Canadian FinTech CEO Andrew Graham is tired of waiting for open banking to become a reality in Canada. He’s not alone.
More than half a year after Borrowell launched an offering that allows Canadians to use their rent payments to build their credit score, Graham said it has seen significant challenges — ones that a formalized open banking system could resolve.
But despite the open banking advisory committee’s call for the federal government to move aggressively to implement the first phase of the system by January 2023, and the Liberal Party’s 2021 election promise to implement a made-in-Canada model “no later than the beginning of 2023,” the system remains delayed. The federal budget, tabled yesterday, didn’t include a mention of the future system.
“Imagine if, to keep your Netflix subscription active, you had to go through the sign-up process again and re-enter your banking information every 30 days.”
Borrowell’s Rent Advantage program, announced in July 2022, allows users to report their monthly rent payments, using data from their bank accounts, to Equifax Canada, the country’s largest consumer credit bureau.
But things haven’t gone to plan, Graham told BetaKit in an interview. Without a formal open banking system in place to dictate a standard API—a secure way for FinTech startups and other third parties to access users’ financial data—Borrowell has had to rely instead on screen scraping.
The result is that less than half of Borrowell customers have been able to connect their bank accounts for the service. With one large bank, which Graham declined to name, the company is seeing a 75 percent failure rate. And over time, he said, using screen scraping for bank account connections tends to stop working: more than 40 percent of the company’s Rent Advantage users have to reconnect their account each month.
“Imagine if, to keep your Netflix subscription active, you had to go through the sign-up process again and re-enter your banking information every 30 days,” he said.
Borrowell uses a third party service provider to make the connection to Rent Advantage users’ bank accounts. That third party, in turn, relies on a variety of data aggregators or goes through the bank directly to access the user’s financial data. But there’s often friction that prevents the connection from working, such as a hard block from being able to access the data at all, or multiple multi-factor authentication questions. Graham said he has spoken with representatives of the major banks, which were largely supportive of Rent Advantage, but there isn’t an easy solution for connecting to users’ accounts.
That technical challenge has a material cost for users who want to improve their credit. A good credit score is essential for qualifying for credit cards, loans and mortgages with favourable interest rates and terms. A consumer’s payment history is the largest factor in determining that score.
Graham said Borrowell’s challenges speak to why Canada needs to move more quickly on open banking. “We urgently need a real system that puts consumers in control of their data to enable them to better understand their finances,” he added.
Council of Canadian Innovators president Ben Bergen called out the omission of open banking from the budget in a statement that said the organization had hoped to see “more urgency and broader support” for tech companies. “We did not see any update on open banking, in spite of an election promise that was broken months ago,” he said.
Steve Boms, North American executive director at FDATA, said in a post-budget statement the organization was “disappointed at the lack of progress in Budget 2023 toward the implementation of Canada’s open banking regime, particularly since the timeline set forth in the 2021 Open Banking Advisory Committee report has now passed.” Boms said the organization and its 30 member companies will continue to collaborate with the finance department.
Boms told BetaKit that delays in implementing Canada’s open banking framework “risk seeing Canada falling even farther behind its international peers. For the sake of Canadian consumers and small businesses, we hope that the government will accomplish its goal of launching open banking this year.”
Multiple FinTech executives BetaKit spoke with characterized the implementation as being in a holding period.
One executive told BetaKit that while the finance department’s initial intention had been to make an announcement of next steps in February or March, department officials told some participants at the Northwind FinTech Forum in February that the timeline was being pushed back, with open banking lead Abraham Tachjian not expected to hand his recommendations to the Minister of Finance until late spring or early summer. The executive spoke on the condition of anonymity as Northwind operates under Chatham House rule, where event participants can use the information received but can’t share who said it.
“If open banking was a real priority, we would already have it.”
“This is a political will issue in my view. … If open banking was a real priority, we would already have it,” the executive said. “January 2023 was the target in the advisory committee report. But ultimately these are not things the Minister of Finance seems to really prioritize.”
In an emailed statement to BetaKit, a Department of Finance official said Tachjian’s “focus continues to be on the work required to support the government in its commitment to presenting a read-only model of open banking in 2023.” The official said open banking working groups — which have focused on accreditation for participants, privacy, liability, and security standards for the system — will resume meeting on April 14.
In a progress updated posted on the open banking implementation website in December, the Department of Finance said Tachjian, department staff and external experts were turning their focus to a period of “internal policy work” following the working group meetings, which took place from July to late October, and an early December steering committee meeting of all open banking working group participants.
“The working groups have made good progress to date, showing clear consensus on some core elements of accreditation and common rules,” the update said.
The internal policy work, focused “on the future administration of the open banking system,” was previously ongoing alongside working group meetings, the update said.
According to the FinTech executive, API standards and clarity around how the system will be governed remain unresolved. As BetaKit reported in September 2022, working group participants from the FinTech community were concerned that delaying governance decisions could leave Canadians without a place to turn if their data or accounts are compromised, and leave FinTech participants without recourse in commercial disputes with other financial institutions.
Tachjian, working group participants and associate minister of finance Randy Boissonnault covered governance considerations and key functions, as well as technical standards, in a December steering committee meeting. The steering committee includes all members of the working groups.
The ministry official said a “significant portion” of the steering committee meeting was dedicated to governance.
The meeting summary, posted to the open banking implementation website, noted numerous considerations for developing a “purpose-built governance entity” such as federal and provincial jurisdiction issues, existing government frameworks, flexibility and scalability, competition and utility to consumers. The summary said the governance entity should have control over administering the system, supervising the technological performance of the system and participants’ compliance with common rules, and resolve conflicts between system participants, as well as between consumers and participants.
The summary also noted the government was “aware of local [API] standards in other jurisdictions” such as Germany, France, Poland and the Czech Republic, “more extensive review and consideration is under way from those from the OpenID Foundation and The Financial Data Exchange.” It also said deliberations about the approach that government should take toward standards development — in terms of setting a single standard or allowing the market to set one —”are necessary.”
In February, The Logic reported that some banking incumbents were advocating for Symcor — a data-exchange company that’s a joint venture between TD Bank, RBC and BMO — to become Canada’s technology provider for open banking and operate like a utility, or essentially a central API.
A delayed timeline only underscores Tachjian’s 18-month secondment from PwC, which is set to end in September. The finance department confirmed to BetaKit in September 2022 that Tachjian plans to return to the private sector at the end of his term.
“Time is running out given how things are evolving,” said Alex Vronces, executive director of Fintechs Canada. “We need to see [movement] sooner rather than later.”
The FinTech executive said others in the space are increasingly jaded about the implementation timeline. “There’s not a lot of faith within the sector,” they said.
Feature image courtesy Borrowell.