Maximizing the Competitive Potential of Open Banking: Insight from the Canadian Conversation

Open banking allows users to securely transfer information between financial service providers. This eases consumer switching and incentivizes the development of a range of innovative new financial service products. However, exchanging such sensitive information can require significant regulatory supervision to ensure privacy and data protection. This creates an opportunity for competition authorities to play a key role in ensuring that such regulations maximize competition and innovation while also satisfying these important public policy objectives. This article, which is based on the Competition Bureau’s recent submission to the Canadian Advisory Council on Open Banking, examines current regulatory design issues from the Canadian experience, and proposes measures that will best support a pro-competitive and innovative open banking system.

By Greg Lang¹

I. INTRODUCTION

Open banking enables greater competition and innovation.² By empowering customers to securely share their data between financial institutions, open banking simplifies switching and makes it easier for customers to find and choose the provider or product that best suits their needs. Encouraging switching places greater competitive pressure on incumbents, and supports the business models of new and innovative service providers. Additional financial services competition significantly enhances choice and brings about lower prices, increased convenience, and higher levels of innovation in an indust