The report neglects write access
What is Open Banking?
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Digital, NEO, Open Banking, Open Finance
Open data for finance as an emerging source of GDP growth
OECD The Forum Network | Olivia White | Aug 10, 2021
Even before the COVID-19 crisis, policy makers in the OECD and beyond were identifying the potential for innovation and productivity growth that could be derived from building out digital financial infrastructure including greater sharing of financial data. This focus has helped give rise to the Open Banking Implementation Entity in the United Kingdom, the European Union’s second payment services directive, and broad discussion in the United States around a consumer-authorized data-sharing market, among other initiatives.
To what extent could open-data ecosystems for finance go beyond greater convenience and easier interactions between financial providers and their customers?
Our research suggests that the upside in terms of generating GDP growth is considerable. At the same time, we find that the size of that GDP lift, and how the economic value can be shared among the various market participants, depend in large part on the design and working of each ecosystem, and in particular the degree to which data are standardized and how broadly they are shared.
In our recently published study, we focused on four regions—the European Union, India, the United Kingdom, and the United States—and identified seven mechanisms for value creation from the adoption of open-data for finance.
See: Open Finance data adoption varies by country (but one thing is certain)
For consumers, these ecosystems can increase access to financial services, including for individuals and small businesses who might otherwise be shut out for lack of credit history. They can also improve user convenience, including with potentially substantial time savings from less routine form-filling, among others, and provide a much larger range of financial product options.
For financial providers, the value-creating mechanisms we identified include increased operational efficiency arising from more efficient data management, along with stronger fraud prevention, improved workforce allocation, and reduced friction from data intermediation, given the reduced need to pull in data from third-party providers.
We sized 24 use cases across these seven mechanisms. Extrapolating to a country or regional level, our analysis suggests that the boost to the economy from broad adoption of open-data ecosystems could range from about 1 to 1.5 percent of GDP in 2030 in the European Union, the United Kingdom, and the United States, to as much as 4 to 5 percent in India. All market participants benefit, be they institutions or consumers—either individuals or micro-, small-, and medium-sized enterprises (MSMEs)—albeit to varying degrees.
Only a fraction of that potential value is being accessed currently
- We estimate the UK has accessed about 30 to 40 percent of the potential value
- European Union and the United States are at about 10 percent of the potential
- India, which has been building out its digital financial infrastructure on the back of its Aadhaar digital identification system, has managed to access about 60 percent of the value of open data for finance to date
See: Minister Freeland releases final report with 34 recommendations on Open Banking from the Advisory committee
Capturing more of the potential value will require a greater degree of data standardization and broader data sharing. For now, both are quite varied across the four regions we examined.
Key takeways from our research include the critical importance of establishing trust in the system, along with the infrastructure to support it. Financial data are particularly sensitive, and users are more likely to want to share data if they know what they are sharing and why that sharing is valuable to them.
Digital infrastructure is also a must, and ecosystems with high-assurance digital ID have an advantage in being able to control use of data and reduce friction in managing online accounts.
Continue to the full article --> here
Download the full 36 page PDF report -- > here
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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Conservatives release full platform promising billions of dollars in new pandemic aid and Open Banking
CBC | Aug 16, 2021
The party would create new legislation to "open banking so Canadians can connect with fintech companies that can provide a better offer for banking services."
The Conservative Party of Canada today released its full 160-page election platform — an ambitious agenda that promises billions of dollars in new spending to prop up an economy ravaged by the COVID-19 pandemic.
Unlike past Conservative platforms, this one embraces a robust role for government in the economy through large cash injections to help businesses weather the pandemic crisis over the next two years.
See: Reflections on Canada’s open banking report
The multi-billion dollar plan has not yet been costed; the party says the Parliamentary Budget Officer (PBO) has not finished studying the numbers.
O'Toole said a Conservative government would balance the budget in ten years' time. The federal deficit for this fiscal year alone is expected to be $381.6 billion.
"You'll probably notice ideas that you haven't heard from Conservatives like me before. It's time for Conservatives to take inequality seriously, because that's becoming more of a problem in our country," Conservative Leader Erin O'Toole says in the opening paragraphs of the document.
