What are the challenges of Open Banking in Canada?
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- Updated On:10-Aug-2023
- Replies:1
Short Answer
Open Banking is a technology implemented in simplifying finances and providing new-age financial tools to banking customers. Open Banking system involves sharing data with third party companies to help provide better financial services to users. Security concerns and public disputes are the major concerns.
Detailed Answer
Open Banking is a banking technology concept in which users' banking data are shared with third-party applications and services to help customers have better financial control and better infrastructure of the financial systems of users. It involves sharing user data through Application Programming Interfaces (APIs). This sharing of data helps companies develop products for fulfilling consumer purposes.
Open Banking - Challenges in the Canadian Market
Some major challenges of Open Banking in Canada are :
1. Security Concerns :
The security of data is a major challenge in open banking. As open banking involves granting access to banking APIs to third parties which gives them access to sensitive data of customers. This data is prone to attacks from hackers, increasing the chances of breaches and fraud. Although banking APIs are secure data transfer methods. If third-party service providers have less strict security measures, it leads to an increased risk of data leaks.
2. Public Disputes and Liabilities :
As sensitive data is shared out of trusted sources if a major security breach happens, the financial institutions have to provide compensation. In any major happening, banks would be exposed to related legal, reputational and financial risks if operated without a proper framework including a proper policy and specified guidelines.
3. Customer Trust :
Asking customers for their financial data is a major challenge. Financial information is crucial for people, which is mostly not shared by them due to a lack of privacy and constant monitoring of their accounts and transactions. This information can be used to track customer behaviour and can be misused if leaked or given access to unauthorised individuals. This can harm the person in various ways.
Open Banking in Canada:
Open Banking has various advantages such as better market competition and better financial product services for users. Thus, open banking is a new concept for the Canadian fin-tech market and has various challenging roadblocks that need to be considered. However, addressing these issues and involving user consent in the process can help in establishing a customer-centric open banking system.
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