Canada’s open banking system may be a work in progress, but experts say that CPAs should be following its development, even at this early stage.
Open banking, or consumer-driven finance, allows consumers and small businesses to transfer their financial data securely and seamlessly among financial institutions and third-party service providers. Consumers gain more control over their financial information and the services they choose. In a recently released final report, the federal government’s advisory committee has recommended that by 2023, a formalized open banking system in Canada be phased in.
In the meantime, Canada’s fintech industry is thriving with startups offering niche digitized financial products and services to eager Canadian consumers. Even banks are on board, entering into bi-lateral contracts with fintechs.
“There’s a boom in the fintech space and things are heating up,” says CPA Michael Wong, principal, research, guidance and support at CPA Canada. “There’s strong demand from millennials and Gen Z for fintech products and Canadian banks are increasingly open to partnering.”
It’s an opportunity for CPAs, who are well-positioned to mitigate challenges and seize opportunities that arise out of this inevitable evolution.
Here are four ways CPAs can play a role in Canada’s open banking future.
Being in step with how open banking and the fintech industry align and the role of its players—including banks, fintech firms and consumers—is key for CPAs to act as advisers to their clients.
“[Open banking] is a relatively new concept to those outside of banking,” says CPA Paula Pereira, partner, banking and capital markets, consulting for PwC Canada. “The more CPAs understand about it and its implications, the better.”
From a data security perspective, the situation remains precarious, with a process called screen scraping—where customers give a third-party, like a fintech firm, permission to access their data (bank log-in credentials, for example)—being used to deliver products or services. This activity can leave consumer’s financial information at risk of cyber-breaches.
Formalized open banking systems—like those in the U.K., E.U. and Australia—provide an extra layer of security, while giving consumers more choice, access and control over their financial services, considered a key benefit to open banking.
“Other jurisdictions have well-established data protection and privacy frameworks for a more mature open banking system,” says Wong. “In Canada, we’re trying to get there, but we are also playing catch up.”
Until then, “do your best to advise your clients and have a business understanding of what open banking is and the impact it could have on your clients,” says Pereira.
To interpret how Canada’s open banking system will play out, CPAs must do their homework, says CPA Benoit Vachon, senior director, risks and controls at Desjardins Group.
“Make sure you’re up-to-date because there’s a lot of touch points,” says Vachon. “Know the best practices and rules around key issues around liability, privacy and security.”
This includes getting to know the advisory panel report (with the knowledge that when the government does take action, the approach it implements may differ in some ways from the panel’s recommendations.) The advisory panel report outlines its two-phased approach highlighting consumer outcomes on: data protection and control; access to a wider range of reliable and consistent financial services; protection and recourse based on market conduct standards.
Phase one—focusing on system design and implementation and run by a government-appointed lead over 18 months—will enact rules of common practice, accreditation and technical specifications.
Phase two—focusing on the ongoing administration beyond 18 months—will be managed by a government-established entity in transition to a fully-operational system.
“[The report] is a roadmap that gives guidance on how [open banking] will grow and be implemented,” says Abraham Tachjian, director of digital banking at PwC. “We are not quite there yet, but this is the time to become well versed in it.”
Once again, CPAs have an opportunity to evolve through innovation.
The technological capabilities, including automation and AI, behind open banking will advance functionality of go-to accounting programs, such as QuickBooks and larger accounting systems like Sage, while improving security and reducing fraud, explains Roy Kao, board member for the Open Banking Initiative (OBIC), a not-for-profit organization that supports open banking in Canada.
This, in turn, will enable CPAs to focus on higher-value-added work over other day-to-day activities, he adds.
“There’s an opportunity for CPAs to really revolutionize their service,” says Kao. “From a CPA’s perspective, I would be very excited because of the possibility, the efficiency and accuracy that an open banking framework can provide.”
Automation also enables CPAs to serve their clients better, adds Wong. Instead of catching issues during month end or quarter end reporting, transactional information can be collected in near real-time and analyzed to offer more up-to-date budget forecasts and cash flow projections. That way, if there is a potential cash flow problem, the CPA can catch it early and advise the business to take appropriate actions before it’s too late.
“The role of the CPA becomes more of a proactive, predictive role, as opposed to a reactive role,” says Wong. “This aligns with the profession’s shift from hindsight to foresight and the focus on data analytics to better support business decision-making.”
Out of a proactive mindset, comes big picture thinking.
It’s a necessary outlook when understanding what open banking means for an organization from a strategic standpoint, both in the short- and long-term, says Pereira.
Think about what role the business will play, products and services it will offer, while identifying any joint ventures or arrangements that can push organizations into the forefront, she adds. This may include reviewing and adapting any internal governance processes so that they adhere to any regulatory requirements.
“Start thinking about the strategic implications for your clients from a business, operational and technological perspective,” she says. “And how they are going to evolve in the financial services ecosystem.”
Finally, Tachjian recommends CPAs use open banking as a launching point to differentiate themselves and take advantage of all it has to offer as it’s implemented and evolves.
“We’re at a watershed moment,” says Tachjian. “There’s a commitment to making this happen with benefits to everyone involved. Leverage those strategic implications and take advantage of them.”
It isn’t new news that the accounting profession is evolving. Dive deeper into what the future holds for CPAs and the industry overall with CPA Canada’s Foresight: Reimaging the Profession resources. Plus, check out the Mastering data series for topics such as corporate data policy and how to digitize your company.