, Director of Customer Experience for ATB Financial. “So we need to educate customers on what the shared data would say about them, what rights they have with it and what the businesses would do with it.” If information was shared from a customer’s digital identity, customers would similarly need to be educated about what was being shared, because it wouldn’t be anything like their banking passcodes, she added.
If you ask a customer if they want Open Banking and want to share their data they will say no, but if you ask a customer if they want the benefits that could come from Open Banking then they would say yes, noted Garrigues.
Banks should use their trusted brand to educate customers about the potential benefits and let the customer decide if they are willing to share their information, said Boga. But the problem is that banks are good at banking—they are not programmers, developers or entrepreneurial third parties who would help develop services to be offered by banks to benefit customers.
Bill Gates once said, “We need banking, we don’t need banks anymore,” quoted Boga, but who else has the same trusted brand and customer data to build these programs to benefit customers?
For more details on the IdentityNORTH 2019 Western Workshop sessions, including “The role of Digital Identification as we move to Open Banking,” join our community mailing list to view the full Conference Report, produced with the support and sponsorship of 2Keys.
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