In Canada, Basic Open Banking Just Got An Upgrade To ‘Open Finance’

At a high level, as financial services firms prepare their post-pandemic exit strategies, they will continue to focus on improving customer engagement.

They’ll need to, in order to keep those same super-digitized customers loyal.

FinConecta CEO Jorge A. Ruiz told PYMNTS that in Canada, Banking-as-a-Service (BaaS) — or, as Ruiz termed it, “open finance” — is poised to gain traction across North America.

On Wednesday (July 21) FinConecta said it had signed a software agreement with FICANEX Technology in Toronto, through which the latter will license and deliver the former’s “4wrd” open banking platform to Canadian credit unions (CUs) and banking clients.

That open banking platform, said Ruiz, leverages application programming interfaces (APIs) to give financial institutions (FIs) the ability to innovate new products and services and bring them to market more quickly. Drilling down a bit, FICANEX’s fosters a single point of connectivity for FIs (in Canada and in other countries) that want to increase, or gain initial, exposure to Canadian markets.

As Ruiz said, “Canada is going through a process of defining regulation around open banking and financial institutions, and the financial services sector is starting to pick up the benefits of doing that.”

By connecting to the platform and interfacing with APIs for connectivity, he said, FIs can sidestep the need to connect on a one-to-one basis with providers as they seek to develop and then test new ideas — speeding up their ability to launch new digital services without having to build or buy new technology.

The platform runs on Amazon Web Services (AWS) and offers a catalog of curated FinTech companies that provide digital services to FIs on a Software-as-a-Service (SaaS) model and the ability to integrate to multiple solutions through a single integration 10 times faster.

Platforms And Single Points Of Connectivity

As Ruiz noted, “the FIs don’t have to invest hundreds of thousands or even millions of dollars — because they can just use the platform that we have.”

Open banking, which has its roots in Europe (through PSD2), has been growing rapidly in the EU and is spreading into other geographies. Thus far, a single API standard has yet to emerge — as Ruiz explained, there is no “single language or one way” of doing this. API standards in Asia may differ greatly from those seen, say, in Brazil. The platform model, by way of contrast, needs only integrate with an FI a single time.

“That means, like in the case of Tunl, that whoever connects to the Canadian platform … would be able to connect with 160 institutions,” he said, with the end benefits ultimately accruing to the individual consumer. BaaS then leads to open finance — a broad range of offerings that can even foster financial inclusion among the Canadian population at large, as they are better able to manage their daily financial lives.

As users elect to share more of their data with providers, he said, the enterprises and FIs can create new revenue streams. The FinTechs (which may pay the FIs for their data) likewise can plug in one time to the platform in order to access the FIs themselves in what Ruiz termed a “win-win” scenario for all stakeholders — with a significant greenfield opportunity, as only about 10 percent to 20 percent of the Canadian population is touched by open banking.

“If you don’’ have a platform that will allow you to monitor what you have plugged in, it will become a nightmare,” Ruiz said of the drive to bring services such as remittances to new markets.

The ultimate impact, he said, may be the “Uberization” of finance, where integration between that platform giant and FIs make payments an invisible part of the experience.

“The data are now open data — it’s any information that can be ‘plugged in’ to create an ecosystem — and that’s where the growth and scale will be,” he said.