Open Banking: Canada, UK, EU developments
With an eye on innovation and competition, Canada’s government is set to conduct a review into the merits of introducing an Open Banking regime which would give consumers the ability to share their financial data with chosen third parties. It is hoped that by making it possible for people to open up access to their own banking data, new providers will offer more tailored products and services, on a more competitive basis. Customers could also benefit from greater banking transparency, helping them to make better-informed decisions, as well as in moving and managing their money.
Open Banking proposes a set of standardised banking APIs that would allow authorised providers to offer services directly to bank customers that consent to securely share their banking records. This idea – of drawing on the data held within banks’ systems – is at the heart of increasingly vigorous debate around the world.
The Canadian Bankers Association have already voiced concern about potential pitfalls of Open Banking, underling the need to have the “highest regard” for consumer privacy, data security and financial stability. In a response to the Department of Finance late last year, the association warned that giving third parties access to customer data could “give rise to contagion, reputational and other types of risks with broad-ranging consequences”. Read more here.
Perhaps unsurprisingly, recent research from Accenture found that 69% of people may not consent to share their banking data with third-parties. At the same time, a UK piece of advocacy argues that Open Banking will unlock significant economic advantages as well as providing more innovative and user friendly services to consumers. Read more here.
The friction between banks and the fintechs and others interested in offering services via Open Banking within the EU is beginning to become visible. Unsurprisingly banks are cautious about the impact that Open Banking might have on their business models. Just as unsurprisingly, new challengers that seek to leverage bank data in an open way want to try to ensure that the bank’s natural monopoly over customer data is prised open.
