Canadian banks, prepared for Open Banking?

The Open Banking wave is selecting up velocity in Canada. The Advisory Committee on Open Banking, in its ultimate report, mentioned an Open Banking system is achievable for the nation by January 2023, and the federal government is shifting to make {that a} actuality with its latest announcement of an Open Banking lead. The transition of the banking system is an estimated $10 billion alternative for Canadian banks. 

As we’re witnessing, the open information economic system (the spine of Open Banking) is reaching completely different shores at completely different occasions, and in numerous sizes and styles. Europe’s third-party suppliers (TPPs) grew from 100 to greater than 450 in underneath two years, whereas America’s Venmo went from 10 million customers to 40 million in simply two years. Spain’s BBVA is claiming its place as an Open Banking chief because it connects with purchasers on different platforms proven by a partnership with Uber.   

Amit earlier shared his suggestions for the way banks can put together for the ocean of change that Open Banking will carry. Collectively, we’re these suggestions with a Canadian focus.  

Our analysis in Canada exhibits that 76% of banks anticipate buyer adoption and Open Banking API utilization to extend by 50% within the subsequent 5 years. Change is coming. Right here’s how Canadian banks can put together: 

1. Turn into a knowledge custodian

Accenture analysis recognized Canada as a market with digitally-enabled shoppers who’re extra open than others to new digital concepts. Due to this fact, banks ought to prioritize information administration capabilities to assist guarantee shoppers obtain worth for sharing information. 

Banks must also take into account how you can carry their experience in taking care of clients’ cash to the custodianship of their private information.  

The excellent news is banks are naturally positioned for this shift, particularly in Canada the place buyer belief rankings are robust. Within the 2020 Banking Client Examine by Accenture, 44% of Canadian respondents indicated that they belief their financial institution “so much”. 

For banks to construct buyer belief in private information custodianship, they have to give attention to:  

• Credible information that’s correctly collected with buyer consent to share. 
• Secure storage for buyer information with safe processes and infrastructure. 
• Knowledge shops with information identification, categorization algorithms, machine studying capabilities, and information audit mechanisms.  

2. Grasp information administration and analytics

Because the custodians of buyer information, Canadian banks ought to take into account how they’ll use this info to create compelling new provides that add worth for patrons. Others are more likely to transfer in rapidly, so delays might be pricey.  

Take into account the non-public monetary administration (PFM) fintechs main the best way in aggregating information throughout a number of sources. Mint brings collectively spending, balances, budgets and extra for patrons to “entry their monetary lives in a single highly effective app”. Quicken brings the same promise as “one answer to handle all of your funds”. Transferring ahead, banks might want to prioritize the administration and integration of exterior sources. 

Moreover, our analysis discovered the share of Canadian clients who depend on neobanks to be comparable with the US, however considerably decrease than Japan and China. Open Banking developments will affect neobank exercise, serving to them carry new companies and merchandise to market.  

Now could be the time for Canadian banks to have a look at processes and methods that enhance the gathering and use of information from exterior sources. Moreover, I counsel investing in superior analytics instruments and supporting the democratization of information with change administration and coaching. Banks can take into account new roles, similar to ‘information hunter’, to determine new sources of information.  

For banks to grasp information administration and analytics, they need to give attention to:  

• Growing a typical framework for capturing, organizing, integrating and sustaining information. 
• Integrating information shops, information identification and categorization algorithms, machine studying capabilities and information audit mechanisms into buyer provides.  
• Constructing information catalogs to be used throughout the financial institution. 

As Open Banking apps, initiatives and APIs collect momentum, a brand new Accenture report particulars how banks can lead within the open information economic system.

LEARN MORE

3. Supply partnerships 

Subsequent, we wish to stress the significance of partnerships in Open Banking. Having the fitting companions is essential to success.  

others main the best way, we will level to the Open Banking partnership between American Categorical and Tink in Europe. Integrating Tink’s know-how into the American Categorical software course of permits “potential card members to seamlessly hook up with their financial institution accounts and immediately confirm their id, earnings and account info.” This removes the necessity for American Categorical clients to manually enter their particulars, saving time and creating a greater buyer expertise. 

Moreover, CIBC has diminished handbook information entry and boosted effectivity for enterprise purchasers by the SmartBanking for Enterprise platform. With safe, two-way information integration between CIBC, cloud accounting software program corporations Intuit Canada and Xero, and payroll software program firm Ceridian, a “enterprise proprietor can see their full monetary dashboard together with upcoming payroll particulars, pending invoices and receivables, in addition to entry their day-to-day banking.” CIBC was in a position to increase its choices by these strategic partnerships.  

Like CIBC, Canadian banks can work carefully with potential companions to know their enterprise, the information they want to supply and entry, and their integration challenges. In some circumstances, challenger banks are extra agile as a result of they’re already engaged on API infrastructure to attach with companions. Banks can strengthen their competitiveness by directing time to develop robust associate connections. 

To drive partnerships efficiently, banks ought to give attention to:  

• Creating an accelerated onboarding course of to make sure companions can rapidly begin delivering worth. 
• Figuring out and measuring KPIs similar to income per associate and associate satisfaction.  

4. Guarantee trusted safety

Trusted safety is a prerequisite for Open Banking success. We proceed to see API safety rising as a specific precedence.  

In an Accenture survey, 75% of respondents have been cautious of the Open Banking idea, citing considerations in regards to the privateness of their monetary information. Nevertheless, 71% mentioned extra safety measures (similar to authentication passwords, biometric know-how or real-time evaluation of funds) would assist tackle these considerations.  

It’s necessary to implement APIs with correct model management and lifecycle administration processes. This self-discipline will keep away from points with ongoing API administration, particularly preserving in thoughts completely different environments throughout channels and legacy methods.  

For banks to arrange Open Banking safety measures, they need to give attention to:  

• Constructing an software supply controller infrastructure, internet software firewalls and devoted API gateways. 
• Utilizing bot mitigation to guard public APIs from misuse. 
• Planning the cloud journey, beginning with dev and check environments within the cloud. 

So, in what methods and the way rapidly will Canadian banks give attention to these areas to arrange themselves and experience the Open Banking wave? The chance is rising, and Canadian banks are distinctly positioned to form and seize it. 

Open Banking is sort of right here, Canada. It’s finest to be prepared.  

Let’s work collectively to arrange for the Open Banking alternatives coming to Canada. Please join with us: 

Patrick Raimondi 

Amit Mallick 

Additionally, we encourage you to go to the Accenture web site to obtain our full report, “Catching the Open Banoking wave. ”  
Learn report

Particular due to Ly Nguyen, Accenture Senior Supervisor – Canadian Blockchain Functionality Lead, Hannes Fourie, Accenture Analysis Lead – Canada, and Jacob McGonigal, Accenture Consulting Analyst, for contributing to this weblog.  

Disclaimer: This content material is supplied for common info functions and isn’t meant for use instead of session with our skilled advisors. This doc might consult with marks owned by third events. All such third-party marks are the property of their respective homeowners. No sponsorship, endorsement or approval of this content material by the homeowners of such marks is meant, expressed or implied. Copyright© 2022 Accenture. All rights reserved. Accenture and its brand are registered emblems of Accenture.