Beyond job-creation measures and child care, the detailed platform includes a number of populist-minded measures — a tougher regulatory stance on cell phone companies, a crackdown on grocery price fixing and new legislation to "open banking so Canadians can connect with fintech companies that can provide a better offer for banking services."
A Conservative-led government would also order the Competition Bureau to investigate bank fees. O'Toole said he would allow foreign telecommunications companies to offer cell phone service to Canadians to drive down prices, "provided that the same treatment is reciprocated for Canadian companies in that company's country."
Continue to the full article --> here
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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Reflections on Canada’s open banking report
Paytechs of Canada | Alex Vronces | Aug 2, 2021
The report neglects write access
As expected, the advisory committee has recommended that Canada focus on implementing read access at launch and write access in a later phase of open banking. Read access lets consumers and businesses share their financial information with fintechs, while write access lets them authorize fintechs to act upon it — by opening a new bank account, for example, or moving money from one account to another. The advisory committee’s timeline suggests that we shouldn’t even begin considering write access until 2023.
This is a mistake of import. As the Competition Bureau has said, Canada will see more competition and innovation in the financial sector if we make the movement of money between financial institutions more seamless, empowering Canadians to better vote with their dollars. Write access, if done right, will make the movement of money more seamless than ever.
See: Minister Freeland releases final report with 34 recommendations on Open Banking from the Advisory committee
I’m not saying write access should be turned on at the same time read access is. The advisory committee is a sage assembly. They know that they risk getting nothing if they ask for too much. That’s why they even suggested starting with a limited scope of read access to financial information. Write access — because we’re talking about the movement of money — comes with more risk and complexity, which, according to the advisory committee, would delay the roll out of open banking.
So if now’s not a good time to consider write access, then when is?
The devil is in the (implementation) details
The first is that this is just a report and it’s still up to the federal government to act on the recommendations. Though there’s no reason to think the federal government won’t, there’s no reason to think it will. Minister Freeland’s statement in support of a “regulated, made-in-Canada system” is reassuring, but such a system can take many shapes and sizes, and promises are just promises for a sector that has seen so many go unfulfilled.
The second is that the advisory committee’s recommended timeline is looking increasingly uncertain.
For one, open banking is already behind schedule. The report was dated April, but the report was released in August. With a proposed go-live of January 2023, we should have already delivered one of the report’s foundational recommendations by now: appoint a “tsar” to work with the relevant players to make progress on the first phase of open banking.
See: Canada’s payment system needs more competition
If I had to bet, I’d say the timeline is going to look more and more uncertain as time goes on. With an impending election, we’re going to lose another few months of valuable time. On top of that, the report mentions a few things that could further delay the implementation of a “regulated, made-in-Canada system,” including “existing legislative or regulatory impediments.” As we all know, there’s no upper bound on how long legislative and regulatory change can take.
Tough practical and political choices will need to be made. The cynic in me suspects that these trade-offs will be made behind closed doors, as push comes to shove in the negotiations between banks and the government. Whether they’ll be made to open banking’s favour or detriment is to be determined.
Continue to the full article --> here
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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Minister Freeland releases final report with 34 recommendations on Open Banking from the Advisory committee
Department of Finance Canada | Kirsten Fraser | Aug 4, 2021
What is Open Banking?
Open banking allows consumers and small businesses to securely and efficiently transfer their financial data among financial institutions and accredited third party service providers. This transfer gives consumers access to a more complete financial picture and other useful services to improve their financial outcomes.
Open banking can connect families with a broader range of budgeting or savings tools and provide financially marginalized Canadians access to low cost, automated support to manage their finances. Open banking can enable Canadians with limited credit history, including newcomers, access to credit based on their financial transaction history. The value proposition of open banking for small and medium enterprises (SMEs) is also strong. Open banking can facilitate faster adjudication of loans and provide access to new forms of capital . Automated financial tools delivered through an open banking system can streamline the management of bills, invoices, payroll, and taxes to reduce the complications of running a small business.
How Should Open Banking be Implemented?
