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Canada yet to develop a system, framework for Open Banking

Canada is one country in the developed world that is yet to make a start in open banking:

Canada, in spite of its well-developed banking system, does not have any initiatives taken up to bring in open banking. In fact, the country lacks an open banking framework on the lines of PSD2 in the EU or similar efforts in Britain, Australia or other countries that have systems now in place regulating what data can be shared between financial institutions. The government in the country is, however, pushing ahead with a second phase of its review on open banking, focusing on security issues surrounding the sharing of financial data.

The Department of Finance Canada had set up an Advisory Committee on Open Banking in 2018 to investigate whether the country should follow the UK in making it easier for people to let third party financial services providers access their banking data. In 2019, a consultation paper was published and individuals and organizations were invited to offer their opinions on whether open banking would provide meaningful benefits, how risks related to consumer protection, privacy and security should be managed, and what role government should play in any implementation. The first phase of the review has been completed, concluding that data-driven services can help people budget, access more affordable financial services and become better equipped to manage their money. The government now wants to analyze the security implications of the data sharing and it now intends to secure advice from stakeholders to create standards about enhancing data protection, examining issues such as governance, consumer control of personal data, privacy, and security.


There are several initiatives by banks and fintechs in Canada to create apps and APIs but these efforts fade away in the absence of any regulatory framework to integrate these efforts and implement a system.


Another factor that inhibits the financial organizations adopting open banking is the fact that the banking sector is in the midst of modernizing the payments system, which once completed, will be ready for an open banking foray. There is the Interac system in the country, which helps consumers benefit from modern payment systems and instant transfers, but there is no faster payments system.

According to Ernst & Young’s Open Banking Opportunity Index, Canada ranks 8 among 10 countries that are ready to adopt open banking.


However, several of the largest banks have launched their own technology and API projects, in some cases providing APIs to fintechs that are developing new products. For instance, Royal Bank of Canada launched its API developer portal in 2018 as part of its effort to promote open banking. Banking industry in general supports open banking and the Canadian Bankers Association has endorsed banks adopting open banking. There are also calls from banking experts in the country for creating open banking standards – standards that take the best from other jurisdictions and those that can be leveraged and are compatible with the work that is now being done in payments modernization.

As mentioned, the country is undergoing a payments modernization transformation led by Payments Canada. The government has outlined how Canada can lead in a digital and data-driven economy, while emphasizing principles that will better protect the privacy and personal data of consumers, including consent and portability.


Some industry experts say delays in adopting open banking are costing Canada in missed opportunities and increased risks for consumers. The delay has raised concerns for Canadians who are already sharing financial data without a federal framework. Some 4 million people in the country have signed up for what is described as ‘screen scraping services’ offered by fintech companies providing the ability to pull information from multiple accounts to conveniently view it in one place. To make it work, consumers have to provide their account passwords to the fintech companies. Security experts say this is a huge systemic risk because no one is monitoring this. There is nothing to stop the screen scraping fintech from reselling the data and the customer has no control. The banks on the other hand cannot interfere at any stage.

It is estimated that at least a year will be required to put the technology in place to enable banks to share financial information. However, a legal framework to spell out the liabilities of all parties could take longer.

In spite of being in such a situation, Canada, many experts believe, is in a unique position to capitalize on open banking. They point out that the country has the tech talent and the banking credibility. If the banks find a way to leverage that relationship and open up, they will find opportunities they could not even imagine now.

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