Open banking is a subject that has prompted plenty of discussion and excitement across the financial services industry, but it has also raised some concerns.
In Canada, the Department of Finance has been engaged in a review of the country’s financial sector framework, with a focus on goals such as encouraging collaboration between entrepreneurs and established companies, stimulating innovation and improving cybersecurity.
The Canadian Bankers Association (CBA) made a submission to the department’s second consultation paper in the review, in which it expressed its support for “progressive proposals” that would deliver results in areas such as competition and customer experience.
On the subject of open banking, the CBA said Canadian banks are “strong proponents” of a “competitive and innovative” financial services sector that utilizes technological evolution to meet the needs of customers.
However, it also stressed that initiatives such as allowing third-party access to customer account data should be judged on the basis of their relevance for Canada, not how they have been deployed in other regions such as Australia, the UK and the European Union.
“Additionally, there is a need to gauge consumer demand for third-party access, which may also vary across jurisdictions,” the CBA continued.
“We would underscore that it is imperative that the implications and potential risks of open banking for the Canadian context be comprehensively assessed, taking into consideration the unique Canadian environment and economy, before any legislative or regulatory measures are introduced.”
Furthermore, the industry association said the proper consideration must be given to the potential consequences of open banking for the “safety, soundness and stability of the overall financial system in Canada”.
It raised concerns over the possibility of third-party access creating “contagion, reputational and other types of risks with broad-ranging consequences”.
Neil Parmenter, president and CEO of the CBA, pointed out that the banking industry is evolving at an unprecedented pace, a trend that must be reflected in any legislative reform.