Open banking is coming

Canadian Banks 2019

Open banking is coming to Canada and will have a profound impact on consumers and the financial services ecosystem. In its 2018 budget, the federal government announced that it was establishing a committee to explore the merits of open banking for Canada. As the concept gains traction around the world and consumer demands for increased convenience, price for value, data privacy and transparent consent drive a shift to new ways of doing business, it’s only a matter of time before open banking fundamentally reshapes the industry.

The introduction of open banking in Canada will change how this country’s banks work with one another and with other players in the financial services ecosystem. It will also be a major transformation for customers as the banks, financial technology companies (FinTechs) and other service providers will be able to introduce innovative products and services based on open access to data.

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What is open banking?

Essentially, open banking refers to the opening of internal bank customer data and processes to other parties through digital channels. It can include the secure sharing of customer-authorized financial data with third parties or the distribution of partner-based products, such as those created by technology companies like Apple Inc., to bank customers. Open banking offers many possibilities to improve financial services and the customer experience, ranging from more straightforward uses like account aggregation and facilitating client identification to a host of creative products and services to solve customer pain points.

Many of the ideas behind open banking have been around for some time, but it has only been in the past few years that policy-makers have started introducing regulations to move the issue forward. A number of jurisdictions, including the United Kingdom, the European Union and Australia, are now leading the way on the opportunities offered by open banking. 

In January 2019, the advisory committee released a consultation paper that reviewed the merits, potential benefits and ways to manage the possible risks of open banking. The paper is now seeking views on some of those issues as the advisory committee moves toward looking at implementation questions ahead of its report to the Minister of Finance.

Read PwC Canada's submission

Important questions in an open banking framework include whether participation by banks is mandatory or voluntary and which products it applies to, such as chequing versus savings accounts, credit cards, mortgages and personal or business loans. Open banking can take many forms:

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Open data

Also known as the "read" privilege, open data involves the use of application programming interfaces (APIs) to let verified third parties access customer data. Customers decide what to share and with whom.

Open process

Also known as the “write” privilege, open process includes using open APIs to access bank systems to initiate payments on a customer’s behalf.

Open products

Also known as the "move" privilege, open products refers to enhanced portability to make it easier, for example, for customers to switch providers and move accounts.

"If we can figure out how to solve for security, transparency and control, we can have an open banking system in this country that could work very well, in my view."

Darryl White, CEO, BMO Financial Group

Explore the key focus areas

Open banking will be a major shift for the Canadian financial services landscape that will play out in different ways for the various players in the financial services industry and for bank customers. While FinTechs have been around for years and played at the fringes of the banking system, access to the banks’ data, processes and infrastructure would help them build products and services on top of what already exists. Technology giants are also likely players in a world of open banking.  We believe the banks could be among the biggest winners of open banking if they, too, seize the opportunities it creates.

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Open banking offers many opportunities for financial innovation and new products and services, but for it to succeed, all players will need to make sure the framework includes strong security and privacy protections.

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With the federal advisory committee on open banking moving forward with its consultations, it's a good time to start preparing for what may come. What does the path forward for Canadian banks look like?

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Harnessing the possibilities

To succeed, banks will need to assess what their value proposition will be. With all of the possibilities open banking offers to disaggregate and combine products and services, banks won’t be able to do everything for their customers, which means it will be even more important for them to differentiate themselves from the competition and turn to partnerships that can boost and complement their offerings.

An important question will be whether they want to be the manufacturers of the products made possible by open banking or if they want to focus on offering a platform that includes a variety of third-party service providers. The answer—and the balance between those two ends of the spectrum—will vary from institution to institution.

Whatever the Canadian government ultimately decides to do, open banking presents the banks with new possibilities for creating a richer and more dynamic financial landscape. Canada’s banks have already shown their capacity for customer-focused innovation, and the power of data sharing is a significant opportunity to take that even further.

Those banks that get ahead of the issue now will be in the best position to not only get an early start on their own plans and strategies but also help influence the new era of financial innovation that’s taking root in Canada and around the world.

Contact us

Jennifer Johnson

National Financial Services Leader, PwC Canada

Tel: +1 416 947 8966

Diane Kazarian

Managing Partner, Greater Toronto Area and National Banking and Capital Markets Leader, PwC Canada

Tel: +1 416 365 8228

Paula Pereira

Partner, Banking & Capital Markets, Consulting, PwC Canada

Tel: +1 416 941 8460

Ryan Leopold

Emerging Markets Lead, PwC Canada

Tel: +1 416 869 2594

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