Open banking
What is open banking or consumer-driven banking
Open banking, also called consumer-driven banking or consumer-directed finance, is not available in Canada yet. It's available in other countries, like Australia and the United Kingdom.
Open banking is a framework that allows you to share your financial data with financial technology companies of your choice. The Government has taken the first steps to introduce a framework in Canada.
Financial technology companies, often called fintechs, provide online financial products or services through financial applications or fintech apps. You use these apps on a computer, mobile phone or tablet. Fintech apps are different from your bank’s online or mobile banking features.
When using fintech apps with open banking, your bank securely shares your financial data with the app for you. You don't need to provide your online banking username and password to access the app’s products and services. However, you do with screen scraping.
Learn more about financial applications.
Figure 1: How open banking works
Text version: Figure 1, How open banking works
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 is screen scraping
Screen scraping is not open banking.
There's currently no secure system in Canada to safely share financial data from your bank account with fintechs, other than your bank. However, fintech apps are already getting lots of financial data. One of the most common methods they use to access financial data is screen scraping.
Fintech apps that use screen scraping may provide access to products and services like those available with open banking. For example, budgeting applications. However, there may be security, liability, and privacy risks when you use these fintech apps.
Why screen scraping is risky
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 and 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:
- account balances
- transactions
- financial products and services, such as investments and insurance products
Say you provide your online banking username and password to another party like a fintech app. You may lose the protection your bank offers against unauthorized transactions.
This means you may be responsible for any:
- losses due to unauthorized transactions
- changes to your financial products and services
You may be responsible even if:
- the app has security measures in place
- the company that owns the app was responsible for losing the information
Learn more about how you're protected against unauthorized credit and debit transactions.
Benefits of open banking
With open banking, you authorize your bank to securely share your financial data with a fintech app for you. They do this using an application programming interface (API). APIs act as a bridge that allows apps, websites, and services to securely share information and work together.
Open banking doesn’t need screen scraping. You don’t need to provide your online banking username and password. By keeping your username and password safe, you don’t risk losing your protection against unauthorized transactions.
When open banking becomes available in Canada, it may increase consumer choices and improve their financial outcomes. Using fintech apps with open banking may help improve how you manage your finances online and through mobile devices. You’ll have greater control over your financial data.
Open banking may offer you several other benefits, such as:
- secure access to more useful and innovative financial products and services
- real-time access to all your financial accounts, products and services in one place
- quick and easy access to more personalized tools and products to help you better manage your finances like:
- apps that help you build your credit history
- budgeting tools
- tools to help you manage your paid subscriptions in one place
- demonstrating your creditworthiness more easily to lenders by having all your information in one place
Figure 2: Benefits of open banking
Text version: Figure 2, Benefits of open banking
Benefits of open banking:
- greater control
- enhanced protection
- more choices
- all in one place
The future of consumer-driven banking in Canada
Consumer-driven banking may offer many benefits, but it's important that Canada introduces it in a way that protects consumers.
In Budget 2024, the Government of Canada announced its plan for the implementation of consumer-driven banking.
Learn more about Canada’s Consumer-Driven Banking Framework.
A consumer-driven banking framework to protect you
In a consumer-driven banking framework, you may control, edit, manage, and delete your information. You may decide when, how, and to what extent your bank shares information with third parties like fintech apps.
Canada's Consumer-Driven Banking Framework has 3 main goals.
Safety and soundness
Keeping the banking system safe and secure by:
- dealing with risks that come with data sharing
- making sure there's oversight of how financial data is shared
Protecting Canadians' financial wellbeing
Making sure you can safely and confidently use your financial information to improve your financial situation. This means giving you choices with new banking products and services while keeping your information safe.
Economic growth and competitiveness
Setting up fair and clear rules to accredit financial institutions in Canada. This way, banks and new companies can do well and come up with new ideas while keeping the financial system safe and stable.
Protecting yourself when banking online or with mobile applications
Most banks offer an online banking service guarantee or commitment. This protects you from unauthorized transactions made using your bank’s online banking services. However, it’s your responsibility to keep 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 the risks of providing your username and password to external apps that use screen scraping.
Learn more about your online banking rights and responsibilities.
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