Open Banking Platforms in Canada
The Advisory Committee on Open Banking released a report on open banking in Canada this August. One of the biggest takeaways is that Canadian regulators are worried about screen scraping. This occurs when fintechs ask their customers to share their login information so the fintech can automatically log into the account and scrape the user’s transaction records. Banks don’t like it when their customers share their login data with third parties because they consider this a security risk.
A better solution is for the bank to set up a dashboard where the bank account owner can grant permission to the fintech to access their data. Once permission is granted, the bank provides tokens containing relevant financial information to the fintech through an API. The account holder can also see which fintechs have access to their personal information on this dashboard. If they no longer need a fintech’s services, the account holder can use the dashboard to revoke access to their data. These platforms are widely available in Britain and the US but not as common in Canada yet.
The idea behind open banking is that regulators want every bank to provide this level of data access to make financial services more competitive. The regulators’ goal is for Canadian banks to offer open banking by 2023. So I decided to check whether financial data aggregators had open banking platforms that Canadian banks could use right now. To do this, I looked up several of the major companies that operate in this market, including Plaid, Envestnet Yodlee, Finicity, and Akoya. The goal was to see whether they had open banking platforms that were currently available in Canada.
Plaid launched its Plaid Exchange platform last year to give banks an alternative to screen scraping. It’s available in Canada and the US. The idea behind Plaid Exchange is that it’s expensive for banks to set up APIs that provide their customers’ financial data to fintechs. It’s much more convenient for the bank to sign up with Plaid Exchange. By signing up, the bank won’t have to worry about screen scraping any more. And it’ll be in compliance with the upcoming open banking laws.
This is a big deal for small Canadian banks and credit unions because it means they won’t have to build their own open banking platforms. Plaid estimated that a bank might incur costs of between US $30 million and $80 million over a few years to set up its own API. Meanwhile, the Plaid Exchange pricing page explains that banks can test the platform for free and ongoing costs scale up as the bank uses the platform to process more data. The minimum cost for the bank is $500 per month. Additionally, the bank can set up API access through the platform in three months instead of three years.
Canadian fintechs that use the Plaid Exchange platform include the roboadvisor Wealthsimple, the accounting app Wave, and the rewards app Drop. The idea is that open banking will allow even the customers of small banks to use these apps to manage their finances and obtain additional rewards from customer loyalty programs and other offers.
Yodlee, a subsidiary of Envestment, is also preparing for open banking. In 2020, the company signed a deal with the bank Wells Fargo to use an API to collect data instead of using screen scraping. Wells Fargo has a Canadian subsidiary. As for Yodlee’s Canadian fintech partners, one of its customers is the accounting software company Xero. This fintech startup is based in New Zealand but it also has a Canadian subsidiary. And Xero uses Yodlee to collect data in Canada.
But right now if you visit the Yodlee developer portal, open banking is only listed as an option for the US and the UK. There’s no section listing for Canada yet, so developers don’t yet have API access to data from Canadian banks. So Yodlee may still be scraping bank account data in Canada. The Wells Fargo deal indicates that the company is working on a token-based access method in partnership with banks that operate in Canada, though.
Finicity is a financial data aggregator based in Salt Lake City, Utah. It was purchased by MasterCard last year. Banks use it to verify customers’ financial information when they apply for loans. And fintechs also use it to pull data from their customers’ bank accounts. Finicity also offers an open banking platform and it has partnerships in place with most U.S. banks.
Last year, Finicity signed a deal with TD Bank. This news indicates that Finicity is preparing to support open banking in Canada and is getting its partnerships with Canadian banks in place for that. It’s unclear how long it will take TD Bank to set up API access through. The bank has had a year to work on the project but the Payment Dive article says that these projects usually take a few years.
The Finicity developer platform documents say that developers can only use the platform if they’re logging in from computers in the US or Canada. This indicates that Canadian developers can currently connect to the Finicity open banking platform and use it to pull data from banks’ APIs. It’s unclear how many Canadian banks are currently using the platform though.
Akoya is a financial data aggregation platform that’s owned by major banks. It was originally founded by the stock brokerage Fidelity in 2018, but in 2020 several major banks invested in Akoya. One of these banks is TD Bank, which indicates that Akoya has plans to support open access in Canada as well as the US and other countries.
As the banks’ open data platform, Akoya doesn’t use screen scraping at all. It only pulls data from the APIs provided by its partner banks. And it was designed by the banks to have strong security and privacy features. Akoya uses a zero-trust model for data access and RestFUL APIs. Banks that already provide data through APIs can sign up for Akoya’s Connect service for free.
Plaid Looks Like the Best Choice for Now
Plaid Exchange is currently set up to support Canadian banks and there’s a service page where banks can see its pricing and features. Plaid also has partnerships in place with several Canadian fintech already and they were beta testing its platform before it launched last year. So Plaid Exchange is providing open banking services for Canadian banks and fintechs right now and has been doing this for the past year.
While other data aggregators have their own open banking platforms and are active in the Canadian market, it appears that many of them are still using screen scraping in Canada and haven’t switched to tokens yet. Once this happens, Plaid’s platform will face more competition. But if a Canadian bank wants to set up open banking and provide data access through tokens right now, Plaid looks like its best bet.