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CHAPTERS:
0:00 Benefits of Open Banking
0:44 Canada's Proposed Hybrid Approach
1:02 When Open Banking Arrives, so Do the Scams.
1:19 What can Canadian banks do to prepare?
TRANSCRIPT:
Why has Canada been slow to use open banking?
I'm Megan Hall and this is your Feedzai Financial Crime News Weekly Update.
Open banking is where financial data is securely shared between banks and third-party service providers. Canadians have not had access to open banking. They've only been able to use apps that use screen scraping, a process that requires them to share their banking login credentials. But this presents many security risks and data privacy issues. An estimated 4 million Canadians have used screen scraping apps, but Canada wants to move to a more secure type of authentication.
An estimated 10 to 20% of Canadians are unbanked or underbanked, either because of a lack of access to banks, lack of funds, high fees, or other issues. Open banking is expected to allow greater access and financial control to this group.
According to the advisory committee, Canada is taking a hybrid approach to open banking. The government will be mostly concerned with policy guidance and standards, and the industry will be responsible for implementing and running the systems.
Since other countries have already started allowing open banking apps, we can probably predict how this will play out in Canada. Scams flourished. If we look at authorized push payments where the customer is tricked into sending the money themselves, banks have been reluctant to reimburse scam victims. Consumers get angry, lawmakers get angry... Who is responsible for these losses?
Open banking is hugely popular, so how can Canadian FIs get ahead of this? Talk to your technology provider about open banking. Start the conversation now, and have a strategy for your risk management software. Take a look at the trajectory of scams in countries that already have open banking and see how the fraudsters took advantage of the system.
Most importantly, you want to prevent the scams from happening in the first place, through fraud prevention, fraud detection, and customer education.
Thank you for listening. This is Megan Hall with Feedzai, and this has been your Financial Crime News Weekly Update.
