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Canadian banks are following in BlackBerry’s footsteps, and that’s not very good news
Hardbacon | Julien Brault | Jan 15, 2021
In my time as a business reporter, I was at the forefront during the decline of the country's 2000s tech giant, BlackBerry.
BlackBerry launched its mobile app store in 2009, a year after Apple launched the App Store.
Everyone knows the rest of the story.
See: NCFA OpEd: Canada’s Open Banking Consultations: Let’s Get it Done!
While BlackBerry executives praised themselves for having better sound quality and a more efficient keyboard, what people wanted when they bought a smartphone were apps.
Today, the Canadian banks are making the same mistake by refusing to put control of financial data back into the hands of their users, as the European banks are already doing.
In fact, since September 14, 2019, European open banking regulations (PSD2) force banks to allow their customers to share their data with third parties according to a standardized protocol. In other words, their customers can choose to share their bank information with an online loan app or even with a budgeting app.
In Canada, the federal government created the Advisory Committee on Open Banking in 2018, which delivered its first report in 2020, which was very favorable to open banking. The report listed the many benefits of such an approach, including increased data security and accelerated innovation in the financial services industry.
The committee then conducted public consultations, the results of which have not yet been released at the time of this writing. Meanwhile, Canadian banks are patiently waiting for a possible regulatory framework before taking action.
This slowness is all the more deplorable as the Canadian banks won’t be the only victims of this delay.
The collateral victims are Canadian financial technology companies like Hardbacon, which must operate in more difficult conditions than their American and European counterparts.
Consumers are also victims, since they can’t benefit from all the innovations they are entitled to expect, have less choice, and have to choose financial products in a scarcely transparent market.
See: Refusal to embrace open banking puts Canada behind yet another curve
Open banking shouldn't be a political issue. The game of competition should ultimately force the hands of reluctant financial institutions to allow their customers to use their financial data as they see fit. This is happening in the United States, where, despite the fact that there is no regulation forcing financial institutions to allow their customers to share their data with third parties, a growing number of players are doing so. This is notably the case with BBVA, ETrade, and TD Ameritrade.
As there is little competition in Canada, this change could unfortunately take a long time to materialize.
However, in recent months, Canadian banks have proven that they can be nimble by allowing electronic document signatures and enabling their customers to open accounts online.
Rather than wait to lose their market share to neo-banks like Revolut, which is already in Canada, Canadian banks have every interest in being proactive and embracing open banking.
The first step would of course be to create and implement a technological protocol allowing their customers to share their data with fintechs like Hardbacon or competing institutions.
But they shouldn't stop there. Canadian banks should also launch their own app stores, which would enable them to offer all kinds of services through their banking portals.
Of course, I would be eager to see Hardbacon become one of the first applications offered through a Canadian banking portal.
Despite the lack of standardized protocols, Hardbacon already manages to offer an application that helps you budget by using your banking information, track your portfolio with its brokerage data, as well as compare credit cards, online brokers, and other financial products. Imagine what Hardbacon could do if it could integrate directly with the financial institutions...
In conclusion, open banking should not be limited to banks. In Europe, PSD2 does not apply to investment account data or data related to insurance policies. However, this data is more complex than bank data, which makes their digital transmission even more significant.
Author: Julien Brault is the CEO and co-founder of Hardbacon, the Canadian fintech behind the eponymous app that helps Canadians plan, budget and invest. Before Hardbacon, he worked as a business reporter for Les Affaires and as a growth marketer for other fintech startups.
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, 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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