What Is Open Banking? A Guide For Canadians
The Canadian government announced that this spring it will introduce the first of two pieces of legislation to implement an open banking framework (known in Canada as consumer-driven banking). This is huge news for the Canadian financial services sector. But what exactly is open banking? And also, how will open banking affect the lives of Canadians? Don’t worry, we’ve got everything you need to know about open banking in Canada.
What Is Open Banking?
According to the Government of Canada’s website, open banking is a safe and secure way for consumers to share their financial information with financial technology (fintech) companies. Here are some different financial data pieces that a consumer will be able to share securely with fintech companies:
Account Information: This includes details about your bank accounts, such as how much money you have, your transactions, and who owns the account.
Transaction History: It’s information about things you’ve bought or moved around in your bank account, such as paying bills, transferring money, or taking out cash.
Income and Expenses: This is data about how much money you make and where you spend it. It helps you understand your financial habits.
Credit Information: Details about your borrowing history, such as loans, credit cards, how well you’ve paid them back, and your credit score.
Direct Debits and Standing Orders: These are automatic payments you’ve set up, such as paying for Netflix every month or your electricity bill.
Payment Initiation: It’s when you permit a company to take money directly from your bank account, such as when you buy something online or pay a bill automatically.
How Will Open Banking Affect Canadians?
In other countries where open banking is practiced, there have been great benefits for consumers. But what specific benefits will open banking bring to Canadians? More financial products, services, and control of their finances.
Access to Better Financial Products & Services: When Canadian customers share their financial data with fintech companies, it allows these companies to tailor solutions to their needs. For instance, they might receive offers for credit cards with lower interest rates or checking accounts with reduced fees. This empowers Canadians to discover products that not only save them money but also align with their requirements.
Centralised Financial Tracking: Just like using apps to monitor health or habits, open banking offers a similar benefit for finances. Fintech companies with access to a consumer’s or even a business’s financial data can create a single platform for them to track all of their finances. Even if someone has accounts with different banks, they can see everything in one place through these apps. This makes it easier to manage money without logging into multiple accounts. Additionally, these apps can provide budgeting tools to help Canadians reach their financial goals.
After years of advocacy by organisations such as Fintechs Canada, collaborating with regulators to emphasise the importance of open banking, it’s now on the verge of becoming a reality in Canada. This marks a significant triumph for remarkable advocates, including Fintechs Canada, as well as fintech companies nationwide, and Canadians overall. With important open banking legislation pieces set to be introduced this spring, and then the remaining framework work being legislated this fall, we anticipate a surge in fintech innovation which will promise substantial benefits for the Canadian public.
