The Department of Finance Canada recently sent out a call for papers on the merits, risks and recommendations of Open Banking (see here).
We are proud to have collaborated on this endeavour to build a 35-page in-depth review, based on 45 interviews from interested stakeholders and an assessment of over 50 research articles, research papers and books. The full paper can be found here (see here), but for those short on time, here’s a synopsis of our findings:
– We conducted a survey where respondents were asked whether Open Banking will cause harm or change the world for better, the average score was 8, with all respondents providing a score between 5 and 10.
– Consumer needs are changing due to high-quality services and products provided by tech giants, Open Banking will allow financial institutions to stay with the times.
– Banks in Canada and around the world, are slow to innovate. Open Banking will increase competitive pressures leading to a change in mindset towards innovations.
– Even in developed nations such as Canada, many unserved/underserved markets for financial services exist. Open Banking will reduce barriers to entry, creating products that serve these markets.
– The amount of data captured and uploaded on every individual will explode in coming years, leading to issues of privacy and tracking that Open Banking may further exacerbate.
– Increased data storage occurring, both within and outside domestic boundaries, could increase chances of a breach.
– Access to more data through Open Banking can lead to situation allowing the financial services industry to discriminate or influence control over our society.
– Financial products and processes involved are becoming increasingly complex, which may increase systemic risk in the financial markets
Yes, move forward with Open banking with the following in mind:
– Start the process and aim towards a co-regulation system.
– Facilitate the standards-setting process. This process will be iterative, involving multiple stakeholders and will extend over several years.
– Identify an open-banking beach-head, such as the merchant market, so that there is a swift acceptance of the new system among a targeted group.
– Encourage regulators to employ or even build technical capabilities, in order to better keep up with technological advancements.
What are your thoughts on Open Banking? Message us and let us know!