Canada’s small businesses want open banking, too

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Small business owners are eager to unlock new opportunities as Canada builds open banking framework.

Transformational leaps in financial technology are disrupting business as usual for small business owners across the country, allowing them to unleash their own data and use analytics to help cut costs and drive new opportunities.

Small business owners are the heart of Canada’s economy and their open banking needs are not identical to consumers.

This will be unlocked through open banking, which will allow businesses and consumers to help safely share their data between their banks and third-party service providers. The Government of Canada is continuing to develop the framework. Once it’s operational, small business owners, particularly from underrepresented groups, are keen to see how the framework can help break down barriers.

Open banking can demonstrate the creditworthiness of diverse small business owners more quickly and holistically than a manual application process, and at the same time help eliminate some of the administrative burdens that can be barriers themselves.

According to a recent survey by Mastercard, over the past two years 90 percent of small business owners with disabilities, 79 percent of Indigenous small business owners, and 71 percent of women small business owners have sought out new digital tools to manage their businesses. This compares to 59 percent of all small business owners over the same period.

Small business owners from underrepresented groups face steeper challenges when it comes to access to capital and funding. Open banking puts these small business owners in control and allows them to benefit from their financial data, which helps remove barriers that marginalized groups typically have had to endure to access financial services.

At Mastercard, we truly believe removing barriers for small business owners has the potential to unlock a new wave of innovation and investment in the Canadian economy. Small business owners are a huge constituency: 98 percent of all businesses in the country are small enterprises, and they employ 8.2 million Canadians, according to the most recent statistics compiled by Statistics Canada.

Our survey finds 86 percent of Canadian small business owners are using at least one digital tool to manage their business. What these small business owners say they are seeking are tools that require little training or experience to use, that will save them time and are secure. The most appealing features include fraud prevention and payment verification.

Small business owners are the heart of Canada’s economy and their open banking needs are not identical to consumers, so it is important that our open banking system is designed with them in mind.

Our latest research findings reinforce this message we keep hearing from small businesses across the country: they want more choice and better access to secure fintech innovation to take control of their finances, access new capital, and succeed.

The Government of Canada has opted for a hybrid model for the open banking system and has committed to review whether the design is working as desired. This hybrid model will regulate some financial tools.

Small business owners have signalled they will be noticing how the rollout impacts their operations. The vast majority, 80 percent, tell us the open banking framework needs to take their unique needs into account, and 70 percent say they’re more inclined to use digital tools and technologies that are government-regulated. This underlies the importance of trust and transparency in the sector.

As open banking moves through the scaling phase of adoption, we can help drive it by adding greater confidence in the experience.

Mastercard is committed to ensuring the data privacy of Canadians, and by empowering them to access and use that data, we can help accelerate greater innovation. Our Strategy & Transformation Team provides business leaders with research, data, and analysis needed to inform strategic decisions related to open banking that will help generate better outcomes for the business and the end customer.

The government started down the path to its open banking framework in 2018 and it is now confident the correct conditions are in place to ensure consumers, and businesses, can successfully take advantage of all the benefits open banking provides.

Canadian small business owners have overwhelmingly integrated digital financial tools into their operations. The government needs to ensure it has designed an open banking system that meets the needs of these owners, and if it doesn’t, it needs to engage with small businesses to find fixes to ensure there are no barriers to their success.

Learn more about Mastercard’s small business survey.

Photo courtesy of Mastercard via AdobeStock.

Darrell MacMullin

Darrell MacMullin is Senior Vice President of Products & Platforms at Mastercard in Canada. He leads the product teams, strategy, and roadmap execution for all product and platform business lines, including Open Banking, Consumer Cards, B2B, Digital, New Payment Platforms, Cyber Intelligence and Crypto. Darrell brings more than 20 years of financial technology leadership and business management experience to his role. In 2019, he received the Canadian Fintech and AI award for Leadership.

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