{"id":31942,"date":"2024-05-21T11:44:55","date_gmt":"2024-05-21T11:44:55","guid":{"rendered":"https:\/\/swoopfunding.com\/ca\/uk\/blog\/open-banking-what-is-it-and-how-does-it-work\/"},"modified":"2024-05-23T13:58:19","modified_gmt":"2024-05-23T13:58:19","slug":"open-banking-what-is-it-and-how-does-it-work","status":"publish","type":"blog","link":"https:\/\/swoopfunding.com\/ca\/blog\/open-banking\/","title":{"rendered":"Open Banking \u2013 what is it and how does it work?"},"content":{"rendered":"<p>Open Banking has changed the way Canadian businesses and individuals can use and grow their money. Fast, efficient, and more innovative than traditional financial systems, Open Banking puts the customer firmly in control. But what exactly is Open Banking, how does it work, and what can it do for you? Read on to find out all you need to know about this financial revolution.<\/p>\n<h2><strong>What is Open Banking?<\/strong><\/h2>\n<p>Open Banking has been gaining traction in Canada, following similar implementations in other parts of the world. It allows major banks to let you electronically share your financial data with other third-party financial providers. Your permission gives these entities \u2018read only\u2019 access to your banking data, such as transactions, payments, and available balances, allowing you to obtain financial services and conduct transactions without the hassle of visiting your bank. With Open Banking, you don\u2019t need to fill out lengthy forms to provide third-party apps or websites with the data they need. Once you\u2019ve given permission through your bank\u2019s mobile or online banking, these services can access the necessary information directly.<\/p>\n<h2><strong>Examples of Open Banking<\/strong><\/h2>\n<p>Open Banking is used by many thousands of businesses and millions of individuals every day and for literally hundreds of different uses. Here are four examples of Open Banking in action:<\/p>\n<ul>\n<li><strong>Business and Personal Finance Management:<\/strong> Data aggregation enables companies to access and combine customer bank account data, such as savings balances, to provide tailored support with money management and actionable insights.<\/li>\n<li><strong>Proof of Income:<\/strong> Crucial for many private and business transactions, including lending or renting residential or commercial property. Open Banking provides instant income verification\u2014there\u2019s no need for payslips, bank statements, or tax returns.<\/li>\n<li><strong>Affordability Checks:<\/strong> Important for lenders in both consumer and business lending. Open Banking allows lenders to analyze up to two years of financial records to achieve an accurate affordability profile.<\/li>\n<li><strong>Online Payments:<\/strong> Open Banking can eliminate the time lag in business transactions by embedding payment processes into the checkout and payment flow of a business\u2019s accounts receivable. Automatic bank-to-bank payments are triggered on agreed timelines, producing a fast and frictionless experience.<\/li>\n<\/ul>\n<h2><strong>How does Open Banking work?<\/strong><\/h2>\n<p>Firstly, no person or business has to use Open Banking. It\u2019s your choice. You have to opt-in to Open Banking, not opt-out. Secondly, every third-party financial provider must ask for your consent to access your data when you sign up for their services. Thirdly, your bank can only share the portions of your data that you want it to \u2013 such as available balances but not recent transactions. You can also withdraw your permission from any provider at any time, and they must renew your permission every 90 days. If you don\u2019t renew, access to your data automatically expires.<\/p>\n<p>As for the technology, without going down a technical rabbit hole, banks share your information securely via technology called an Application Programing Interface (API). APIs act as tech translators, allowing the different systems and platforms of various providers to &#8216;talk&#8217; to each other in the same language and seamlessly pass along the information you&#8217;ve agreed to share. You\u2019ve almost certainly experienced this kind of technology before with popular platforms or apps such as Google, Uber, or SkipTheDishes. For example, SkipTheDishes might use Google Maps&#8217; API so it can work out where you are and where their delivery driver is to tell you when you can expect your take-out meal to arrive.<\/p>\n<h3 class=\"wp-block-heading\"><b>How is Open Banking different from traditional banking?