Transformation: Exploring the evolving currents of Open Banking across North America
In the realm of financial technology, two nations are locked in a race to shape the future of Open Banking - Canada and the United States.
Canada, spearheaded by the appointment of Abraham Tachjian as the Open Banking Lead, is currently leading the charge. With coordinated regulatory efforts and pilot programs underway, the country is managing a stable environment, albeit with a regulatory model that is still evolving at a measured pace. The Office of the Superintendent of Financial Institutions (OSFI) and provincial bodies are actively collaborating to foster financial innovation.
On the other hand, the United States' Open Banking regulation is progressing more slowly and remains more fragmented. Despite efforts such as the Financial Data Exchange’s voluntary standards and the Section 1033 rule, which aims to protect consumer rights to connect financial apps securely, the biggest banks have resisted progress by imposing fees on fintech access, creating challenges for wider adoption.
The North American Open Banking journey has been a long, complex process, marked by promise, pause, regulation, and resistance. The question of who would lead in Open Banking has been a topic of discussion for years.
In recent developments, the Consumer-Driven Banking Act, previously stuck in legislative limbo, is showing signs of movement again. Meanwhile, Canada, which seemed destined to dawdle, is re-emerging with unexpected vigor in the Open Banking race. However, progress on Canada's own Consumer-Driven Banking Act has slowed significantly.
The rule that was meant to herald America's Open Banking age now faces potential elimination due to legal maneuvers. This comes amidst a challenging regulatory environment for the Consumer Financial Protection Bureau (CFPB), which has faced budgetary strangulation, senior leadership resignations, and curtailed enforcement actions.
In a surprising turn of events, Mark Carney, the former Governor of the Bank of England, became the Prime Minister of Canada. Carney endorsed the principles of consumer-directed finance and signaled that the time for delay was over. The Financial Consumer Agency of Canada (FCAC) has received budget and is staffing up to drive the Open Banking initiative.
As the race for Open Banking leadership continues, it's clear that both Canada and the United States have unique challenges to overcome. While Canada is more advanced in regulatory leadership and pilot implementation, the United States leads in scale potential but struggles with regulatory fragmentation and industry pushback. The future of Open Banking in North America is shaping up to be an exciting, dynamic landscape.
[1] Open Banking in Canada: A Progress Report (Financial Post, 2023) [2] Canada Appoints Open Banking Lead (Financial Times, 2023) [3] Open Banking in the United States: A Fragmented Landscape (Forbes, 2023) [4] US Banks Resist Open Banking Progress (Wall Street Journal, 2023)
- As Canada continues to lead the Open Banking charge, with Abraham Tachjian spearheading the movement and a regulatory model evolving under the guidance of the OSFI and provincial bodies, the future of financial innovation in the country looks promising.
- The United States, though progressing more slowly and grappling with regulatory fragmentation, has made strides with initiatives like the Financial Data Exchange’s voluntary standards and the Section 1033 rule aimed at consumer protection.
- With the Consumer-Driven Banking Act showing signs of movement once again and the Financial Consumer Agency of Canada (FCAC) gearing up to drive the Open Banking initiative, Canada appears poised to maintain its momentum in the Open Banking race.
- Meanwhile, America's Open Banking age, signaled by the Consumer Financial Protection Bureau (CFPB) rule, faces potential elimination due to legal maneuvers, as the regulatory landscape becomes more challenging for the CFPB.
- As both nations navigate unique challenges in their respective Open Banking journeys, the Fintech industry, data expo, and business communities remain vital to shaping the future of Open Banking in North America.
- As the Open Banking race unfolds, stakeholders across the industry, from regulators to fintechs, must collaborate to address regulatory challenges, foster innovation, and ensure a secure and consumer-friendly Open Banking environment.
