You may have heard the term open banking - and wondered what it means for you. At its heart, the idea is fairly simple: you should have greater control over your own financial information and how you choose to use it. It’s also commonly known as consumer-directed finance, or more recently, consumer-driven banking.
For Kindred, any conversation about open banking begins in the same place as our approach to other technology: protecting members’ privacy and financial information while considering how new tools could provide meaningful value.
Today, Canadians increasingly use apps and services that help them budget, manage their finances, access financial advice, or bring information from different financial institutions together. The challenge is that some of these services have traditionally relied on a practice known as “screen scraping,” where people provide their online banking username and password to a third party so it can access their account information.
Sharing your online banking credentials creates security concerns. You should never have to give another company your online banking password to benefit from a financial service.
Open banking is intended to provide a safer alternative. It creates secure ways for you to authorize financial institutions to share certain financial information with an approved third party, without sharing your online banking credentials. The technology behind this uses application programming interfaces, or APIs. Think of an API as a secure bridge that allows two authorized systems to communicate directly with each other.
One of the most important principles behind consumer-driven banking is choice. Open banking isn't intended to make everyone's financial information openly available. Rather, it is designed to give consumers a secure way to decide whether they want to share their information and, if so, with whom.
For example, in the future you might choose to give an authorized financial planning tool access to certain account information so you can see a more complete picture of your finances in one place. The important distinction is that you would be providing permission to access the information, not handing over the credentials that allow someone to sign into your account.
Done well, consumer-driven banking has the potential to provide Canadians with greater control, choice, security, and access to useful financial services.
Canada's approach to consumer-driven banking continues to evolve, and Kindred is staying closely involved in the conversations taking place within the credit union sector.
As a member-owned financial cooperative, our approach to technology is grounded in our purpose and values. Before adopting new technology, we consider both its potential benefits and its risks, including a fundamental question: Will this help us provide members with innovative solutions that align with our purpose and values?
That same approach applies to open banking.
We recognize the potential for consumer-driven banking to give members more choice and greater control over their own financial information. At the same time, protecting your privacy and safeguarding your personal and financial information remain essential considerations.
As Canada's consumer-driven banking framework develops, we'll continue to learn, participate in industry conversations, and carefully consider what new opportunities could mean for Kindred members.
While the technology and regulations continue to develop, one piece of advice doesn't need to wait: protect your online banking credentials.
Don't provide your online banking username, password, or authentication codes to another person, app, or service. If a financial service asks you to hand over your credentials so it can access your banking information, consider whether there is a safer alternative.
Technology will continue to change how Canadians manage their money. Our role is to understand those changes, consider them thoughtfully, and help members navigate them with confidence, while prioritizing security, privacy, choice, and your financial wellbeing.