What is Open Banking?

Banks are essential and ancient institutions we have made use of over the centuries – we all deal with money through our works, daily lives, monthly expenses, and such. When it comes to personal data and how we store it, banks have their solutions and options to keep clients’ money safe. 

Many countries around the world allow the use of open banking. This is simply a safe option for customers to share their data with fintech companies that provide their own financial services, through apps. This way, a bank shares financial data from a client with a fintech company, securely and with the client’s consent. 

A common method used by fintechs, however, is the famous screen scraping. Unlike open banking, the client’s personal login information – that is, username and password – is shared with the app and, for this confusion, many fear open banking is the same. When someone shares such details with a fintech app, they lose the protection their bank offers. And, with open banking, this breach on security is not allowed. 

This is one of the benefits open banking can bring to customers. With open banking, people can also have access to financial services easier or to their own accounts in one place; they can improve their overall budget health, and present good credit score more conveniently.

And, what would be the benefits Open Banking brings to fintechs and banks? 

Well – fintechs can provide innovative product or services offers to clients, related to financial platforms, planning or advice; they can tend to customers’ needs by making features of a number of financial services available. 

For banks, costs can be reduced thanks to the innovations open banking brings. It can also help banks reduce their risks and anomalies. If banks work together with fintechs, they can become valuable partners and give access to their platforms – consequently, expanding service offering and making up for a great customer experience. 

PWC has a great article about it here. 

 

How does Canada fall behind on this subject? 

Countries like Australia, India, South Korea, Brazil, the UK or Japan are just a few examples of where Open Banking is available and thriving. However, Open Banking is yet to be available in Canada. While it has an appeal to the Government, this measure will be a complex task for financial institutions. That is because, while banks obey to federal rules, credit unions depend on each province – and each province has their own regulations. Another issue would be privacy concerns from customers. 

The logical solution would be for institutions to cooperate, and for the public to be educated on this matter. McMillan has a report with detailed information on where Canada stands towards the process of legalizing Open Banking. The research results show that most parties seem eager to move forward and modernize the Canadian financial sector. 

Open Banking offers secure data-sharing among customers, banks and fintechs, giving the chance for institutions to provide clients with a variety of services convenient to them. Stakeholders are on-pair with the Government to approve of Open Banking, as the process carries on. It all seems possible and positive for Canada, and the public can expect the country to offer Open Banking in the following years. 

No Comments Yet.

Leave a comment