By Brendan Read
As Canada prepares to adopt open banking, financial institutions (FIs) are figuring out how to embrace this new level of digital information sharing.
Canada is following the lead of other jurisdictions, such as the United Kingdom, Europe and Australia, in giving its citizens more control over how their information is used and which third-party providers can gain access. Open banking is expected to increase competition in the financial services industry, giving consumers more choice on everything from opening a bank account to applying for a loan.
McKinsey & Company reported that, for financial services companies, the potential benefits of open banking include a vastly improved customer experience, new revenue streams and—if executed properly—a more sustainable service model1. For most of these companies, the value will come from having a flexible, scalable and secure open banking platform that delivers reliable products and services.
Financial services companies that establish a first-mover advantage are also likely to be leaders in open banking, pointed out Chris Buck, CEO of open banking platform provider Portfolio+ Inc. (www.portfolioplus.com). This is significant, since PwC UK estimates that in that country alone, the open banking revenue opportunity by 2022 will be upwards of £7.2 billion ($11.7 billion Canadian)2.
“It’s a case of disrupt or be disrupted,” said Buck, whose company is part of the Volaris group of companies under Constellation Software Inc (TSE: CSU).
Payments Business recently interviewed Chris Buck, where he discussed the importance of open banking to Canada’s financial services ecosystem, and how companies can prepare for the new digital-sharing environment.
Payments Business (PB): How big a change will open banking be for Canada’s financial services sector?
Chris Buck (CB): We see open banking as a large opportunity to embrace and increase customer value. Open banking will allow customers to access their own information and execute their financial transactions in a way they find convenient and secure. Open banking is a digital evolution, not a revolution. In our view, it will be a risk-managed approach that carries the day.
PB: How can open banking transform a FI’s business?
CB: It’s an opportunity to attract new customers and keep them for a lifetime. FIs will each embrace open banking in their own way. They will need to ask themselves important questions such as, “What does open banking mean to my bank?” or “What does it mean to our customers?” Open banking will be a journey by a FI or FinTech based on what customers come to expect and demand.
Over time, people will seek out products and services they want from multiple channels. It’s the FIs that offer high-quality, high-satisfaction service delivery that will lead in market share. While the big banks may dominate today, they have to assume they’ll be disrupted over time. The goal for financial services companies will be to capture share of mind, share of wallet and share of heart in their open banking products and services. It starts and ends with trust.
PB: Why should financial services companies prepare for open banking, before it’s formally adopted?
CB: More and more Canadians are becoming aware of and are using digital financial services. It’s evolving quickly and not just with the Millennial generation either. Everyone from Generation Z to Baby Boomers are looking for the kind of services that open banking offers. Customers will do business where it’s most convenient and cheapest to safely manage their financial affairs. FIs need to be on board in this new era of customer-driven service and demand for a superior experience, or risk being disrupted by others that are.
PB: What criteria should FIs look for when seeking out an open banking platform provider?
CB: They should look for a provider that offers all of the following attributes: openness, flexibility, scalability, security, responsiveness and trust. What do I mean by each of these? Being open, flexible and responsive means having a platform that can adapt and change as the banking system and digital technologies inevitably change. The platform should also be able to scale to meet market demand as the numbers of customers and transactions increase. The platform should further be able to operate within the corporation’s technically secure and auditable technology infrastructure. Last but not least, the corporation should be able to trust that their open banking platform provider is in it for the long-term: and not some fly-by-night operation.
PB: How is Portfolio+ Inc. readying for open banking in Canada?
CB: We are ready now. We are able to actively engage in the design and deployment of an open banking platform today. We have a technical solution and a full set of documented open banking application programming interfaces (APIs) ready to deploy. They can be adapted, modularized and customized, as our clients are already finding.
The question for businesses considering open banking is “Which solution do you feel you will need?” Whatever it is, we are ready and able to support their strategy. This is our core business. It’s time that we embrace open banking.