Open banking is fast approaching in Canada. Financial institutions across the country are anticipating an update from the Government of Canada this year about its open banking framework. As credit unions gear up for the transition, many have questions regarding the impact of open banking on their organization and how it will affect the financial well-being of their members.

We sat down with Greg Dyck, Chief Digital and Information Officer at Prospera Credit Union and Robert Hayman, Central 1’s Head of Emerging Digital Initiatives to learn more about open banking and its anticipated impacts on Canadian credit unions.

What do you see as the biggest opportunities and risks that open banking presents for credit unions?

Greg: Traditionally, it’s been a challenge for mid-sized credit unions to compete with larger financial institutions. I see a huge opportunity for all credit unions, regardless of their size, to leverage open banking and grow their organization to deliver more value to members. Open banking will give credit unions equal access to member data, helping to level the playing field by giving all financial institutions the opportunity to benefit.

At present, the Government of Canada has stated that open banking will be optional for provincially regulated credit unions. I think the greatest risk to the credit union system is not participating. Credit union participation will be necessary to maintain relevancy and long-term viability in a competitive marketplace. Planning ahead will be essential to our success.

Robert: I strongly agree with Greg’s point, there could be a significant risk in not participating in open banking. As credit union members’ expectations for a top-notch digital experience continue to rise, competitive pressure among financial institutions also grows to enable such services for their members.

I believe the biggest opportunity for credit unions is the enablement of new and innovative digital banking experiences for their members – both existing and prospective – whether those be provided by the credit union directly, or through a third party.

How can credit unions use open banking to improve the member experience?

Greg: Among other benefits, open banking will give credit unions an opportunity to provide improved financial advice to members. Many of our members have relationships with other financial institutions, limiting the amount of information that is available to us. Open banking will allow credit unions to gain a full view of a member’s financial picture to better assess their overall financial well-being.

Another example is on the lending side, where there is an opportunity to improve the lending process for our small business members. Currently, lending to an entrepreneur sole proprietor without a credit history is a very onerous process and sometimes results in a denied application. Through open banking, we can leverage data from other financial institutions much more efficiently to make a better credit decision for that member, giving new entrepreneurs a greater chance at success.

Robert: Open banking will open the doors to many benefits. Credit unions can think of the opportunity in two ways, “data out” and “data in”. Data out enables credit union members to share their data with other participants in the system, including fintechs or other financial institutions. Data in enables members to import their financial data from other entities into their own environment.

As Greg has noted, data in leads to the creation of a variety of value-add services based on the ability to aggregate a member’s data within digital banking, including personal financial management tools, mortgage and loan origination and small business solutions.

How is your organization approaching the open banking opportunity?

Greg: Prospera is planning to participate and expects to be fully open banking enabled. I believe open banking will bring the biggest change to the financial services industry since online banking, likely even bigger. Open banking is a huge opportunity for us to provide even greater value for our existing members as well as advance our value proposition in the marketplace and continue to grow and bring our strategy to life.

We are staying very connected to open banking through direct participation in the Government of Canada’s Privacy Working Group and Steering Committee, serving as chair of the Large Credit Union Coalition (LCUC) open banking work stream and by participating in the Canadian Credit Union Association Open Banking Strategy committee.

To be successful through the transition, we are doing a lot of work and looking at every area of our organization, with an increased focus on our digital capabilities. Prospera is still assessing how quickly we can participate, recognizing that we must keep a sense of urgency to stay competitive with other financial institutions.

Robert: Central 1 is committed to supporting credit unions through the open banking transition. This includes advocating about the credit union difference as part of our participation in the Government of Canada’s Accreditation Working Group and Steering Committee, and across other ecosystem partner engagements, such as the Canadian Credit Union Association, and our work with the Financial Data Exchange (FDX). In fact, Central 1 is co-chair of the FDX’s Canadian Technical Task Force.

Our team is also exploring and identifying how open banking intersects with Central 1 lines of business. A key part of this work is engaging with our clients through planned webinars, outreach and by co-leading our Digital Experience Council with Greg to learn how they see open banking fitting into their strategies.

How can credit unions work together through the transition to open banking?

Greg: Collaborating as a credit union ecosystem will be key to our collective open banking success. The LCUC is spearheading a process to select a national open banking utility for Canadian credit unions. While participation will be the decision of each credit union, we can use a single and common utility, including API management, security, consent management, privacy and much more. By collaborating on this “plumbing” at a national level and making it as efficient as possible, it will enable each credit union to focus their resources on creating value for members in their own unique ways.

Robert: We are already seeing great collaboration and participation in the Federal Government working groups. It’s been inspiring to see leaders unite around certain principles and positions and have their feedback communicated back to the government on behalf of the entire credit union ecosystem. There have also been several knowledge-sharing sessions where open banking strategies have been openly discussed.

Seeing this level of collaboration amongst different entities is rare, it’s refreshing to see. Going forward, as we prepare for full open banking enablement, I expect we will see even more collaboration among credit unions to efficiently deliver a working model for our ecosystem.

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