Open banking is a major transformation for the financial services industry and will have a profound impact on all consumers. It’s a framework where customers will consent to a secure sharing of their data across different financial institutions and third-party providers to gain access to a larger variety of products and services.
For financial institutions, open banking will reduce costs by tapping into new innovations and efficiencies. It also has the potential to reduce risks, such as fraud and money laundering, as sharing data between institutions will make it easier to spot anomalies.
Countries such as Australia, the European Union, Japan, South Africa and the United Kingdom are currently working on open banking, but Canada took the leading position in providing Canadians with control over their personal financial data and to drive innovation in the financial services ecosystems.
Open Banking gives Canadians more control over their financial well-being by easily and securely sharing data held by financial institutions with third parties that have targeted financial solutions. The innovative nature of open banking will also be a major transformation for this country’s banks who work with one another and with other players in the financial services ecosystem like fintechs and large tech. These are just a few findings from PwC Canada’s Canadian Banks 2019: Open banking is coming report which launched today.
Building on input received from Canadians in the latest review of the financial sector framework, the Government of Canada is assessing the merits of open banking. Following the federal government’s appointment of an advisory committee on open banking in September 2018 and its recent consultation paper, open banking is now a hot topic for financial services in Canada and around the world.
“Customer expectations are evolving rapidly and they are looking for a one-stop-shop where they can find all their financial information,” says Diane Kazarian, National Banking and Capital Markets Leader, PwC Canada. “Banks could be among the biggest winners of open banking if they seize the opportunities it brings to create a better customer experience.”
“Financial institutions who get ahead of the issue now will be in the best position to get an early start on their plans and strategies as well as help shape the future of Canadian banking,” adds Paula Pereira, Banking Consulting Leader, PwC Canada. “Leveraging their strong customer trust and combining it with the right innovation, open banking will position the Canadian banks for success in meeting customers evolving needs for digital interactions and greater control over their data.”
According to the report, despite rising concerns about privacy breaches, Canadian banks are more likely to have security measures in place than any other type of business. However, as banks work with third party providers, they will need to focus on strong risk management and data stewardship to provide added security.
“Banks are already trusted custodians of customer data. Because they are heavily regulated, they already have controls and safeguards in place to help reduce the risk of breaches,” says Jennifer Johnson, National Financial Services Leader, PwC Canada. “Working within an open banking landscape also leads to an increased need to have cyber and proper privacy protection practices across the parties involved.”