Throughout 2023, open banking and open finance have cemented themselves as core services in the fintech world. However, some countries are more behind than others when it comes to the technologies’ development, leading to a poor public understanding. This is the case in Canada, as the Financial Consumer Agency of Canada (FCAC) revealed less than 10 per cent of Canadians have heard of open banking.
In its report, FCAC uncovered the extent of open banking and open finance’s understanding in the country. It is set to help inform the approach to open banking, specifically identifying the need for education around financial consumer protection policies. Open banking has a huge opportunity to help consumers in Canada. Consumers give access to personal financial information when accessing financial services online or through mobile applications such as fintech apps.
Open banking can give users access to a wide range of consumer-oriented financial products and services, increasing consumer choice and offering various benefits. It is not yet readily available in Canada, however, many Canadians are using fintech apps that use screen scraping to access financial data. However, there is a big difference between open banking and screen scraping: the security threat.
One of the biggest concerns associated with open banking is security. A misconception is your financial username and password will be shared with other organisations – this is not the case. However, with screen scraping it is. Sharing this information may violate consumers’ electronic access agreements with their banks and expose them to security, privacy, and liability risks.
“As Canada moves forward with introducing a framework for open banking, it is essential that the rights and interests of Canadians are protected. The findings from FCAC’s survey show that Canadians value consumer protection. For Canadians to realise the benefits of open banking, strong and consistent protections will be key,” said Judith Robertson, commissioner, FCAC.
In order to break down the security misconceptions and more surrounding open banking, FCAC has highlighted more education needs to be provided to Canadians. Especially seeing as only nine per cent have heard of open banking. Not all who have heard of it fully understand it either. When the respondents learnt what open banking was, only 15 per cent said they would participate in it. Meanwhile, 29 per cent they might while over half (52 per cent) of respondents said they would not.
When it comes to user protection, only 18 per cent of consumers understood that protections offered by fintechs were different to that offered by banks. Over 80 per cent of respondents either thought their protections were the same for both or were unsure. Ultimately, 80 per cent of Canadians shared the global sentiment that they would not use a financial product if they did not trust it.
Looking to the future
The Government of Canada is currently considering the best way to enable the safe introduction of open banking in Canada as the FCAC contributes to developing a framework for open banking. Additionally, it looks to continue providing advice on how to protect consumers.
FCAC has also provided recommendations to the Government’s Advisory Committee on Open Banking. One of FCAC’s key recommendations is that consumers should benefit from strong and consistent consumer protections and market conduct standards. These include language that is clear, simple and not misleading, no coercion, express consent, and a robust complaints-handling system. Protections should also address the privacy and security of Canadians’ financial data.