With the federal government examining the idea of bringing “open banking” to Canada, research from Ernst & Young Global Ltd. (EY) suggests that Canada has work to do before it can embrace the idea.
The firm reports that Canada ranks eighth out of 10 countries in terms of its readiness for open banking, based on the EY Open Banking Opportunity Index, which assesses the current state of regulation, the industry, and consumer interest. In particular, Canada ranks last in both “adoption potential” and “regulatory environment,” and eighth in “consumer sentiment” towards open banking.
EY Canada says that its analysis of online sentiment finds that concerns about cybersecurity and data protection loom particularly large for Canadians.
“Open banking will succeed only if customers trust that their data is safe, and many Canadians still need winning over when it comes to sharing their information online,” says Abhishek Sinha, EY Canada’s open banking leader. “This is especially true of older generations, whereas millennials are more comfortable with the idea.”
According to the index, Canada ranks fifth in terms of its “innovation environment,” which EY Canada attributes to a strong fintech industry, private investment and government support for startups. Yet, it also notes that fintech adoption remains relatively low in Canada, with only 18% of Canada’s “digitally active population” using two or more fintech services, and only 44% of smartphone users engaging in mobile banking.
“A crucial component to accelerating the adoption of open banking is having the right regulatory framework in place to manage customer privacy and consent—something Canada’s Advisory Committee on Open Banking is working on now,” said Anthony Rjeily, financial services digital leader at EY Canada.
“But regulation is not a prerequisite for a healthy open banking system. Bankers can make meaningful progress by coordinating internal initiatives, opening their platforms to innovators and proactively promoting digital adoption to consumers.”
The federal government launched its public consultation on open banking last month. Following the consultation, which ends Feb. 11, the Advisory Committee on Open Banking will submit a report assessing the merits of the idea for Canada.