To eliminate screen scraping, the initial phase of open banking should be implemented quickly, with the system becoming operational by January 2023. The implementation should be neither exclusively government-led nor industry-led. Instead, Canada should pursue a hybrid, made-in-Canada approach that recognizes the potential for government and industry to collaborate, each with appropriate roles.
See: NCFA OpEd: Canada’s Open Banking Consultations: Let’s Get it Done!
A hybrid, made-in-Canada open banking system should have the following core foundational elements:
1. Common rules for open banking industry participants to ensure consumers are protected and liability rests with the party at fault;
2. An accreditation framework and process to allow third party service providers to enter an open banking system; and
3. Technical specifications that allow for safe and efficient data transfer and serve the established
policy objectives.
What does success look like in Canada?
Open banking will be successful in Canada if consumers and small businesses can intentionally share their data in a safe and efficient manner to access useful products and services without the use of screen scraping. The availability of these new services will enhance the welfare of Canadian consumers and businesses and support innovation and economic growth in Canada without compromising the safety and stability of Canada’s strong financial system.
Recommendations for Vision
1. Six key consumer outcomes should provide the basis for an open banking system in Canada:
- Consumer data is protected;
- Consumers are in control of their data;
- Consumers receive access to a wider range of useful, competitive and consumer friendly financial
services; - Consumers have reliable, consistent access to services;
- Consumers have recourse when issues arise; and
- Consumers benefit from consistent consumer protection and market conduct standards.
2. Financial inclusion should be considered in the design of an open banking system and be
complemented by financial education policies, programs, and resources.
3. Open banking in Canada requires a hybrid, made-in-Canada approach, one that harnesses the
benefits of both industry and government-led models deployed elsewhere, but better reflects the
Canadian context.
See: Review: Financial Consumer Agency of Canada (FCAC) submission to Advisory Committee on Open Banking
Recommendations for Scope
4. Federally regulated banks should be required to participate in the initial scope of the open banking system and provincially regulated financial institutions such as credit unions should have the opportunity to join on a voluntary basis. Participation from other entitles should be allowed upon meeting accreditation criteria and following the rules of the open banking system.
5. The initial scope should apply to both consumers and SMEs.
6. The initial scope should reflect data currently available to Canadians through their online banking applications, including chequing and savings accounts, investments accounts accessible through a consumer’s online banking portal and lending products. The initial scope of data shared in Canada’s open banking system should not be limited to specific use cases.
7. Consumer-provided data, balance data, transaction data, product data and publicly available data should be part of the initial open banking scope. All industry participants should have the right to exclude derived data and an obligation to justify any exclusion.
8. The initial scope should be limited to read access functions. However, the system should be built to allow the scope to be expanded to include new types of data and write access functions once the system is established and the risks can be fully understood and addressed.
9. All participants within the open banking system should be equally subject to consumer-permissioned data mobility requests. Reciprocity must be driven by express consumer consent and participants should not be allowed to require reciprocal data access in order to provide a product or service.
Recommendations for Governance
10. Governance must be impartial, transparent, and representative of all parties in an open banking system. Governance of the open banking system could proceed in a phased approach, commensurate with the risks posed to the system.
11. Common rules, an accreditation framework and technical s pecifications are the key foundational elements which need to be advanced before open banking can begin formally operating in Canada.
12. The Government should appoint a lead responsible for convening stakeholders to advance the key foundational elements (9 months) and implementation (9 months) of a system of open banking.
The mandate of the lead should include the following:
- Sufficient authority: The open banking lead must be provided the authority to convene industry and to deliver solutions in key areas, notably the establishment of common rules and an accreditation framework.
- Direct accountability to Government: The open banking lead must be directly accountable to the Deputy Minister at Finance Canada and be required to provide regular updates on the progress of this work.
- Clear deliverables: The open banking lead must have clear deliverables, including related to common rules, an accreditation framework and technical standards development.
- A set timeline: This work should be delivered within 18 months.
- Appropriately resourced: The open banking lead must have appropriate financial and human resources to support him or her in this work, including both internal and external resources. Based on the experience in other jurisdiction, this resourcing should include dedicated 4-6 full time staff and access to external expertise and advice. Technical expertise will be particularly important to support progress on the development of technical standards.
