The Globe and Mail offered an opinion piece explaining Why Canadians Should Care About Open Banking.
The article puts forward a powerful case for the equivalent regulatory catalyst for Open Banking as is being enjoyed in Europe. It makes the point consumers would benefit from the same improved services through data sharing, and also critically highlights the boost for the nations FinTech innovation ecosystem.
A follow on article explores why Canada is holding back on adoption, noting that there is a lack of political will to make it happen. This has serious implications for the Canadian economy.
Canada has long had an innovation and productivity challenge, and the author observes that without Open Banking regulatory impetus, banks will remain closed and consequently stifle FinTech innovation and growth.
The largest obstacle to improving Canada’s economic growth is the lack of support for policies that encourage and promote innovation.
MoneySense makes exactly the same points, about consumer benefits and the risk of being left behind.
Hence why advocates like Senator Colin Deacon are on a mission to spur Canada to catch up, such as contributing to this Senate report and through regular awareness raising and thought leadership on the topic. He describes it as a matter of urgency that Canada lays out a policy framework akin to Europe and elsewhere.
“Disrupt or be disrupted” sums up the current situation surrounding #OpenBanking (better described as #ConsumerDirectedBanking) in Canada. I believe that big bank reluctance is due to fear of the biz model shift from moats to ecosystems (https://t.co/DRqNbQGwM3). @HarvardBiz https://t.co/DfwTvoWo5R
— Senator Colin Deacon (@colindeacon) October 1, 2019
Resistance is Futile
It’s adoption in some form certainly seems inevitable. As BankingTech writes the country is Edging towards Open Banking, and the Department of Finance ran a consultation on the topic and published a report – A Review into the Merits of Open Banking.
The Centre for International Governance Innovation asks if Canada is ready for it, citing the lack of a GPDR equivalent presenting a risk for personal data privacy safety.
However despite these concerns a powerful ecosystem is taking shape. While they may not have an Open Banking regulatory framework Canada has a rich industry of digital banking innovators.
Banks like RBC are beginning to pilot API programs to access their data, and startups are emerging. Writing that Resistance is Futile, the Financial Post describes a similar pilot initiative from the National Bank, and Mobeewave a Montreal-based startup that facilitates contactless payments who raised $16.5m in late 2018.
PYMNTS.com writes about Flinks, a startup pioneering a platform that facilitates data sharing between banks and non-bank service providers. Canadian Mortgage Trends explores their capability in more detail. Koho is one example of a Canadian digital challenger bank.
In his review of the State of Open Banking in Canada, Phil Siarri highlights startups like Montreal-based Wealthica, who offers an API-powered investment aggregation platform that allows users to consolidate their investment accounts and portfolios in one simple interface with various reporting functionalities. Similarly PureFacts is harnessing AI and Big Data to power better investment decisions.
With a total funding of $50m Flybits offers a platform that can dynamically assemble data from across legacy systems to present compelling new offers to customers in real time.
Presenting at the San Francisco Finovate Spring conference, they demonstrated how their platform can be used to quickly build new digital banking services. Their Flybits Experience Studio offers this via a no-code interface meaning it makes it easier for non-technical teams to easily own the end-to-end customer experience.
Through the Flybits Concierge, a simple but powerful widget, a white label turnkey integration can be injected into the existing mobile channels to enable new innovations to be taken to market quickly.
Open Banking 3.0 – Canada’s Opportunity
So Canada is not only easily positioned to catch up but can even leap ahead in this field.
Indeed speaking at the Toronto Open Banking Expo Rizwan Khalfan, chief digital and payments officer at TD Bank Group, makes the specific point that Canada shouldn’t simply copy the policy regime of Europe but instead should build atop their own unique expertise and craft a framework accordingly.
In particular Canada’s deep expertise in the core field of Digital Identity could see this leap be defined as “Open Banking 3.0“.
The ongoing evolution of Digital Identity notably Self-Sovereign Identity, such that it forms an “Identity Metasystem”, will power an equivalent step change leap forward for all industries using these technologies, banking being one of them, and Canada has a unique level of global leadership in this field.
For many years now Canada has been building an Identity industry ecosystem, through organizations such as DIACC, who have developed a reference model blueprint, their PCTF, for enabling this ecosystem to share login credentials to streamline access to digital services. The Government is actively stimulating the sector, including accelerating adoption through this procurement and through pioneering use cases like this British Columbia use case study.
CIBC’s President and CEO Victor Dodig describes how this approach is the key to the future banking experience.
Much of this work has been driven by a goal of enabling integrated access to online government services, utilizing your banking credentials to single sign-on to portals for completing tax returns et al. Canadian Id specialist SecureKey has built a strong position in this space, such as their Concierge service.
In short the mechanisms to improve online government services is achieved through the same interconnect foundations as Open Banking. It’s a keystone foundation to build upon. The perfect storm is that the concerns holding up adoption is also the opportunity.
From Moats to Ecosystems – Canada’s Open Banking Action Plan
This leap forward can be characterized through what Senator Deacon describes as the shift “from moats to ecosystems”.
As explained in this case study of the ‘ACE’ program being pioneered by ATB Financial in Alberta, they are pioneering exactly this type of ecosystem approach, using Self-Sovereign Identity technologies. It is one of if not the most advanced implementations of this new paradigm.
Should Canada embrace, invest in and accelerate this expertise they will emerge as the world leader in both Open Banking and also Self Sovereign Identity, two massive growth markets in their own right and astronomically huge when combined.
So Canada easily has the tail wind, expertise, financing and innovation momentum to charge ahead to a global leadership position.
Ernst and Young believes that Open Banking can thrive in Canada, improving the competitiveness of the sector and encouraging better services for tech-savvy Canadians, through building upon and growing an existing, thriving FinTech ecosystem.
There is also a wealth of industry support to make this happen. For example the Holt Accelerator is a prestigious startup incubator specializing in FinTech, and have laid out their own set of recommendations for achieving Open Banking innovation leadership:
“– Start the process and aim towards a co-regulation system.
– Facilitate the standards-setting process. This process will be iterative, involving multiple stakeholders and will extend over several years.
– Identify an open-banking beach-head, such as the merchant market, so that there is a swift acceptance of the new system among a targeted group.
– Encourage regulators to employ or even build technical capabilities, in order to better keep up with technological advancements.”