What is open banking
Open banking is not yet available in Canada, but it is available in other countries, like Australia and the UK. The Government of Canada is currently considering the best way to enable its safe introduction in Canada.
Open banking is a secure way for you to share your financial data with financial technology companies (often called fintechs or fintech apps). Fintech apps provide online financial products or services. You use these apps on websites or on your mobile phone or tablet. Fintech apps are different from your bank’s online or mobile banking features.
When you use a fintech app with open banking, your bank securely shares your financial data with the app on your behalf. You do not need to provide your online banking username and password to access the app’s products and services.
Open banking is sometimes also known as consumer-directed banking or consumer-led banking. Open banking is the term most widely used internationally.
Figure 1: How open banking works
Figure 1: How open banking works - Text version
How open banking works
- You find a fintech app that can help you manage your finances
- The app prompts you to link your bank accounts to access your financial data
- You authorize your bank to share your financial data with the app via open banking (your account username and password are not required, keeping you protected in the event of unauthorized transactions, a data breach or fraud)
- Your financial data is shared using a secured online channel
The app analyzes your data and recommends personalized financial products and services:
- product comparison tools
- budgetary tools
- viewing all your accounts in one place
What should you know about screen scraping
Open banking is not yet available in Canada. This means that there is currently no secure system in Canada to safely share financial data from your bank account with fintechs other than your bank.
However, significant amount of financial data is already being shared through technological workarounds used by fintech apps. One of the most common methods fintech apps use to access financial data is called screen scraping.
Screen scraping is different from open banking because you have to share your online banking username and password. This is a problem because sharing your username and password could break your electronic access agreement with your bank and put you at risk.
Fintech apps that use screen scraping might allow you to access similar products and services as those available with open banking. However, they present security, liability, and privacy risks for you.
Why is screen scraping risky
Screen scraping is not open banking
Fintech apps that use screen scraping require you to provide your online banking username and password to access your financial data. They use this information to automatically log into your bank account as if they were you. They then transfer your data to an external database that supports their products or services.
Once you share your username and password in this manner, you no longer have control over it.
Screen scraping means fintech apps may have access to your:
- online banking usernames and passwords
- account balances
- financial products and services, including investments, insurance products, etc.
If you provide your online banking username and password to another party, such as a fintech app, you may risk losing the protection your bank offers against unauthorized transactions.
This means you might be held responsible for any losses resulting from unauthorized transactions or for any changes to your financial products and services. You may be liable even if the app has security measures in place, or if it is the cause of the loss.
How can open banking benefit you
Open banking doesn’t need screen scraping. With open banking, you don’t need to provide your online banking username and password to give a fintech app access to your financial data. Instead, you authorize your bank to securely share your financial data with the fintech app on your behalf.
By keeping your username and password safe, you don’t risk losing your protection against unauthorized transactions.
Open banking is not yet available in Canada. If it becomes available, open banking could increase consumer choice and improve financial outcomes for Canadians.
Using fintech apps with open banking can help improve how you manage your finances online and through mobile devices. It gives you greater control over your financial data.
Open banking may offer you several benefits, such as:
- having access to a wider range of useful, competitive and consumer-friendly financial products and services that meet your needs
- having real-time access to all of your financial accounts, products and services in one place
- having quick and easy access to personalized tools and products to help improve your financial health. Examples include financial product comparison tools and budgeting tools.
- demonstrating your creditworthiness more easily to loan providers by having all your information in one place
Figure 2: Benefits of open banking
Figure 2: Benefits of open banking - Text version
Benefits of open banking:
- greater control
- enhanced protection
- more choices
- all in one place
What is the future of open banking in Canada
Open banking can offer many benefits to consumers, but it is important that it is introduced in a way that protects consumers.
That is why in 2018, the Government of Canada undertook a review of open banking. It appointed an Advisory Committee to guide the review. In early 2020, the Department of Finance released the findings from the first phase of this review.
This first report included the results of stakeholder consultations and learnings from other jurisdictions. It proposes that industry and government collaborate to develop a framework that would enable the safe introduction of open banking in Canada.
In November 2020, the Advisory Committee held more stakeholder consultations on a proposed open banking framework for Canada. This phase assessed implementation considerations, such as consumer privacy, security, access, and recourse. The Committee will deliver its findings to the Minister of Finance in 2021.
The Financial Consumer Agency of Canada (FCAC) welcomes the government’s review of open banking. FCAC recognizes that consumers want a safe and secure way to share their financial data with fintech apps. FCAC is providing advice on how the open banking framework should be designed to best ensure consumers are protected.
What should you keep in mind when banking online or via mobile applications
Most banks offer an online security guarantee. This protects you from any unauthorized transactions made using your bank’s online banking services. However, you need to do your part by keeping your username and password safe.
This protection may not apply to fintech apps that use screen scraping. Read your bank’s account agreement and online banking or electronic access agreement. This will help you understand potential risks of disclosing your username and password to external apps that use screen scraping.
This problem doesn’t exist with open banking. Open banking doesn’t need screen scraping. With open banking, you authorize your bank to safely share your financial data with the fintech app on your behalf. You don’t have to provide your online banking username and password to anyone. This is one of the reasons FCAC supports the Government of Canada’s efforts to create a safe and secure open banking framework.
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