After several months of acquisitions and positioning, Mastercard is preparing to launch its first “open” banking services in Canada in the coming months. Ultimately, this will provide Canadians with greater access to personalized financial tools, from opening a savings account via mobile app to automatically granting a personal loan.
Ultimately, it is consumers who will benefit from the arrival of open services like those of Mastercard. For the time being, the international financial giant will target business-to-business services, the keystone of this digital shift in international finance known as open banking, or open banking as is the consecrated English expression.
We have been talking about the open banking system in the finance industry for a few years now, because it is a digital business model that promises significant gains for its companies: better fluidity of data between partners, greater ease in creating new tailor-made financial services and better control of the financial situation for consumers and businesses.
“It’s all about data [numériques] and their use to create new business opportunities, whether for existing financial institutions or for new and smaller companies. We believe that an open banking system will unlock immense value that lies dormant within the industry,” summarizes Craig Reiff, vice president of open banking products and services for Mastercard Canada.
The Toronto leader believes that it is a good time to launch such services in Canada, after two years of significant digitization of economic activities at all levels: government, commerce, shopping…
“Canada is at an inflection point in 2022,” continued Mr. Reiff. In recent months we have seen the emergence of some financial technologies [fintechs]. And there, the legislative framework is being adjusted. There is a wholemomentum right now. »
In Ottawa to play
Precisely, the Canadian government is slow to keep its promise to adapt its laws to promote the emergence of a more open banking sector. On the legislative level, a committee suggested to the federal government, in April 2021, a roadmap to allow the emergence of an open banking system in the country. The fall elections put a damper on the adoption of the suggested measures, but the Deputy Prime Minister and Minister of Finance, Chrystia Freeland, was again called upon by representatives of the financial sector to accelerate the transformation of the Canadian banking sector.
It is urgent for Ottawa to react, proclaim the representatives of the industry in favor of this change. According to them, there is a risk of loss of competitiveness for Canadian financial companies which cannot follow a movement already well underway in other markets, such as the United States, England, Australia and New Zeeland.
“Currently, consumers and businesses in Canada have no legal right to own their own banking information,” summarizes the Financial Data and Technology Association (FDATA). The North American organization actively promotes open banking. By owning their own data, consumers can more easily transfer that data from one service to another, which drives competition and innovation, says the FDATA.
“There is an urgent need to appoint a federal representative to lead the transition and create a legal framework for the use of digital data,” adds the organization. “This must include the ability for users to quickly make transfers and open bank accounts. Provision must also be made for the creation of a governance body. »
Improved finances
Ultimately, open banking promises the reduction of the time and steps required to complete certain money-related tasks. It is also a question for users of the creation of a digital identity which would allow them to better secure their banking and financial data, which would protect them a little more from possible computer flaws, frequent in the industry.
Access to credit is easier, and it will be easier for the average consumer to access their savings. This does not mean, however, that the objective of this shift is to add to the level of indebtedness of Canadian households and businesses, which remain very high, despite the brightening caused by government financial assistance during the pandemic.
“It’s more of a way to better equip consumers and help them better manage their personal finances,” says Craig Reiff of Mastercard. “For example, there is a lot of information and education that can be offered in a more personalized way through services open to people who have difficulty managing their portfolio. »
Naturally, there is also a business opportunity to be seized, believes the firm PwC: the international market for open banking services saw its value increase from 12 billion dollars to 15 billion between 2019 and 2020, then to 19 billion dollars. last year, despite the pandemic. This value could jump to 47 billion by 2025. North America is seen as the market where growth will be strongest.
This explains Mastercard Canada’s interest in establishing itself early in this market, then that of other banking and financial institutions in preparing for the arrival of the open banking system.