Next month, Canada unveils its budget for 2024.
The federal government’s annual economic blueprint is expected to include a long-anticipated framework for open banking.
Open banking rests on the idea of secure data sharing. By enabling consumers to share their banking data with other firms, financial processes such as payments and accessing credit can become streamlined and simplified.
But while open banking is gaining traction all over the world, Canada is falling behind.
Canada has been slow to adopt open banking protocols compared to the US and the UK, which may be why citizens continue to be either unaware of, or confused by, the concept.
When it comes to open banking, 57% of Canadians acknowledge being unfamiliar with the concept, according to recent data from Abacus Data—while a mere 12% claim some familiarity.
Canadians’ main concerns with open banking revolve around data security (63%), privacy (62%), and unauthorized access to their personal information (54%).
“Given these apprehensions, it’s necessary for open banking solutions to prioritize innovation while ensuring consumer protection and data security measures,” writes Eddie Sheppard, who serves as vice president of insights for Abacus.
Yet open banking holds the potential to boost security, not erode it. For example, data sharing can enable real-time fraud detection.
Sheppard anticipates the cautious nature of Canadians may spur a bit of a Luddite effect.
Citing a “widespread lack of understanding among many Canadians,” Sheppard points to a pattern reflected in past technological advancements: we were initially hesitant to normalize email, smartphones, and online shopping, for example.
“In each instance, initial resistance gave way to widespread acceptance as people recognized the benefits of these innovations,” said Sheppard.
It would also help if open banking was marketed to Canadians in a more palatable form, rather than comprising nebulous high-level concepts that may be too vague to gain consumer trust, experts posit.
“Typically, when I see consumers and people talking about it, it’s clear to me that it’s not well understood,” Osler financial services lawyer Elizabeth Sale informed Ian Bickis for The Canadian Press. “That needs to be overcome; people need to actually understand what it is.”
Overall, fostering digital literacy and advancing open banking awareness “are crucial steps towards creating a more inclusive and resilient financial ecosystem in Canada,” Sheppard concluded.
“By addressing these key areas, the industry can better equip Canadians to navigate the complexities of modern banking and improve their financial well-being,” he said.
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