Look to the future and get a handle on the ins and outs of open banking, a new method of monitoring your money soon to be available in Canada.

What’s open banking, you ask? It’s a system within which you can securely share your financial information across financial technol­ogy companies (fintechs)—think budgeting and investment apps, for example. Available in many countries already, it’s not available in Canada yet, but we’re exploring the pros and cons here so you’ll be in the know when it is.

Here’s what you need to know

1

The government of Canada has formed a working group to sort through the challenges of implementing open banking here. Right now, fintechs have created a workaround solution they call “screen scraping,” which means you give a fintech, which is a third party, your username and password to access your financial data. The fintech will then transfer your financial data to its own database to work with its own products and services. The biggest challenge with this is, you guessed it, main­taining the security of your personal financial information.  

2

Why do we need open banking? So that you can take advantage of all the digital financial services you want. For example, how handy would it be to down­load a good budget­ing app that could access all your finan­cial data at the same time, to give you a clear look at your spending across all your holdings, with­out any compromises to your security? You would have access to your complete financial picture, including services, products, and accounts, all in one place. And you can rest easy at night knowing that you aren’t risking any breaches to your terms of agreement contract by sharing your information. You’d have more control and would be able to provide explicit consent to sharing your information. That means you’d decide who sees what information.

3

The current system of information sharing creates risk for you as a consumer. You may not be entitled to the normal protections of your financial insti­tution because you shared your username and password with a third party. If you lose money using a fin­tech, your loss may not be covered by your bank. But with the implementation of open banking in Canada, you’ll be able to give your bank permission to share your information without having that worry.

The Canadian government has significant work ahead in terms of regulating open banking and consumer protection. The government wants to ensure companies have the proper technology infrastructure to handle consumer security and confidentiality. This means that when open banking is available, we understand what we are consenting to, how our data will be used (and potentially shared), and how that information will be protected and your privacy maintained. 

► Stacy Yanchuk Oleksy is Chief Executive Officer at Credit Counselling Canada.