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Canada’s Open Banking Journey: Interview with Steve Boms, Executive Director Financial Data and Technology Association – North America “FDATA”
NCFA Canada | Mahi Sall | Dec 5, 2022
Thought Leadership Series of Expert interviews and insights related to a made-in-Canada open banking regime
The National Crowdfunding & Fintech Association of Canada (NCFA), true to its mission of providing education, industry stewardship, networking, growth, and funding opportunities for innovative financial technologies and related sectors, is pleased to launch a brand new thought leadership series on Open Banking led by Berlin-based NCFA ambassador and independent expert in Fintech-Bank Partnerships Mahi Sall.
NCFA is proudly contributing this thought leadership series to help shape a system that will bring profound changes in how financial services will be created, distributed, and consumed in Canada over decades to come. Our hope is that Canada’s Open Banking system will improve economic outcomes, improve market efficiencies and competitiveness, and enable consumers to access new and innovative financial services in a way that is secure, efficient, and consumer-centric.
The series is called ‘Canada’s Open Banking Journey’ and aims to aggregate international and domestic perspectives of Open Banking/Finance expert practitioners from around the globe to advance dialogues, key considerations, and explore potential solutions for the development of a made in Canada open banking regime with the following timeline:
- Sep 2018: Canada’s Open Banking journey officially began when the government established a multi-stakeholder Advisory Committee tasked to conduct a review into the merits of Open Banking
- Apr 2021: Advisory committee publishes final recommendations
- Mar 2022: Government appoints Abraham Tachjian – PwC Canada as Canada’s Open Banking lead responsible for convening industry, government and consumers in designing the foundation of the system of Open Banking for a launch in 2023.
- Oct 2023: Phase 1 implementation expected
NCFA Canada's Open Banking Journey Series:
Interview Begins
”As the government advances critically important initiatives to modernize Canada’s financial services market, including open banking and payment modernization, the voices of consumers and small businesses must be at the center of the conversation”.
-- Steve Boms, Executive Director Financial Data and Technology Association - North America “FDATA”
Mahi Sall: Please tell us about yourself and FDATA North America
Steve Boms: Steve Boms, Executive Director FDATA North America, Founder & President of Allon Advocacy LLC.
FDATA North America was founded in early 2018 by several financial firms whose technology-based products and services allow consumers and small and medium enterprises (“SMEs”) to improve their financial wellbeing.
We are a regional chapter of FDATA Global, which was the driving force for Open Banking in the United Kingdom, and which continues to provide technical expertise to policymakers and to regulatory bodies internationally that are contemplating, designing, and implementing open finance frameworks. With chapters in North America, Europe, Australasia, Latin America, and India, FDATA Global has established itself as an expert in the design, implementation, and governance of open finance standards and frameworks globally since its inception in 2013.
We count innovative leaders such as the Alliance for Innovative Regulation, APImetrics, Basis Theory, Betterment, BillGO, Codat, Direct ID, Equitable Bank, Envestnet Yodlee, Experian, Finansytech, Fiserv, Flinks, Hank Payments, Interac, Intuit, Inverite, Kabbage, Mogo, Morningstar, M Science, MX, Petal, Plaid, Questrade, SaltEdge, Trustly, ValidiFi, Vaultree, VoPay, Wealthica, and Xero, among others, as our members.
Mahi Sall: Chief among the factors affecting the take-off of Open Banking is low adoption by consumers. What could Canada do differently than other jurisdictions in order to pre-empt this risk?
Steve Boms: I would respectfully disagree with the premise of this question. Millions of Canadians are already using open finance tools today offered by dozens of FDATA North America member companies. At last count, in excess of five million Canadians were utilizing open finance tools offered by just our members in Canada. Moreover, open finance is not itself the product; it is the rails upon which products and services are offered to consumers. Said another way: Canadians are already benefiting from open finance. The implementation of a formalized open finance regime is a means of providing ubiquitous access to open finance tools regardless of the financial institution with whom one banks.
Mahi Sall: Speak about Open Banking limitations and the most common misconceptions people have about it?
