‘Open banking’ holds promise, security fears loom

As banks work to fortify their cybersecurity defences amidst a growing number of data breaches, they are also exploring the promise of so-called “open banking,” a concept that could finally disrupt the staid financial services industry.

Customers have increasingly moved away from physical branches toward online and mobile apps, but banking has yet to reach its “Uberization” moment, one that breaks down traditional models to usher in new innovations, as Uber has done for the taxi industry.

Open banking — granting third- parties like financial technology startups access to bank data to develop innovative apps — could be such a “game changer,” according to Toronto Dominion Bank’s chief information officer, Jeff Henderson.

All but one of 100 payment executives at major banks globally said they were planning major investments in open banking by 2020, according to an online survey by consulting firm Accenture released last month.

But even as Canadian financial institutions toy with the idea, they’re concerned about the looming risk to consumers’ personal information amid the growing threat of cyberattacks.

The Accenture survey also showed that 50 per cent of respondents said that implementing the emerging concept increases risk.

“There’s no question this is a trend,” TD’S Henderson said. “(But) I want to make sure that any time we exchange information externally, that is done so in a very controlled and understood manner.”

In these early days, the exact nature of the innovation in the open banking landscape is unclear, said Bob Vokes, managing director of financial services at Accenture in Canada.

“What we’re trying to do in open banking is to create new sets of services off of the banking data, or alternatively, allow you to manipulate your banking information in a different way,” he said.