Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Why Canadian Banks Are Fighting Open Banking
Open Banking | Nov 20, 2024
Image: Freepik/newelement
The Battle Over Open Banking
Open banking was first announced in Canada in 2018. It was called 'consumer-driven banking' and aimed to give consumers more control over their financial data and access to innovative services while remaining globally competitive. That was six years ago, yet not much has changed since then. While other countries like the UK are seeing millions of consumes adopt open banking (and reaping the benefits), Canada has remained in first gear and stuck in the planning phase.
Four years post announcement, in 2022 Abraham Tachjian was appointed as Canada’s Open Banking Lead but left without establishing a clear framework about a year later. Recognizing momentum needed to pick-up, the Canadian government allocated $1 million in the 2024 budget to the Financial Consumer Agency of Canada (FCAC) to kickstart the implementation of Open Banking and run a consumer awareness campaign. Why the FCAC? Ultimately they will be responsible for oversight and regulation which includes establishing guidelines and standards for secure data sharing, monitoring participant compliance of financial institutions and third party providers, and addressing any issues around consumer privacy, security, and service. Now the question is how much progress is being made and will it deliver the results that are needed?
See: Open Banking: Revolutionizing Financial Data Sharing
Until then, Canadian consumers interested in accessing financial products and tools that help them in ways that banks aren't, are taking disproportionate risks by giving their banking credentials to third parties who then login and scrape data to be used in their systems. This is the sad and very risky workaround that every day Canadian citizens have to deal with.
While open banking promises to help consumers find the best personalized and competitive financial tools to optimize mortgages, budgeting, and investments, Canadian banks are pushing back to delay its arrival. Why are they so opposed and what’s really at stake?
Open Banking Can Save Canadians Thousands
Open Banking flips the script. It puts you in charge of your financial information instead of your bank. So you can decide who has access to your data and how they can use it. That control comes with many benefits. For example
- If a fintech company could find you a better mortgage rate with lower fees and competitive options it would save you money (the banks won't like it because it eats into their profits).
- If a fintech company could give you access to new financial products tailored to your needs, you would appreciate that option and might take a look to see if it can improve your financial position or outlook (but the banks won't like it because you are getting better service and more choice at lower prices elsewhere).
See: BoE Report: Open Banking Boosts Productivity, Competition
- If a fintech company could help optimize your investments but you need to allow access to your financial data and the bank makes it incredibly difficult to access your information to share it with a third party, you wouldn't be happy because of the hoops you needed to jump through and time lost just to access your own financial data.
Why Are Banks Resisting?
If banks feel they don't have to innovate to compete, they won't spend on research and development to create new products that better serve their customers. With Open Banking banks may have a lot to lose, if adoption takes off like in other jurisdictions. Below are some of the key reasons why banks are hesitant to support change and exactly the reasons why the government should get on with it and diversify the market by giving Canadian's better options and more choice.
- Data privacy - Banks say that letting fintech companies access customer data could lead to more fraud and data breaches. But is this really a threat? The UK has proven that with strong rules in place open banking can be just as secure as traditional systems.
- Banks hold a lot of power because they control your financial data - Open banking would lesson banks control while giving fintechs a chance to compete. This Financial Post article explains it well. The Canadian mortgage market is worth over $2 trillion, and a core banking product. If banks lose their grip on this market segment it would seriously cut into their profits.
- High price tag of change - Banks would need to invest in new technology given that most systems are legacy, so for them they see it as a big expense (without guaranteed profit which they are used to).
See: Open Banking: Revolutionizing Financial Data Sharing
- Eat their lunch - Banks earn billions annually from fees and interest. Open banking would allow competitors who are offering cheaper and more personalized alternatives cut into those profits. Worth noting that there are some segments the banks underserve that would be ripe for the pickings that could lead to a waterfall of other fintech products customers might be interested in.
- Losing the primary customer relationship - today banks are the go to for most financial services. While some tech savvy consumers dabble in innovative fintech product offerings, most fintechs do not own the primary relationship. Open banking would weaken the direct connection banks have with their customers, as they soon realize there are better, cheaper, and more personalized offerings available to them.
What Can We Learn From Other Countries with Open Banking?
The results are pretty telling...
- In the UK, over 7 million people now use open banking services and competition between financial providers has spurred innovation. See: The Transition Towards Open Finance in the UK
- In Australia, the Consumer Data Right program has increased competition, especially in personal loans and mortgages. Non-bank lenders are now thriving.
- In the European Union, PSD2 regulations have created a vibrant consumer-first financial ecosystem.
- In the United States, October 2024 the CFPB introduced the new Open Banking rule, has since been sued by the Kentucky Bankers Association and policy institute. (they are feeling the pressure)
Where Does Canada Stand?
Canada's Open Banking timeline is cloudy and banks continue to raise concerns about risks and costs (delaying the process).
Darko Mihelic, RBC Capital Markets banking analyst said in a report this week:
“We do not think open banking will be coming in the next couple of years. [He's thinking it may take] “three to five years.”
See: Canada’s Open Banking Journey: Interview with Abe Karar, Chief Product Officer, Fintech Galaxy
Closing Thought
Consumers want and deserve better choices, lower fees, and more control over their finances. Whether the Canadian government or banks like it or not, the future of finance will be open.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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