Industry players are betting on open banking’s ability to create an environment that would promote healthy competition in Canada’s highly centralized financial services industry.
Submissions to the federal government’s consultation on the open banking framework ended last week, with the Department of Finance Canada saying that it has received more than 95 entries.
Among those who put forward their support of the set-up was independent lender Equitable Bank, which said that open banking would encourage consumers to look around for the best services, as the “competitive intensity” would push banks to provide the greatest value for their customers’ money.
“We don’t really think that that’s necessarily provided by one institution,” Equitable president and CEO Andrew Moor said in a recent interview with the Financial Post. “And open banking makes all of that much easier.”
Venture capital fund Portag3 Ventures also voiced out its support. It has previously invested in fintech firms like robo-advisor Wealthsimple.
“Facilitating improvement in competition has been a specific driver for Open Banking in the (United Kingdom), Australia and New Zealand,” Portag3’s submission stated. “Canada lacks a specific focus on competition in regulating financial services, especially compared with the U.K. and Australia, countries with very similar banking sector market structures.”
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PwC Canada’s Canadian Banks 2019: Open banking is coming analysis released last month reported that Canadians are indicating a growing preference for a banking and borrowing environment that would provide consumers with greater control and security over their data managed by financial institutions.
“Customer expectations are evolving rapidly and they are looking for a one-stop-shop where they can find all their financial information,” PwC Canada national banking and capital markets leader Diane Kazarian said.
“Banks could be among the biggest winners of open banking if they seize the opportunities it brings to create a better customer experience.”
Lenders and other financial institutions will benefit from the open banking revolution as well, since they would be able to ensure greater operational efficiency and security.
“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.”