Top 2 Reasons Why Canada Will Benefit From Open Banking
Technology is making the lives of consumers easier by making services easily accessible. With the click of a button, consumers can now have groceries delivered to their homes, purchase those last-minute Christmas gifts, and even fund their iGaming accounts. But consumers in Canada need more choices when it comes to gaining access to diverse financial products and services. This is where Open Banking comes in.
According to the Government of Canada’s website, Open Banking, also known as consumer driven banking, is a secure way for consumers to share their financial data with financial technology companies (fintech companies). While open banking has been popular in regions such as Europe, markets like the United States and Canada are yet to catch up. But there is hope. Open banking discussions are happening in Canada right now, with the initial phase of open banking expected as part of the country’s evolving regulatory framework. The Minister of Finance highlighted Open Banking’s role in Budget 2024, emphasizing its potential to drive economic growth by improving data portability and financial inclusion.
With these discussions well underway, it is important to know the benefits of open banking. While there are multiple, we’ve put together two of the strongest reasons why Canada will benefit from open banking.
Better Choices for Consumers
A big part of open banking is the sharing of financial information in a secure manner. Once a consumer provides consent, third-party service providers can access financial data—previously controlled by banks—through application programming interfaces (APIs). According to Forbes, this data can include things such as:
Account type
Name on the account
Date of account opening
Transaction history, including how much you spent and where
Account balance
Payment details
Now, what’s in it for the consumer? When this data is shared with third-party service providers, they use it to offer personalized financial products and services. This could be a credit card with lower interest rates, a chequing account with reduced fees, or a long-term savings plan that aligns with their financial goals. More competition in financial systems means better choices for consumers and small businesses.
A Single Place to Track Your Finances
Whether it is using a fitness application to know how many steps they’ve walked in a day or monitoring their water consumption, people are using technology to better their lives. Open banking can provide another benefit—consolidated financial tracking. Third-party applications with secure access to a consumer’s bank accounts can offer a centralized platform to track all financial activity. Even if a consumer has accounts at multiple banks, they can view all their transaction data in one place without logging into multiple banking applications.
Additionally, these third-party applications can provide budgeting tools, helping consumers to manage their spending habits effectively. This shift away from outdated methods like screen scraping ensures secure and accurate data sharing, ultimately helping to protect consumers.
The Future of Open Banking in Canada
While open banking in Canada is still in its infancy phase, it has begun to capture the attention of consumers, fintech companies, and policymakers. The transition to a structured open banking system includes data protection measures that will ensure financial systems remain secure. As discussions continue, Canada’s approach to banking innovation will play a critical role in shaping the future of financial accessibility and economic growth.
