OPEN Banking! Why do Canadians need it?

The NEED

The business of consumer banking has long been owned and operated by financial institutions that have been working very hard to keep up with the constantly growing consumer expectations and advancements in technology. Although financial institutions have succeeded in providing their customers with proprietary mobile and online banking channels to operate and manage their portfolios, the modern-day customer is still spending more time and money when it comes to personal budgeting, financial product comparison and proving their creditworthiness to loan providers, especially if they have a diverse and distributed financial profile. It gets complex and therefore financial data consolidation and management is often outsourced!  So, there is a growing need for digital solutions that can enable a customer, to increase control over their financial information and make healthier financial decisions.

The SOLUTION

Open Banking is the concept of allowing accredited third-party service providers open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through the use of application programming interfaces (APIs) which would enable developers to build applications and services.

Open banking holds the potential to reduce costs, improve a customer’s ability to manage financial services, and gain access to a wider range of services that the digital economy has to offer. This approach would ultimately give ownership of data to the consumer and provide them with a framework that would enable them to make well-informed financial decisions. This would ultimately change the payments landscape by transforming the way people transact, save, borrow, invest, and manage their finances. Lenders would get a 360-degree view of their consumer’s financial situation through a comprehensive view of their finances, helping them assess the risk level and offer optimal account terms.

With the customer’s consent, FinTechs would be able to offer a customer a wide range of services, some of them listed below.

- Account Aggregation &     Management	Consolidating all bank accounts and products to manage over a single dashboard offering you a 360degree of your portfolio.
- Instant Loans	With better access to a customer's Creditworthiness, institutions could pre-approve loan applications and credit approvals with improved conversion rates.
- Subscription Management	Manages all the recurring payments from the customer and shows them in one interface.
- Opening new accounts	Opening new accounts digitally is a customer’s first interaction with the bank, The KYC process is expedited with customer authentication using APIs, so expectations on speed and user experience will be high for some customer segments.

 

The REVOLUTION

Open banking is a world citizen. The concept is spreading like wildfire across continents and each time it changes territory it takes on a different form. While researching this topic the statics I came across were mind-blowing.

US/CANADA Open banking is not currently available in USA/Canada. ·  In the USA, Consumer Financial Protection Bureau (CFPB) is still deciding on exactly how to manage the consumer privacy and data protection issues created by open banking. ·  Canada has not yet established a governance model for open banking although OPEN Banking is expected to launch in 2023.

Across the GLOBE ·  As of January 2022, the UK has reported 4.5 million regular users of open banking of which 3.9 million are consumers and 600,000 were small businesses. ·  India currently reports 260 million people are using UPI for real-time payments based on open banking. ·  Tarabut Gateway is currently the Middle East and North Africa (MENA) region’s first and largest regulated Open Banking platform that connects a regional network of banks and FinTechs via universal APIs. ·  In Australia, 49% of banks are currently providing Open Banking transactions in under a second. ·  Hong Kong has been an early adopter of open banking since 2017. As of May 2020, more than 50% of incumbent banks had either open APIs or other open banking innovations. ·  Mexico is seen as a FinTech leader in Latin America and launched its API Hub in July 2021, providing FinTechs access to its public APIs for testing and implementation as well as real-time data for their 9,000 ATMs.

 

Since 2018, Canada has been on a long, delay-ridden journey to implement open banking. On March 22, 2022, Abraham Tachjian was appointed as Canada’s open banking lead and responsible for developing an accreditation framework for the open banking system. Open Banking is expected to arrive in Canada in 2023.

 

Sources :
https://www.canada.ca/
https://ottpay.com/
https://www.openbanking.org.uk/
https://www.wamda.com/
https://nordigen.com/
https://www.pwc.com/