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Open Banking to Bring Multitude of Benefits to Canada in 2023

The Globe and Mail | | Aug 6, 2022

The benefits and challeges of Open banking - Open Banking to Bring Multitude of Benefits to Canada in 2023When Colin Deacon started his career as an investment adviser 40 years ago, he made a point of working with some of the smallest customers – those who’d typically be passed over by the financial services industry.  His clients got financial and tax planning advice, help with their small business concerns and investing assistance – support that, he said, was and still is typically unavailable to the majority of Canadians.

We still have a situation where most Canadians are not given really good, basic advice … and if you’re somebody from a marginalized community your access to that is 10 times worse.

Mr. Deacon said he sees the development of an open banking system in Canada as a solution to that problem. Open banking, or consumer-directed finance, would allow individuals and businesses to have control over their own financial data, and to securely share it with third-party financial service providers or authorize them to take action on their behalf.

See:  Open Banking is Coming to Canada…Are you Ready for Change?

Currently, Canadians don’t own or have the right to share their financial data, and their ability to access services provided by fintech companies is dependent on whether their financial institution permits it. This means that financial products and services aimed at helping Canadians improve their financial picture – such as credit-building products for those with poor or no credit history, predictive budgeting apps that warn the user if their account is at risk of being overdrawn and more – may not be available to them.

Many Canadians are unhappy with the current financial system, according to an April survey by FDATA and Paytechs of Canada. The survey of Canadian consumers and small businesses found more than half felt stress interacting with the country’s financial services sector. Women business owners were more likely than their male counterparts to report stress and younger Canadians were more likely than older individuals to say the same. More than two-thirds of respondents said they’d benefit from more competition and transparency in the market.

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The federal government is expected to roll out an open banking system by early 2023, with working groups under way this summer. Proponents say this system will give Canadians access to a wider range of financial products and services, make it easier to switch financial institutions, reduce fees on transactions and make the financial system more equitable for marginalized Canadians. That includes the millions of consumers without a bank account or who aren’t adequately served by mainstream financial services.

Open banking is ultimately about consumer choice and making financial services more accessible and less expensive for small businesses and individuals, said Andrew Graham, co-founder and chief executive officer of Borrowell, a fintech firm that provides free credit monitoring and offers credit coaching and credit-building products.

I would not overlook the importance of lowering fees and the cost of interacting with financial services.  Such payments can become a significant blocker to financial growth for many people and many businesses.

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