- Working groups: The open banking lead should be supported in this work through industry working groups that include balanced representation from banks, other prospective open banking participants and consumer representatives.
13. The Government should ensure the engagement of consumer representatives in this work including considering remunerating these representatives to support meaningful engagement.
14. The Government should establish a formal governance entity to provide ongoing administration and seamless transition to an open banking system following the conclusion of t he lead’s work programme.
15. The Government should consider the need to formally codify some elements of open banking in legislation or regulation, with a view to expanding to additional products or functions over time.
See: Open Finance data adoption varies by country (but one thing is certain)
Recommendations for Common Rules
Establish common rules to ensure the efficient functioning of an open banking system. The objective of these rules should be to protect consumers and ensure a positive consumer experience.
17. The Government should address legislative or regulatory impediments that could inhibit the operationalization of an open banking system, particularly with a view to resolving hurdles that necessitate bilateral contracts.
18. The common rules should ensure a consistent and high standard of consumer protection safeguarding the transmission of data while avoiding regulatory overlap in respect of how the data is used.
19. The common rules should articulate that liability flows with the data and rests with the party at fault.
20. The rules regarding complaints handling and liability attribution must be simple and efficient for consumers. Each participant must have internal and external complaints handling mechanisms in place, as well as data traceability protocols. In all functions of open banking, consumers must be limited from liability beyond a fixed dollar amount (e.g., $50) unless gross negligence or criminal act can be proven.
21. The common rules must prescribe clear and automatic terms of redress for consumers, which include immediate compensation for any financial loss and follow appropriate standards of care for protection and redress regarding a loss of sensitive financial data.
22. Common rules for privacy should be developed for the following two areas:
- Consent management: Ensuring consumers have a clear line of sight into who has their data, what that data includes, and how it is being used; a clear standardized process for consumers to provide and revoke consent to share their data; and considerations of how financially marginalized or vulnerable consumers will navigate an open banking system ; and
- Privacy management: Policies, practices and procedures built into operations that protect personal information.
23. The common rules should prohibit undue pressure on consumers, ensure that information provided to consumers is accurate, clear and not misleading, and require public disclosure regarding consumer complaints received.
See: Open banking would help the recovery
24. Common rules for security should be developed for the following two areas:
- Data security: Authentication, authorization, access management, data transit and encryption,
tokenization, auditability and traceability; and - Operational and systemic risk: IT security infrastructure, APIs security and technical standards as well as prevention, incident response and monitoring, penetration testing and recovery measures.
25. A minimum “floor” of security standards should be followed by entities seeking accreditation with stronger security standards required based on risk.
26. Educational tools and resources should be developed for consumers to raise consumers’ awareness of their rights and responsibilities.
27. The common rules should be developed in an impartial, consistent, transparent and representative manner, with sufficient government oversight to ensure consumer interests are protected and public policy objectives are met.
Recommendations for Accreditation
28. The accreditation criteria should be sufficiently robust to protect consumers but not so stringent as to exclude a wide range of market participants.
29. The criteria should be sufficient to demonstrate that the participant is able to comply with the common rules related to liability, privacy and security, including having sufficient financial capacity to ensure consumers are protected in the event of loss.
30. The accreditation process should be trusted, independent, proportional to risk, transparent and coherent with other regulatory regimes. The accreditation criteria, as well as the list of accredited firms, should be easily accessible to consumers and other market participants.
31. Accreditation will be required for entities to be allowed in the open banking system with the exception of federally regulated banks. Consideration should also be given to exempting provincially regulated financial institutions, such as credit unions, from accreditation requirements.
32. Firms seeking accreditation should bear the costs of the accreditation process, with a party outside the open banking system, such as an independent entity with appropriate auditing capacity or a government regulatory body, undertaking the process. The accreditation framework and individual firms’ accreditation should be reviewed and updated at regular intervals.
See: Is Open Finance worth getting excited about, or is it just spin?
