Open Banking in Canada: what to expect next

Who is VoPay? And what’s their role in Canada’s Open Banking playing field?

VoPay is a data-driven payment transformation company. We build innovative payment products that reduce friction for digital enterprises simplifying the complexity of offering account-to-account payment (A2A) methods. A2A payments are our core focus. In Canada, these payments are called EFT (electronic funds transfer), similar to ACH in the US. It is the most common payment method in North America with over 19% of total payment volume and 51% of total transaction value in 2019.

Major pain points with these payments include lack of visibility and traceability, which causes issues for both consumers and businesses that use this method.

Lack of visibility is the inability of service providers to verify the fund’s availability and the status of the payer account. Whereas traceability is a delay in verifying the status of the transaction. Therefore, causing a delay in validating the transaction status. We overcome these challenges by applying Open Banking technology to account-to-account (A2A) payments – offering our clients a larger pool of tools and services to enhance their service offering while helping consumers obtain services faster.

What is Open Banking’s status in Canada?

The concept of Open Banking is active in Canada. Over 4 million Canadians are sharing their financial data using the online data transfer method, screen scraping, to access a range of innovative financial services driven by Open Banking.

Recently, the Advisory Committee on Open Banking dropped its final report on Open Banking, can you provide more details on this?

The Advisory Committee on Open Banking provided recommendations on how to modernise Canada’s financial services sector. To expedite the implementation of a unified Open Banking system, the advisory committee suggested a two-phase approach. The first phase is aiming to operationalise the Open Banking system by January 2023. There are three key pillars for an Open Banking system to be operational, which include: common rules for participants, accreditation to allow third parties to participate, and technical specification to allow safe and effective data transfer.

How far does Canada still have to go in its Open Banking journey? What are some of the challenges Canada is facing in Open Banking?

With the rapid growth of digital transformation globally, Canada is stepping up to meet the expectations and challenges of the future by implementing an Open Banking structure. I think the most important component of this phased approach is the establishment of common rules on how regulated financial institutions and third-party service providers will work together to ensure consumer protection while offering a positive consumer experience.

If adopted properly, Open Banking will alter the financial landscape. It will also improve the lives of Canadians, bring more equality to the industry, and help small to medium-sized businesses along the way.

How did digitalisation accelerate in Canada since 2020 and what was the pandemic’s influence?

Digitisation has accelerated in Canada at an extraordinary pace since the COVID-19 pandemic. As global citizens, we altered how we work, travel, shop, and how businesses pay for goods and services. 40% of Canadians who used to be weekly users of cheques were using cheques less frequently, as well as 62% of Canadians reported using cash less than pre-COVID-19.

For businesses that meant adopting digital experiences very rapidly to meet their customers' new habits. Businesses are increasingly replacing cash and cheques with faster, safer, more convenient digital payment options. And for Open Banking that meant one thing: opportunity. Open Banking humbly stepped out of the shadows of the traditional financial services industry and presented itself as the future.

What more do you expect from Open Banking in Canada? And will it be regulatory-driven?

I am a firm believer in financial inclusion and Open Banking is just one of the several initiatives that support financial inclusion and innovation. Open Banking can help drive innovation and increase new services or improve the quality of existing services for people who have bank accounts but are underbanked.

As suggested in the recent Open Banking report, there will be a legislative framework and governance entity that will manage Open Banking in Canada. However, the implementation and establishment of a formal governance entity and legislative body will take many years. And may delay the launch of an Open Banking system in Canada for many years. For this reason, the government suggested a hybrid non-exclusive government-led, not industry-led initiative, being the best approach for Canada.

In my view supporting micro, small, and medium-sized businesses will be the most important use case in Canada. If implemented properly under the right regime, it can support these businesses to have access to a broader range of services focused on their particular needs such as cash flow management, financial forecasting, and also enhanced borrowing options.

This interview was originally published inside the Open Banking Report 2021. To download the report, please click here.

About Hamed Arbabi

CEO and Founder of VoPay, Hamed Arbabi has successfully built multiple startups and leveraged his knowledge of business expansion to develop them into successful, disruptive organisations. With over 15 years of executive-level experience in spearheading comprehensive strategies and business developments, Hamed has a proven track record of the global payment industry.

About VoPay

VoPay’s Payment-as-a-Service platform is revolutionising the future of payments by creating robust payment, collection and verification solutions specifically designed for each industry. By integrating a single API, businesses can instantly connect to all major payment rails securely and leverage data-rich information for better decision making.