Canadian economists have welcomed major changes to the Canadian banking system. In the recent Economic Statement, the Federal Government has promised to introduce Open Banking consumer-driven banking by 2024. The Liberals promised to legislate during the 2021 election campaign.
Concordia University economics professor Mosh Lander said it would bring competition to the Canadian banking world.
Open banking emphasizes the exchange of financial data between different services, so that customers can bring their accounts under a single interface, even if they belong to different banks. That’s the idea of open banking, Landor said. Suppose someone comes and says, all you have to do is tell me the various account and transit numbers, so that I can bring them on one platform. Then everything will be easy to reach at your fingertips. There will be not only your existing accounts, but also potential accounts, so that banks can advertise through this platform.
Many countries have embraced the idea, Lander said. This is necessary to create competition in mortgage rates and to reduce the monopoly of a few major Canadian banks. While the benefits of competition created by this legislation have been brought home to Canadians, they have not gone very far. What they have not been able to do so far is open the door to international banks.
This will force Canadian banks to focus on providing superior service. Imagine if an American giant or a major European bank set up shop in Canada, what it would be like for Canadian banks, who are not currently in any kind of competition.
The federal government has said in its Economic Statement that it will introduce legislation in 2024. Although the Liberals initially announced that Open Banking would be implemented by 2023.
