With markets currently in a state of flux, you might think that Canada would double down on financial innovation. Instead, decision makers continue to stall on implementing the very thing that would make our economy more competitive and much more stable: open banking.
Dubbed “consumer-driven banking” by Canadian regulators and policymakers, the immediate positive economic benefits that an open system would bring is fundamentally underestimated. This mismatch of priorities is slowing down action, and costing Canadians in the process. Considering the fact that Canada’s GDP has dropped for three consecutive months and we have an ongoing productivity problem, there’s no time to waste.
“The opportunity for Canada’s leaders is clear: end the debate, deliver a robust open banking framework, and finally unlock the game-changing services our small businesses urgently need.”
The solution lies in getting the legislation over the line and announcing firm implementation timelines, not in exhausting efforts on the discussion of theoretical benefits.
Historically, the public narrative often emphasized consumer impact and security concerns, but overlooked the fact that without real-time financial data, small businesses and the communities they serve are left behind. But with the new government back in session, there’s a significant opportunity to shift the narrative.
In the meantime, the absence of open banking continues to negatively impact the liquidity, efficiency, and growth potential of Canada’s small businesses, at a time when they need it most. Not to mention the hidden security risks inherent with current workarounds. If not addressed properly, these misaligned priorities threaten to further widen the gap between policy discussions and the practical realities faced by businesses and their financial advisors.
While there’s talk of innovation and policy, the real-world pain points—like laborious manual data entry, unreliable bank feeds, lack of real-time cash flow insights, extended cash collection cycles, and limited access to capital—are not being adequately highlighted as the core drivers for urgent implementation. As a result, the direct experiences of small business owners and the financial professionals who serve them are largely left out of the conversation.
Plus, without a secure and standardized system, small businesses and their accountants resort to insecure practices as workarounds. Unsafe practices, such as sharing banking credentials to share access to vital financial data, while common, pose a massive security risk, making businesses vulnerable to fraud and mismanagement.
To-date, decision-makers’ emphasis on security and stability in the context of open banking ironically overlooks the far greater, unaddressed security issues stemming from the absence of a regulated framework. Fortunately, the new government’s fall budget provides a clear and timely opportunity to legislate and drive this critical change.
Companies like Xero are hungry for clear implementation timelines. Across the FinTech industry, the demand for change and the willingness to collaborate to move open banking forward is apparent.
FinTech companies intimately understand the barriers our current, closed system presents. Still, the ecosystem remains optimistic about open banking becoming a reality. We’re eager and ready to help make it happen. And a firm commitment to implementation timelines from the government will kickstart product development and investment from both banks and FinTech startups that will help the small businesses that need it most.
As a global brand that operates in regions with open systems like the United Kingdom, at Xero we know that open banking will be a complete game-changer for Canada. It will foster a more competitive financial ecosystem, and enable the development of new, integrated financial products and services.
“We know that open banking will be a complete game-changer for Canada.”
Any further delay in implementing open banking in Canada won’t be merely a missed opportunity for innovation, it would feed the silent, escalating crisis for the nation’s 1.2 million small businesses. Currently, entrepreneurs operate at a profound global disadvantage, forced into insecure data practices just to manage their daily finances.
To address this issue, the discussion and understanding among regulators and policymakers needs to shift.
By continuing to spend too much time on theoretical benefits, achieving solutions to the immediate, pressing operational challenges that are actively impeding the growth and stability of nearly 98 percent of the Canadian economy will not be possible.
Innovators within the FinTech and financial services industry are ready to make open banking a reality.
This is a pivotal moment for decisive action. The opportunity for Canada’s leaders is clear: end the debate, deliver a robust open banking framework, and finally unlock the game-changing services our small businesses urgently need.
This is paramount not only to foster innovation, but to secure the foundational data integrity and competitive future of the businesses that drive the Canadian economy and create jobs.
Mike Cascone is VP, Government Relations and Public Policy at Xero.
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Feature image provided by Xero.