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Open banking — available in Britain but not yet in Canada — is when a financial institution shares client account details (with consent) with a third party, without the client having to share their login name and password.   In 2021, a government-appointed advisory committee recommended that open banking be up and running by January 2023.

In the committee’s proposed initial phase, third-party service providers (such as fintechs) should be able to read data from clients’ chequing and savings accounts, investments accounts, RRSPs, TFSAs and non-registered accounts that hold stocks, bonds, mutual funds and GICs, the committee said in its final report. Open banking should be mandatory for federally regulated banks and optional for provincially regulated institutions and “other entities,” the report added.

• Fee comparison:  Armed with such data, a third-party fintech could potentially tell a consumer how much they could save on fees, said Stephanie Holmes-Winton, CEO and founder of Halifax-based fintech CacheFlo Inc. Through open banking, a fintech could learn that a client has multiple accounts at different institutions with similar investments in them. The fintech could then compare the fees, Holmes-Winton said.

See:

Canada’s Open Banking Journey: Interview with EY’s Dr. Francesco Pisani and Dr. Alexander Christoph

Canada’s Open Banking Working Committees Flag ‘Governance’ as the Latest Gap

• Risk tolerance/matching:  Getting a complete picture of a client’s investments has other benefits. For example, a fintech could determine whether all of a client’s investments put together (as opposed to at just one institution) match their risk tolerance, Holmes-Winton suggested.
• KYC automation: Open banking could also speed up know-your-client (KYC) processes, said Darcy Ammerman, partner and banking regulation lawyer with McMillan LLP. This is because a third party with access to a consumer’s banking data could potentially automate the process of filling out KYC forms.

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