Recommendations for Technical Specifications and Standards
33. Efforts underway in the market to develop technical specifications should continue over the next 9 months, with the goal of aligning with the following principles:
- Accessible and inclusive for all accredited system participants without requiring additional arrangements;
- Enable a positive consumer experience without overly onerous steps that the consumer must follow to realize the benefits of open banking;
- Enable the safe and efficient transfer of data among system participants;
- Capable of evolving with technological change to keep pace with the rapidly evolving sector;
- Sufficiently flexible to enable the development of new and innovative products; and
- Compatible and interoperable with international approaches.
34. The open banking lead should engage technical expertise to actively participate in technical specifications development to ensure public policy objectives are met. Government should intervene in the process if no adequate solution emerges.
Download the Final 29 page PDF Open Banking Report by the Advisory Committee to the Department of Finance Canada --> here
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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LendingClub Reports Strong 2nd Quarter Results, Shares Rise Dramatically
Crowdfund Insider | | Jul 28, 2021
LendingClub (NYSE:LC), a Fintech that started as a peer-to-peer lender and now operating as a digital bank, has posted strong 2nd quarter results that easily topped expectations. LendingClub finally turned the corner on profitability shredding guidance that had expected a loss. Shares moved considerably higher in after-hours trading during a crowded earnings announcement day.
At the start of 2021, LendingClub completed the acquisition of Radius Bank thus entering the red hot digital banking sector. This quarter is the first earnings round as a nationally chartered digital bank.
According to LendingClub sequential revenue increased by 93%, driven by growth in marketplace lending revenue and increased net interest income from the retained portfolio of consumer loans. Total revenue was $204.4 million, almost double the previous quarter, with net income jumping to $9.4 million – in stark contrast to the $47.1 million loss delivered in Q1.
See: Why LendingClub’s Acquisition Of Radius Bank Is A Smart Deal
The fact that LendingClub will now be able to hold deposits as a bank means a lower cost of funding for its online lending segment.
LendingClub CEO Scott Sanborn, issued the following statement:
“Our first full quarter operating a digital bank was the most profitable quarter in LendingClub’s history. This is the beginning of a dramatically enhanced earnings trajectory for the business. Our transformation is fueled by our competitive advantages, which include our 3.5 million-plus members, deep data capabilities, marketplace model as well as our more efficient operating platform. Our earnings are being bolstered by our bank, which is generating a new stream of recurring net interest income that is only beginning to contribute to our bottom-line results.”
LendingClub highlighted the following stats:
- Marketplace revenue grew 86% sequentially, primarily reflecting 105% growth in origination fees and a 132% increase in gains on loan sales as loans sold through the marketplace doubled.
- Net interest income grew 148% sequentially to $45.9 million, as the bank’s loan portfolio (excluding PPP loans) grew 27% sequentially, propelled by growth in the consumer loan portfolio of 145% to $795M.
- Deposits grew to $2.5 billion, helping fund growth in the bank’s loan portfolio.
Updates:
Shares in LendingClub have rocketed higher today jumping by over 55% (as of this moment).
The few analysts that participated in the earnings call congratulated LendingClub on its performance. Earlier today, Wedbush analyst Henry Coffey boosted his price target to $33.50 (from $25), reiterating an outperform call, after calling the results “amazing.”
See: Fintech Startups Broke Apart Financial Services. Now The Sector Is Rebundling
By becoming a nationally chartered bank, via its acquisition of Radius Bank, LendingClub is now financing its own loans, alongside a growing number of other institutions – including other banks (which now account for more than half of funding including LendingClub Bank).
Management also said there were some unanticipated benefits by becoming a bank as being regulated as a bank helped boost confidence for bank investors. There is a lot of confidence in credit quality.
Continue to the full article --> here
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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Square launches small business banking
Reuters | Anna Irrera | Jul 20, 2021
July 20 (Reuters) - Square Inc (SQ.N), the company led by Twitter Inc (TWTR.N) CEO Jack Dorsey, is launching banking services for small businesses, as it continues to grow beyond payments processing.
Square Banking will offer small businesses savings and checking accounts, as well as its existing lending offering which has been renamed Square Loans, the San Francisco-based company said on Tuesday.
Square Checking will have no account minimums, overdraft fees, or recurring fees and saving accounts will offer a 0.5% annual percent yield on deposits.
