Open Banking Concept

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Creating an Open Banking Framework for Canada It is uncertain how closely changes to PIPEDA will reflect the privacy stipulations outlined in GDPR. Nonetheless, as Open Banking is developed in Canada, care must be taken to ensure that Open Banking a) is abiding by any changes to PIPEDA, and b) there are no gaps in coverage with respect to the consensual sharing of financial services data between Open Banking and PIPEDA. What is the supporting economic model? In order to make data available, data generators are likely to incur upfront fixed costs (i.e., system upgrades and changes) as well as ongoing variable costs (i.e., costs of fulfilling data requests). Whether data generators are able to recover their variable costs (e.g., through a minimal fee charged to data recipients) is a critical decision for the design of an Open Banking framework. There are several considerations that can support the choice: .. Fairness to data generators: Beyond the direct costs of making data available, data generators are likely to face additional indirect expenses (e.g., customer complaint management); ensuring that they are able to sustainably perform these functions ensures that data generators are not unfairly burdened by the process. .. Barrier to entry: Charging fees for access to data may act as a barrier to the market; this could be considered a negative (i.e., stifling innovation) or a positive (i.e., stifling the creation of low-value use cases), depending on the size of the data transfer fee How often should data requests be allowed? In the UK, data recipients are limited to making 4 requests in a 24 hour period, unless a higher frequency is agreed to in a commercial agreement between the data generator and data recipient. However, customers can initiate data requests an unlimited number of times, which is similar to the level of access currently provisioned through online banking services. (i.e., customer has 24/7 access to their banking information through the bank’s online interface). Allowing for a large number of requests enables additional use cases (e.g., an account balance monitor that notifies users when they are approaching overdraft), at the cost of burden to data generators (i.e., of data transfer). Depending on whether a fee is charged to data recipients for every request they make, a limit may or may not be necessary to prevent data generators from being overwhelmed by a large volume of requests. .. Comparison to current state for data recipients: API-based solutions are likely to be significantly less resource-intensive (and thus, less costly) than the solutions that data recipients use today; as a result, the costs of accessing customers’ financial data for data recipients is likely to be lower than the current state. 16.
Creating an Open Banking Framework for Canada Conclusion Canada sits at an inflection point in the modernization of its financial services ecosystem. When looked at in conjunction with payments modernization and an expected overhaul of privacy legislation via PIPEDA, Open Banking represents the third pillar of a new landscape, one that will reshape customer expectations for the delivery and consumption of financial services. It will do so by: .. Lowering barriers for customer movement between organizations. .. Allowing for more personalized and tailored experiences. .. Automating unnecessary procedures and tasks. However, this will not lead to a drastically different financial services ecosystem overnight. Rather, Deloitte predicts that the major changes arising from Open Banking will arrive in time, meaning that a window of opportunity exists for all organizations to prepare - either to defend their market share and customers, or to shift their position within the ecosystem. In other words, this is not just an opportunity for new entrants, but also for incumbents to address the pain points in their current banking solutions, in order to reshape the market and come out ahead. Lastly, Open Banking is just one step in a broader movement of returning customer data ownership back to where it belongs - with the end customer. Customers’ right to data ownership is about far more than just financial data, which means that Open Banking should set the precedent for the opening up of other industries as well. By taking the first step, Open Banking can act as a template for others, illustrating the leadership role that Financial Services has in Canadian society, and in protecting the customer above all. Footnotes: [1] CIRA Internet Factbook 2017 [2] eMarketer Digital Banking Adoption Rates [3] OSFI Annual Report 2016/17 17 .
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