Armed with such data, a third-party fintech could potentially tell a consumer how much they could save on fees, said Stephanie Holmes-Winton, CEO and founder of Halifax-based fintech CacheFlo Inc. Through open banking, a fintech could learn that a client has multiple accounts at different institutions with similar investments in them. The fintech could then compare the fees, Holmes-Winton said.
Getting a complete picture of a client’s investments has other benefits. For example, a fintech could determine whether all of a client’s investments put together (as opposed to at just one institution) match their risk tolerance, Holmes-Winton suggested.
Open banking could also speed up know-your-client (KYC) processes, said Darcy Ammerman, partner and banking regulation lawyer with McMillan LLP. This is because a third party with access to a consumer’s banking data could potentially automate the process of filling out KYC forms. This is one example of how open banking could “absolutely” disrupt wealth management by improving efficiency, Ammerman said.
But don’t expect things to change overnight.
Some people may overestimate “the degree to which there will be an effect and how fast there will be an effect,” Holmes-Winton said. Fintechs could receive a lot of banking data, but not necessarily in a format that’s easy to use or understand.
In 2021, a government-appointed advisory committee recommended that open banking be up and running by January 2023.
In the committee’s proposed initial phase, third-party service providers (such as fintechs) should be able to read data from clients’ chequing and savings accounts, investments accounts, RRSPs, TFSAs and non-registered accounts that hold stocks, bonds, mutual funds and GICs, the committee said in its final report. Open banking should be mandatory for federally regulated banks and optional for provincially regulated institutions and “other entities,” the report added.
The federal government “remains committed to implementing an open banking system,” wrote a Department of Finance spokesperson in an email to Investment Executive, without confirming that open banking would be running by January. The advisory committee “prepared a roadmap” to implement open banking in Canada and the federal government “welcomes its findings,” the spokesperson said.
While the exact implementation date is uncertain, the March 22 appointment announcement of federal open banking lead Abraham Tachjian shows there is “good momentum,” Ammerman said.