July 3, 2019 by Greg Meckbach
If open banking is on your radar screen, Senator Colin Deacon would like to hear from you.
“I would love to have a conversation within [the property and casualty insurance] sector to talk with your sector leaders at some point, just to understand where they see this going,” Deacon said of open banking in a recent interview with Canadian Underwriter.
Deacon, who represents Nova Scotia in the upper chamber of Parliament, is one of the senators who studied the issue of open banking. The resultant report, Open Banking: What it Means for You, was released June 19 by the Senate committee on banking, trade and commerce.
One of the 10 recommendations in the report is that the federal government establish an innovation sandbox to allow new third-party providers to test and develop open banking technology.
Meeting with property and casualty brokers and carriers “would be an important part of informing the banking committee going forward because our committee intends to do an awful lot more work in this field,” Deacon told Canadian Underwriter.
Last month’s report is just the first step in the committee’s work on open banking, he suggested.
“There is a global transformation going on and we want to make sure Canada has the ability to benefit from that, not just get punished by it because we are not competitive. We have to have Canadian companies in the fintech field that are globally competitive,” said Deacon.
Some say open banking provides an opportunity for fintechs to improve service offerings because they could get insight into customer data than they currently can.
In some countries outside Canada, open banking has two components, the Senate committee said in its report. One is to give consumers the ability to tell banks when they can share selected financial data with other businesses. The second is to give customers additional ways in which to make payments from their bank accounts.
Open banking is somewhat of a misnomer because it is not just about banking, suggested Justin Ferrabee, chief operating officer of Payments Canada, in an interview.
With open banking, a person could give a fintech permission to look at a dashboard and view the information on their home and auto insurance, life insurance, investments, and their brokerage account for their registered retirement savings plans, said Ferrabee.
“It’s really open data. It doesn’t mean insecure data. It means customer-controlled data. [The client] gets to decide who can see what.”
A major opportunity for fintechs is to improve the quality of a customer’s online experience, said Ferrabee.
For a broker, the greatest risk is a fintech without a bricks-and-mortars office could find a way to give customers better online service and at a lower cost, Ferrabee warned.
“They are going to be able to look at a customer from a broader portfolio. That’s going to have an impact on those who are very narrowly focussed in a single set of financial services.”
One of the committee’s recommendations is that the federal government to “confirm the prohibition of the use of consumer banking data for insurance underwriting purposes, ensure continued stability of the financial sector and provide any necessary bank-specific consumer protection measures.”