Steve Boms: Open finance’s ability to spur innovation and competition is almost entirely limited by how policymakers design, implement, and ultimately govern their open finance systems. The technological barriers to consumer control of data are minimal and decreasing by the day, particularly as APIs and other modern data communication systems are rolled out across various sectors of the economy. That’s basically why FDATA exists- to be a strong, vigilant advocate for open finance’s potential to the very policymakers who will determine its form and function.
Perhaps the most common misconception of open finance is that it will inherently present a cybersecurity risk to banks and data holders. However, we have stressed since our inception that this risk has so far been entirely speculative, and there are no examples of data breaches in open finance frameworks – formalized or otherwise – due to a third-party data sharing relationship with a fintech. To further address this concern, we have also repeatedly advocated, mostly through comment letters to regulatory agencies, that third party fintech providers should be entirely responsible for all elements of cybersecurity, due diligence, regulatory compliance and consumer protection- and are perfectly capable of doing so. In fact, we are opposed to the idea of banks and data holders retaining responsibility or liability for such damages, since this provides them the pretext to arbitrarily limit data access, and cut it off in some extreme cases. The details of how third party providers must go about ensuring privacy, data, and cybersecurity will be properly developed through an accreditation process. Once such process is devised, any accredited third party financial provider should have continuous access to customer-permissioned data from any and all Canadian banks that participate in the open finance system.
Mahi Sall: In the early days of Open Banking some European banks provided in addition to APIs a Modified Customer Interface (MCI) as alternative means for third party providers (TPPs) to get access to customer data. Would you foresee the need for Canadian banks to deploy fallback options? If so, what could be some of the alternatives?
Steve Boms: Yes. Any realistic view of open finance in Canada must consider the need for fallback options. The vast, overwhelming majority of customer-permissioned financial data sharing in Canada currently occurs via credential-based screen scraping. While all stakeholders in the market would prefer to transition to token-based APIs, it is unrealistic to imagine that 100% of data access will quickly transition to this data access method. Accordingly, fallback options will need to remain.
The harsh reality is that Canada’s financial system is not yet ready to eliminate existing technological methods of accessing customer data without massive detriments to consumer financial health. This is a lesson clearly learned from other, more advanced markets like the United Kingdom, which retain screen scraping as a connectivity method either as a fallback option or for data not available through APIs. In the absence of a fully developed, robust API environment, screen scraping is a necessary tool to enable universal consumer and SME data access.
“ Regulatory certainty and clarity will be key to ensuring that this new open finance marketplace develops to its maximum potential.”
Mahi Sall: What must be thought of and accounted for at this early stage of Open Banking in Canada in order to ensure compatibility and interoperability at regional/international level?
Steve Boms: Regulatory certainty and clarity will be key to ensuring that this new open finance marketplace develops to its maximum potential. We have been working with Canada’s independent banking regulator the Office of the Superintendent of Financial Institutions (OSFI) to ensure that their efforts to modernize third-party risk management do not interfere with open finance development. Since the open finance accreditation standards in Canada will almost certainly include cybersecurity requirements for third-party providers, harmonization of efforts between the Department of Finance’s open finance work and OSFI’s approach to third-party cybersecurity risk will therefore be essential. We’ve also urged OSFI to clearly distinguish between what it considers to be bank third party providers under its supervisory guidelines from what will soon be accredited open finance participants to avoid any confusion.
“Half of Canadians feel stress when interacting with Canada’s financial services sector.”
Mahi Sall: Any final thoughts?
Steve Boms: We recently commissioned a landmark survey of Canadian consumers along with Paytechs of Canada to measure attitudes toward the existing financial services marketplace and open banking. It found that more than half of Canadians feel stress when interacting with Canada’s financial services sector and believe they would benefit from increased competition and transparency in the financial services market. The findings indicate this is especially true among women, young people, and new Canadians. Among the biggest sources of dissatisfaction are high fees and a lack of choice.
As the government advances critically important initiatives to modernize Canada’s financial services market, including open banking and payment modernization, the voices of consumers and small businesses must be at the center of the conversation. These first-of-their-kind surveys clearly demonstrate Canadians’ hunger for a more competitive, transparent, and innovative Canadian financial system.
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Links you may be interested in:
Mahi Sall is an Ambassador of the National Crowdfunding & Fintech Association of Canada “NCFA”, and an Expert on Fintech-Bank Partnerships. He is based in Berlin, Germany.
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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