Home Economy Open banking is for consumers, but they are missing from the discussion

Open banking is for consumers, but they are missing from the discussion

by SuperiorInvest

Everyday Canadians, the main stakeholders to benefit from the data mobility rights that open banking will provide, seem to be an afterthought in the current development process.

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Open banking continues its slow march forward in Canada.

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Following the Federal Advisory Committee final report last year, Randy Boissonnault, the junior Treasury secretary, named Abraham Tachjian to oversee the transition to an open banking regime that would give Canadians more control over their financial data, and task force discussions are underway.

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The government’s objective is important: to make it easier for new companies to enter the market, to stimulate competition in the financial system, to encourage innovation, to increase choice for consumers and to reduce costs. Open banking can achieve all of these things by allowing consumers to share their financial data with the service providers of their choice, which would level the playing field that is currently titled in favor of Canada’s largest banks. The added competition should spur more innovation in the financial industry through the creation of more personalized financial products and advisory services as new entrants vie for market share, forcing older players to step up their games.

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The Department of Finance emphasizes that an open banking regime would allow consumers to transfer their financial data between financial institutions and accredited third parties in a secure and consumer-friendly manner in order to give Canadians and businesses more control over their financial data and be better. equipped to manage their finances.

Ironically, the consumer focus appears to have been lost in the wider public policy development process, as consumer perspectives seem to be absent, despite the participation of the task force Center for Public Interest Advocacy and Option Consommateurs.

These discussions of an open banking framework, which is fundamentally about giving consumers control over their financial information, are driven by business interests, not consumer interests. This is at least in part due to the fact that “low public profile” of niche consumer groups in Canada compared to their counterparts in other advanced economies. Small businesses may also lack appreciation of the potential of open banking – Canadian Federation of Independent Business recently observed that “most small businesses don’t even realize what open banking is, let alone what it can do.”

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As one message of the United Kingdom notes, “Companies should shape products around people, rather than expecting consumers to shape themselves around products.” Yet in Canada, consumers have been largely left out of the conversation.

It is true that the implementation of open banking requires some very complicated and fundamental discussions related to consumer data mobility rights, which include the accreditation of new entrants to the financial sector, liability solutions and the implementation of digital ID, all while ensuring that privacy and security are respected consumers. enforced when transferring data between institutions.

Many consumers already have some kind of portability with their banking data through well-known intermediaries such as Plaid Inc.which allows customers to share their banking information with financial technology or budgeting software companies such as Intuit Inc. Mint. In the advisory committee’s final report, members wrote that the screen scraping tactics used by these programs “pose real security and liability risks to Canadians by requiring them to share their banking credentials with third-party providers.” Again, the best interests of consumers are consistently underrepresented.

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However, consumers who have joined the digital finance frontier are not protected by a regulatory regime designed to protect their interests and their data, which is essential to building trust. That’s the role open banking working groups under the leadership of Tachjian. Unsurprisingly, established entities in the financial industry are well represented. However, everyday Canadians – the main stakeholders who will benefit from the data mobility rights enabled by open banking – appear to be an afterthought in the current development process.

This lack of representation could ultimately undermine the entire initiative. If consumers are not involved in the development of the system, then uptake of the initiative could be low, lending credence to the arguments of those who have opposed the creation of an open banking regime by inferring that there is a lack of interest. .

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In fact, the lack of broad public engagement and advocacy for open banking guarantees that people will be surprised or confused (or both) after the process is over because they will not be properly prepared to take advantage of the initiative. That would be a costly mistake.

These discussions are important from another perspective: engaging consumers in what they expect in terms of data mobility, including privacy and security. The implications go far beyond open banking. What is decided in these deliberations has the potential to change the way data is controlled, used and regulated across the economy. This makes it even more important for consumers to be at the table.

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This raises the question of where the responsibility lies to prepare people for this delayed innovation and its consequences. Politicians? Journalists? bankers? Consumer advocates? Currently, no one is doing this effectively.

Public policy processes seem increasingly to favor the mediation of legislative change across the interests of society’s stakeholders. The formal processes clarifying Canada’s long-awaited open banking regime are focused on key channels of the new regime – banking institutions and fintechs. However, we seem to be overlooking the voice(s) of Canadians to engage with open banking.

The Open Banking Advisory Committee has recommended that the Open Banking leader, Tachjian, be supported in this work through industry working groups that include balanced (italics added) representation of banks, other potential open banking participants and consumer representatives.

It is not too late to restore this balance.

Vass Bednar is the Executive Director of the Master of Public Policy in Digital Society program at McMaster University and a Senior Fellow at the Center for International Governance Innovation (CIGI). Robert Fay is the Managing Director of the Digital Economy at CIGI.

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