Finance Minister Chrystia Freeland has mandated the Financial Consumer Agency of Canada to implement an open banking system for Canadians. This is an excellent initiative that will make it even easier and more secure to manage the finances of Canadian consumers and small businesses. Let’s back up a bit before explaining what open banking is.
The Department of Finance estimates that one in four Canadians uses an app to manage their personal finances. It is through a screenshot that these applications download a consumer’s financial data. As all financial institutions allow their customers to upload their personal data, the consumer is able to monitor the evolution of their overall financial situation even if they rely on several different financial service providers. However, the screenshot requires you to provide your username and password every time you want to update your financial data, which potentially opens the door to fraud.
Open banking allows you to share your banking data with the fintech companies of your choice. This is done through secure online services, whether with your computer, mobile phone or tablet.
When you use a financial app with open banking, your bank securely shares your financial data on your behalf with that app. You do not have to provide your online banking ID and password to access the app’s products and services, protecting you in the event of an unauthorized transaction, data leak or fraud. Your personal financial data is always up to date when you participate in an open financial system.
As desirable as the Minister of Finance’s initiative is, it is incomplete since it excludes savings and credit cooperatives, insurers, stock brokers and all other financial institutions. These institutions already allow their customers to upload their financial data to an application of their choice using the screenshot with username and password. Canadians need an open financial system, not an open banking system. All financial institutions present in the country should be able to participate since many of their customers have demonstrated their interest by already using an application to manage their complete financial portfolio.
The governance of an open financial system cannot be entrusted to a government agency if we want the participation of all Canadian financial institutions. Why not take inspiration from the example of the United Kingdom, which has entrusted the governance of its open financial system to private companies? The board of directors should be composed of representatives from all participating financial institutions without granting control to any particular group. A model to follow would be the Interac system, which works very well and has been able to adapt to the evolution of technology and consumer needs since its creation.
I welcome the initiative of Canada’s Minister of Finance. However, I hope that she will quickly survey the provincial finance ministers in order to reach a consensus that will allow Canadians to benefit from an open financial system as quickly as possible.
reference: www.lapresse.ca