Our Insights

Open banking snapshot

The Canadian experience

Open banking generally refers to the ability for customers to give trusted third parties access to their bank accounts to share financial transaction data and initiate payments. It presents opportunities to provide customers with new types of product and service solutions, and is expected to generate greater competition and innovation in the financial industry, globally.

The drivers behind open banking

Key insight

  • Enthusiasm about open banking is growing globally, and Canada’s financial services industry is at the forefront of development of an appropriate framework.

In our highly digitized world, online platforms are increasingly being used to carry out financial transactions such as payments. In addition, technologies such as application programming interfaces (APIs) are making it easier for financial transaction data to be shared in the most secure way possible.

Regulators have also played a role in open banking in some jurisdictions such as the European Union and United Kingdom where competition was a factor among banks and fintechs. However, in other jurisdictions with multiple regulatory frameworks like Canada and the United States, open banking has been primarily market-driven. In these jurisdictions, banks are leading the way without being mandated to do so.

Open banking is not new in Canada

Lisa Ford, Senior Counsel for Royal Bank of Canada, spoke about Canada’s state of play in open banking at the recent SIBOS conference in London. She commented that, “Open banking is not new to Canada. While most Canadians are not familiar with the term “open banking” per se, the reality is they have been participating in it for some time now. In particular, businesses have always had the need to share their financial information with their accountants and other professional advisors, and this is something banks have always accommodated in various ways.”

Technologies such as application programming interfaces are making it easier for financial transaction data to be shared in the most secure way possible

She also made clear that, “Although some commentators have gone as far as to say Canada is “lagging behind” open banking in comparison to other jurisdictions, this is simply not the case. Canadian banks are (and have been) actively involved in open banking, and collaborating closely with other fintechs to leverage new technologies (such as APIs) to facilitate open banking solutions in the most secure way possible”. RBC, for example, launched an API portal to support the development of new products by third parties. “By providing external developers, industry innovators, and clients with access to select RBC APIs, (RBC) has the opportunity to increase connectivity, create new tools and experiences for clients, and enable open and innovative collaboration to improve the future of banking,” said RBC.1

Canadian policymakers are examining the merits of open banking

In 2018, Canada’s Department of Finance set up an Advisory Committee on Open Banking and in January 2019, they launched an Open Banking consultation to gauge the public’s appetite for sharing financial transaction data with third-party providers. The findings are expected to be released later this year, and reflect there is merit in open banking in Canada.

As noted by Ford, “Regulators in Canada have taken notice of the need for government policy and some laws (in particular governing privacy and data) to be modernized to catch up with what is already happening in the marketplace.”

Canadian banks
are and have been
actively involved in
open banking

Further to this, according to an EY report, Canadian regulators are unlikely to take any specific action on open banking until the Personal Information Protection and Electronic Documents Act (PIPEDA) is updated to include provisions around data portability. “Having the right legal framework in place to manage customer privacy and consent before layering open banking on top will be essential for success,” concluded the EY report.2

Overall, Canada is increasingly embracing open banking, and is being facilitated by progressive government policies, new technologies, and the demands and desires of customers.

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