In the fall of 2018, the Canadian government appointed an advisory committee on “open banking”, and earlier this year issued a formal consultation paper on the same subject. This paper kicked off a public discussion which may well result in open banking arriving in Canada.
What is open banking?
As with most things financial, it can be a complicated topic – but boiled down it’s about giving a bank account holder the ability to securely grant a third-party service provider (imagine a financial planning app, for example) access to their account details and payment functions. Recently, access has been cobbled together by services using risky “screen-scraping” practices that open web pages and simply copy all the text and numbers they find there. Since account holders have shared their account information to make this possible, this approach creates security risks for both customers and financial institutions. It also threatens the trust that our financial system relies upon. Open banking would address this concern by utilizing modern API-based access methods, strong authentication, clear consent and the encryption of all information that should be kept private.
It’s important stuff. So we decided to make a short film about it. (See below.)
In this documentary, part of an ongoing series on innovation in finance and payments by Interac, we explore open banking and also look at the first major jurisdiction to implement it: the European Union. Over a decade ago the EU adopted its first Payment Services Directive (PSD) with the intention of creating an EU-wide payments area. A follow-up directive, PSD2, came into force at the beginning of 2018. It grants to third-party service providers limited and consent-based access to the bank accounts of their users – access that those providers are then able to leverage in order to initiate online payments to businesses, or to present and help analyze a user’s financial situation by aggregating data drawn from their various accounts.
We travelled to London and Paris to talk with local experts and entrepreneurs about this momentous change: Ranzie Anthony, chief creative officer of user experience design firm Athlon, whose firm has participated in the UK’s open banking standards-setting process; Nigel Verdon, CEO of Railsbank – a fintech using APIs to offer turnkey open banking services to other enterprises; and Pierre Storrer, a lawyer with extensive experience in European payment and banking regulations, from Kramer Levin’s Paris office. We also talked with Debbie Gamble, Chief Officer for Innovation Labs and New Ventures at Interac Corp., on how the potential for similar developments occurring in Canada has already begun shaping our approach to the marketplace.
We’re excited to release this documentary. We hope it provokes thoughtful conversation on how open banking might affect your own businesses or areas of responsibility, and how it might create new areas of opportunity – or new challenges. And we hope you’ll become part of the public conversation on this issue.