See: Square buys 3,319 more Bitcoin at an average price of $51,236 for another $170 million investment
Square hopes its new checking and savings accounts, which build upon its debit card offering, will be attractive to small businesses who have struggled to gain access to more mainstream banking services, said Christina Riechers, Square Banking's head of product.
"There is no monthly fee so we see this as having high potential to get folks into more formalized business banking," Riechers said in an interview.
Deposits collected from small businesses will be lent back through Square Loans, she said.
The new services come following the launch of the company's industrial bank, Square Financial Services, which began operations in March after completing the charter approval process with the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions.
See: Inside Jack Dorsey’s Next Big Bet on Bitcoin, DeFi
The industrial bank is part of efforts by Square to expand its revenue stream beyond facilitating card payments for small businesses.
The company's consumer business Cash App has been booming, with first quarter revenue excluding bitcoin investing up 139% year on year to $529 million.
While initially, only small business deposits will be brought under the Square Financial Services umbrella, over time the company will look to have the bank work across its range of products and services, a spokesman said.
Continue to the full article --> here
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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Open Finance data adoption varies by country (but one thing is certain)
McKinsey & Company | By Chandana Asif, Tunde Olanrewaju, Hiro Sayama, and Ahalya Vijayasrinivasan | Jul 11, 2021
If open finance continues to accelerate, it could reshape the global financial services ecosystem, change the very idea of banking, and increase pressure on incumbents.
Banks hold a record of much of what we spend, save, and borrow—from electricity bills and mortgage payments to our weekly spend on fuel and coffee. Now, some of that customer data is being shared with third parties in a global movement known as “open financial data” (sometimes referred to as “open banking.”) Roughly half a decade in the making, it’s unlocking a wave of digital financial innovation—and likely disruption.
Brought on by a combination of government regulation and market forces, open financial data allows an expanding universe of players—both financial and non-financial—to access customer accounts and data in order to offer new products and services (all contingent on customer consent) (Exhibit 1).
See: WEF: Decentralized Finance: (DeFi) Policy-Maker Toolkit
For customers, open financial data affords greater flexibility in how their money is managed, allowing, for instance, better visibility of accounts and more convenient access to payments. (This paper focuses primarily on benefits for consumers; for more detail on benefits for all participants, including financial institutions, see our recent related report, “Financial data unbound: The value of open data for individuals and institutions.”) Still in its infancy, the movement has the potential to reshape everything from bank accounts, credit cards, payments, mortgages, small business loans, and even insurance policies.
Around the world, this trend is evolving in different ways. In the European Union, the United Kingdom, South Korea, Australia, and India, governments have mandated large banks to open up their vast troves of customer accounts to other companies, in a bid to stimulate competition (Exhibit 2). In the United States and China, it is a market-led movement, with companies establishing open-banking relationships among themselves. Singapore is using a blend of the two models.
The adoption of new digital habits and a dramatic movement toward online channels during the pandemic appears to have accelerated open banking. With so much more of their lives spent online, both consumers and small and medium-sized enterprises (SMEs) became much more open to fintech apps and other non-traditional financial products and services. They also habituated to greater levels of convenience, choice, and flexibility in their financial relationships. In just the first six months of 2020, the number of users of open banking–enabled apps or products in the UK doubled from one million to two million and grew to over three million as of February 2021. In the US, almost one in two consumers now use a fintech solution, primarily peer-to-peer payment solutions and non-bank money transfers.
See: Financial data unbound: The value of open data for individuals and institutions
We believe that if open finance continues to accelerate it could reshape the global financial services ecosystem, change the very idea of banking, and increase pressure on incumbent banks. According to the UK’s Financial Conduct Authority, a significant share of customers who are dissatisfied with their current accounts, earn uncompetitive interest rates on savings accounts, or pay higher mortgage rates do not change providers due to the hassle of switching or lack of visibility into better options. The ability for customers to better understand their full financial picture—one of open banking’s promises—could result in margin compression, as pricing and charges become more transparent. Banks may also have to contend with margin sharing, as payouts to digital platforms could play a far greater role in customer acquisition.
Continue to the full article --> here
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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