They say it is set to boost competition and consumer choice
The recent budget announcement indicating the advancement of open banking in Canada has been met with optimism from industry experts, as they foresee with it an increase in market competition and expanded consumer choices. The federal government’s initiative aims to implement consumer-driven finance, enabling secure sharing of financial data across institutions and applications.
Mahima Poddar, group head of personal banking at EQ Bank, welcomed the announcement, noting the potential market stimulation. “I think the biggest advantage is really the increase of competition in the market…It will impact the customer because they will have more choices (and) more features. You’re going to see more innovation in the market,” he said in an interview with BNNBloomberg.ca on Wednesday.
“And the reason for that is that once you break constraints around data and they can move more freely, what it does is it gives customer autonomy (and) the ability to choose which financial provider they want to work with without the friction of the switching pain that exists today.”
Open banking promises to alleviate the traditional hassles associated with switching financial providers by giving consumers greater control over their financial data. This shift is expected to reduce barriers to entry for new players, potentially leading to more innovative financial services and better pricing.
Seeking for standards and regulations
The Financial Consumer Agency of Canada (FCAC) has been tasked with overseeing, administering, and enforcing the open banking framework. This development builds on the 2023 Fall Economic Statement wherein the federal government proposed legislation to establish a robust open banking framework in Canada.
Poddar highlighted the transformative nature of open banking, noting its potential to enhance access to credit for small businesses, a sector traditionally underserved by conventional banking models. He noted open banking could provide small businesses with more access to credit, “which is a fundamental ingredient in growing a small business venture.”
Meanwhile, Hanna Zaidi, VP of payments strategy at Wealthsimple, pointed out the benefits already observed in other markets such as the UK and Australia, where open banking has been implemented. According to Zaidi, these markets have experienced downward pressure on pricing and an expansion in the variety of financial products available.
However, Zaidi also cautioned that the successful implementation of open banking hinges on the details of the framework, particularly the technical standards to be adopted. “At the end of the day, these are technical specifications. What we haven’t seen so far, what I’m hoping to see really soon is what are the technical standards that the industry should be using,” she said.
