The global pandemic caused huge shifts in consumer behaviour, one of the most significant being them as adoption of digital payments. In the midst of a turbulent economy, the benefits of adopting innovative digital payments and Open Banking were ever-so important. Open banking will reshape financial services in Canada by offering a secure banking ecosystem that allows consumers to selectively share financial transaction data with regulated fintechs, FIs and payment services that fit their unique needs. In this regulated model, Canadians choose who can access their financial data, where they can use it and when they can no longer see it. Open banking in Canada is ultimately consumer-directed finance(CDF), and it puts consumers where they should be when it comes to their money: in the driver’s seat.
Canada’s current model for offering consumers a convenient, fast, and secure digital banking experience is screens craping, a practice that essentially scans and scoops banking transaction data such as purchase types, payments and deposits in order to provide financial apps required data for the personalized experience that consumers have come to expect. However, it leaves Canadian consumer’s data vulnerable to hackers and once they have given permission to service providers, they cannot control how long these third-party apps can continue to access their bank accounts or how much data they have access to.
A healthy and competitive financial services sector is vital to Canada’s economic well-being. Our current banking culture predominantly favours Canada’s largest FIs. In are centre port by the World Bank Group, Canada is ranked only 23rd in the world for ease of doing business. There port considered different aspects of the participating countries’ business environment including their regulatory environment. To truly meet the changingneedsofCanadianconsumersandsmallbusinessesinadigitalage, this balance of power in the financial industry must shift. Progressive and
inclusive innovation requires banking providers to welcome competition by partnering with fintechs and other third-party providers who can help them excel in today’s digitally-driven world. Not only could this positively shift the equilibrium in the financial services industry, but it could also redefine the very nature of relationships between FIs and emerging partners in consumer-centric innovation.
Partnerships between Canadian FIs and FinTechs have already begun across the ecosystem, with large financial institutions and notable FinTechs partnering to offer Canadians new products and services. As other market players such as Tech Giants (Ex. Apple, Google, etc.) and Challenger Banks (Ex. PC Financial) begin to offer Canadians financial services and products, partnerships will play a critical role for FIs and FinTechs to maintain their market share and relationships with Canadian consumers. FinTechs will leverage large FI’s consumer base and trust while FI’s will benefit from FinTech’s agility as well as digital-first solutions. Open Banking will create a number of opportunities for exciting and innovative products and services for all Canadians. Specifically, hyper personalized products and services, increased access to consumer spending insights, the acceleration of credit applications, and account aggregation are just a few of the use cases that Open Banking in Canada will unlock.
Further, the Canadian launch plan for a Real- Time Rail (RTR) payments system will create additional benefits and synergies with Open Banking as Canadian consumers and FinTechs will be able to access faster and more efficient transactions.
