Open Banking and Lending in Canada
Updated: Feb 16, 2022
THE FUTURE OF (OPEN) BANKING IN CANADA The financial industry is in the midst of major and ongoing digital disruption, driven primarily by consumers looking for more choice, value and personalization. They want simple ways to leverage technology to understand and manage their money and they’re willing to use multiple financial services providers and online apps to get what they need.
Banks and financial technologies (FinTechs) are hard at work creating digital experiences that consumers are asking for, but their success requires broad access to personal banking data. The potential for vulnerabilities and exposure is ever-present in this fast-moving ‘eye on the prize’ race to gain consumers’ business. In this innovation model, all roads lead to the same two questions: Who actually owns that banking data and what will be done with it?
Consumers likely, and quite reasonably, assume that their personal banking data is safe and secure when they share it. They also may believe that they are in control of it. However, neither of these assumptions is 100% true. Banks own their customers’ personal financial data and can actually sell the data or give access to third parties with or without their consent.
The other challenge in meeting consumer needs is the decades-old business model of the traditional banking industry. Limited by this, what retail banks are actually capable of offering today is limited in terms of innovative technology. Consumers don’t factor this into their desire for a better banking experience. They just want a fast, user-friendly, smooth omnichannel experience when managing their finances online. They also expect state-of-the-art security to protect their data. However, these expectations are above and beyond what traditional banks can currently provide. This is where working with FinTechs can help banks meet the needs and digital expectations of their customers, but it magnifies the very real and pressing issues of consumer data, ownership and consent.
THE OPEN BANKING SOLUTION There is a solution to all of these challenges. It is open banking. Open banking is a set of guidelines and objectives for how banking can and should work in Canada and around the globe. In the open banking model, consumers are given control over their financial data. Only they get to decide how, when and where their personal financial data is used shared.
Europe was the first to implement open banking regulation in 2015 in order to bring innovation to the otherwise traditional and stagnant banking system. In September 2019, there were 138.5 million successful use-cases of open banking APIs (application programming interfaces) in Europe.
The Canadian government has been considering the merits of open banking since 2018, with security and privacy concerns front and center in its investigations, reports and, ultimately, recommendations for moving forward with its implementation by 2020. As the saying goes, a rising tide lifts all boats, and this is what is starting to happen around open banking in this country. As it takes shape and gains traction, open banking will have a profound impact on the Canadian financial services ecosystem.
Its collaborative framework will ideally position banks. third-party providers and other players within the financial services industry to meet consumer demands for increased convenience, value, data privacy and transparent consent. The end result will be consumer-directed banking, and it will fundamentally reshape the industry. It will foster ongoing innovation in financial services and products that are designed to pivot to consumer demand with the ease and speed that Canadians have come to expect from other digital players like Amazon, Netflix, Apple and Google.
The collaborative nature of open banking has the potential to progress the Canadian economy and change how banking – and lending – work in Canada, both immediately and in the long term. Imagine the possibility of new innovation when stable financial institutions and agile fintech companies work together to unlock and enrich financial data that is otherwise misused or overlooked in a way that directly benefits people and modernizes banking.
HOW OPEN BANKING CAN (AND WILL) CHANGE CONSUMER LENDING Approximately 40% of Canadians are $200 or less away from insolvency at the end of every month. Household debt in Canada is at an all-time high of $2.23 trillion. A vast majority of this debt (over $1.59 trillion) is due to mortgages.
What if open banking could provide essential financial data to the very regulators who could improve lending best practices in Canada? What if open banking could help lending products evolve to meet consumer needs and expectations? For example, third-party apps could share financial tips to consumers based on actual financial statements, loan payments and bills with targeted, expert knowledge that could help them get out of debt.
Consider someone with a lower credit score looking to repair their financial situation in order to be approved for a mortgage loan. How will this consumer know which loans, bills or credit cards to pay off first in order to make the biggest impact on their credit score? Imagine a scenario in which that person could opt to receive daily financial literacy tips and encouragement customized to their real-life financial data? It could empower them to break free of their crippling debt cycle faster and achieve long-term financial health sooner.
All of this can – and should – happen in Canada, but it largely depends on the implementation of open banking. At Marble Financial, our fintech solutions are designed to support consumers who fit the profile of the scenario described above. We help Canadians in consumer proposals leave their debt behind. We also provide education, tips and suggestions based on their personal financial data to bring them back to good financial health and improve their credit so that they can achieve a major life goal like purchasing a house.
Open banking will elevate our ability to do this for Canadian consumers who are struggling with debt. Access to consumer data along with a bank’s processes and infrastructure will make it possible for us to enhance our technology and service through customer-focused innovation powered by consumer-consented data sharing. The results will lead to an even more dynamic financial landscape for all. Please visit mymarble.ca
About Marble Financial Inc. At Marble Financial (CSE: MRBL; OTCQB: MRBLF) we are a group of forward-thinking financial technology experts who understand that Canadian’s occasionally need help in achieving longer-term credit health. Through our industry-leading proprietary technology solutions Fast Track Loan, Score Up, and Credit Meds, we guide our customers back to mainstream credit 50% quicker than traditional methods. Since 2016, We are proud to have empowered thousands of Canadians to a positive financial future and continue to establish ourselves as a leader in financial wellness. For further information, please visit mymarble.ca.