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On July 5, 2018, Canada 2020, a Canadian think-tank, published its report on open banking following a Policy Lab which brought together various stakeholders to discuss open banking in Canada.1 While still a relatively new concept in Canada, open banking has the potential to transform the financial services sector. The federal government is currently undergoing a review of open banking to assess whether it could have a positive impact on consumers while considering the risks to consumer privacy, data security, and financial stability.2
A number of jurisdictions have either mandated or encouraged open banking. In the European Union, PSD23 (Revised Payment Service Directive) enables bank customers to allow third-party providers access to their account data, which, for example, could enable third-party providers to manage a customer's finances.3 Recently, the European Banking Authority (EBA) released an Opinion4 and draft Guidelines5 to provide clarity to market participants on the implementation of the technical standards on strong customer authentication and common and secure communication under PSD2.
1. WHAT IS OPEN BANKING?
"Open Banking" refers to an emerging financial services business model that focuses on the portability and open availability of customer data, including transactional information. The core aim of open banking is to enable consumers to share their financial data between their financial institution and third party providers (and between financial institutions), typically through the use of application programming interfaces (APIs).
2. UNITED KINGDOM
The United Kingdom has been actively mandating open banking, pursuant to an order from the Competition and Markets Authority requiring the UK's largest banks to share customer data with third parties in accordance with the applicable Open Banking Standards.6
The term "Standards" within the context of the Open Banking Standards refers to open standards for Application Programming Interfaces (APIs) in UK banking.7 Such Standards will facilitate the use of client bank data by Fintechs in order to drive innovation to benefit banking customers with a broader variety of products and services while providing clients with a greater degree of control over the use of their data in the context of such products and services.
Open Banking APIs allow personal and business banking customers to use web and mobile applications developed by regulated third party providers to connect to and move money between bank accounts....