Canada’s largest banks have joined a U.S.-led group developing a common technical standard to share customer data as the financial-services industry inches toward embracing open banking.
Thirty-one Canadian financial-services companies, including most major banks, have joined the Financial Data Exchange (FDX), launching a Canadian chapter of the non-profit group that already counts major American banks such as JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. as members.
Since 2018, Canada’s federal government has been studying the merits of open banking, a concept that allows consumers to more easily share their banking data with different institutions, promising access to better financial services in return. Open banking is more advanced in other countries such as Britain and Australia, which have taken different approaches to setting the necessary standards for data-sharing and security.
The FDX is the industry’s most co-ordinated effort to get banks and other financial-services providers to coalesce around a common standard. And it is also an effort to ensure the banking industry sets that standard, rather than having governments or regulators impose it. The cornerstone of the FDX is its proprietary API, or application programming interface, which governs the way financial institutions connect to share sensitive data.
The FDX API has been adopted by more than 100 companies and deployed to about 12 million customers in the United States so far.
Don Cardinal, managing director of FDX, said in a statement that the non-profit is “inviting all participants in Canada’s financial-services ecosystem to join us.”
Royal Bank of Canada and payments processor Interac Corp. are joining the FDX board, which already includes Toronto-Dominion Bank and most of the largest American banks. And FDX has launched a Canadian working group, which will be co-chaired by TD’s vice-president of digital channels, Franklin Garrigues, and Interac’s Kashmera Self, the associate vice-president of strategy and emerging solutions delivery.
In a statement, Mr. Garrigues said TD is pleased “to be part of the work the industry needs to do to implement industry-wide data standards that put customer safety and security first.”
Other members of the FDX Canada working group include major banks such as Bank of Montreal, credit card giants Visa and Mastercard, Quebec-based financial co-operative Desjardins Group, financial technology companies Flinks and Koho, and digital-only banks Simplii Financial and Tangerine Bank, which are owned by Canadian Imperial Bank of Commerce and Bank of Nova Scotia, respectively.
The federal government is in the second phase of its review of open banking, which it has sought to re-brand as “consumer-directed finance.” Early this year, an advisory committee struck by the government recommended that Canada embrace consumer-directed finance, concluding in a report that “there is no going back.”
Millions of Canadians already use financial-technology services built on the principles of open banking, but many of those services require customers to share their passwords so companies can use a technique called “screenscraping” to gather their data. A lack of clear regulation of the sector has raised concerns about security and privacy, and prompted calls to craft a safer, more effective open-banking ecosystem.
“We feel FDX technical standards offer a flexible, market-based solution to facilitate secure financial transaction data sharing, and look forward to working closely with all industry participants to assess and develop the potential for use of these standards in Canada,” said Rami Thabet, RBC’s vice-president of digital product.
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