At the recent 2022 CPPO Prepaid Symposium, it was clear that fintech innovation is being accelerated by leaders in the prepaid space. I heard about exciting developments like prepaid solutions for underserved niche markets and incorporating “hot” tech like wearables and crypto. Canada’s prepaid card providers enjoy somewhat greater regulatory freedom than other financial services, and they’re using it to improve the experience of businesses and consumers.
That said, I repeatedly heard that lack of progress on open banking is a serious obstacle to both prepaid and the entire Canadian banking industry, putting a stranglehold on their innovation efforts.
Open banking APIs are the key to sharing information for fully connected and secure fintech solutions. Although there’s widespread agreement on this, momentum is slow when it comes to implementation. Starting in 2018, the Canadian government conducted a review and engaged in stakeholder consultations leading to a March 2022 announcement that it would move forward with open banking with Abraham Tachjian as the open banking lead.
Mr. Tachijan’s mandate is to “design and implement key pillars of the open banking system, including common rules and an accreditation framework for open banking participants,” but it would seem that the industry is pushing for even greater leadership and support from the Feds.
I came out of the CPPO Symposium with more conviction than ever that open banking is the key to fintech innovation and that we need three key things to make it a reality in Canada:
1. Centralized digital identification
Currently, responsibility for digital identification to access financial and health information resides with the provinces. Secure digital ID with 2-factor authentication is an essential building block for open banking, and it should be implemented nationally. Patients and consumers are increasingly mobile, and they need to have access to their information regardless of their location.
2. Increased government support
The government appears to be taking a somewhat hands-off approach to open banking. It proposes to deliver rules for industry and a framework for accreditation. I think they need to take it a step further by making the required technology available to the industry. If companies have the option to maintain compliance by simply connecting an API to a government-provided service, it will significantly accelerate adoption and availability of open banking to consumers.
3. Reference implementation
In addition to offering compliant solutions, the government should provide a reference implementation to guide the industry towards compliance.
A practical approach to open banking
By taking a practical approach and giving the industry the tools they need as noted above, the government can play a key role in making open banking a reality.
The CPPO Prepaid Symposium made one thing crystal clear: the prepaid industry is growing – and growing up. No longer just “gift cards”, open-loop prepaid solutions are increasingly addressing critical business and consumer challenges. With open banking in place, Canadian fintech and banking companies, including prepaid providers, can move forward quickly with innovative solutions while keeping consumer data safe.