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">There are significant differences between Open Banking and traditional banking:<\/span><\/p>\n<figure class=\"wp-block-table\">\n<table>\n<tbody>\n<tr>\n<td class=\"has-text-align-center\" data-align=\"center\"><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><b>Open Banking<\/b><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><b>Traditional banking<\/b><\/td>\n<\/tr>\n<tr>\n<td class=\"has-text-align-center\" data-align=\"center\"><b>Data ownership<\/b><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Users have control over their own data<\/span><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Banks have control over their customers\u2019 data<\/span><\/td>\n<\/tr>\n<tr>\n<td class=\"has-text-align-center\" data-align=\"center\"><b>Data sharing<\/b><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Allowed between authorised third parties<\/span><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Data typically not shared<\/span><\/td>\n<\/tr>\n<tr>\n<td class=\"has-text-align-center\" data-align=\"center\"><b>Supported services<\/b><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Personalised financial services<\/span><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Generic financial services<\/span><\/td>\n<\/tr>\n<tr>\n<td class=\"has-text-align-center\" data-align=\"center\"><b>Innovation<\/b><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Encourages innovation and advanced services<\/span><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Often limited by need to adhere to established processes<\/span><\/td>\n<\/tr>\n<tr>\n<td class=\"has-text-align-center\" data-align=\"center\"><b>Collaboration<\/b><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Encourages collaboration between service providers<\/span><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Almost zero collaboration<\/span><\/td>\n<\/tr>\n<tr>\n<td class=\"has-text-align-center\" data-align=\"center\"><b>Competition<\/b><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Encourages competition which can improve services<\/span><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">High barriers to entry stifle competition<\/span><\/td>\n<\/tr>\n<tr>\n<td class=\"has-text-align-center\" data-align=\"center\"><b>Speed of service<\/b><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Very fast<\/span><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Typically slower \u2013 for example, bank to bank transfers can take days instead of seconds<\/span><\/td>\n<\/tr>\n<tr>\n<td class=\"has-text-align-center\" data-align=\"center\"><b>Regulation<\/b><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Regulated to safeguard data sharing<\/span><\/td>\n<td class=\"has-text-align-center\" data-align=\"center\"><span style=\"font-weight: 400;\">Complies with traditional regulations<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n<h2 class=\"wp-block-heading\"><b><strong>How is Open Banking regulated?<\/strong><\/b><\/h2>\n<p>The rules regarding Open Banking are strict and designed to protect customer privacy and financial data. These rules have been in place in Europe since 2007, evolving with the Revised Payment Services Directive (PSD2) in 2018. In Canada, Open Banking is being developed and overseen by various regulatory bodies, including the Department of Finance Canada and the Office of the Privacy Commissioner. Only companies that are authorized by the appropriate regulatory bodies can use Open Banking technology (APIs) to access financial information or initiate payments on behalf of a customer. Penalties for misuse of Open Banking systems and data can be severe.<\/p>\n<h2 class=\"wp-block-heading\"><b><strong><strong>Is Open Banking safe?<\/strong><\/strong><\/b><\/h2>\n<p>Yes. As long as they&#8217;re authorised, providers can only access the data that\u2019s needed for the service you&#8217;ve signed up to. For example, if you\u2019re an SME seeking a <a href=\"https:\/\/swoopfunding.com\/ca\/business-loans\/\">business loan<\/a> and you&#8217;ve asked a <a href=\"https:\/\/swoopfunding.com\/\">comparison marketplace<\/a> to look at your business\u2019 current account, it can&#8217;t also look at a <a href=\"https:\/\/swoopfunding.com\/ca\/commercial-mortgages\/\">commercial mortgage<\/a> you have with the same bank unless you give your express permission.<\/p>\n<p>Additionally, all third-party financial providers have to comply with data protection rules. This includes GDPR. The provider must tell you exactly which data it will use, how long for and what it&#8217;ll do with it before you sign up. If you&#8217;re not sure about anything, make sure you ask the provider what data they want and what they are using it for before you give access. If something doesn\u2019t feel right, don&#8217;t share your data with that provider.<\/p>\n<h2 class=\"wp-block-heading\"><b><strong><strong><strong>Open Banking benefits<\/strong><\/strong><\/strong><\/b>:<\/h2>\n<p>Open Banking has major benefits for both businesses and consumers:<\/p>\n<h3 class=\"wp-block-heading\"><b><strong>Benefits of Open Banking for businesses<\/strong><\/b><\/h3>\n<ul>\n<li>Enables businesses to access their customers\u2019 financial data (with their consent), allowing them to offer better and more personalised products and services.<\/li>\n<li>Allows businesses to automate and streamline their financial processes, such as accounting and compliance. This saves time and cuts costs, which can improve efficiency and productivity.<\/li>\n<li>Helps businesses tap into new <a href=\"https:\/\/swoopfunding.com\/\">sources of financing<\/a>, which can increase their revenue.<\/li>\n<li>Helps businesses to detect and prevent fraud. This improves the customer experience.<\/li>\n<li>Can help organisations to capture more sales (especially online and consumer-facing businesses, where slow payment systems often lead to customers leaving unpurchased items in their basket).<\/li>\n<\/ul>\n<h3 class=\"wp-block-heading\"><b><strong><strong>Benefits of Open Banking for consumers<\/strong><\/strong><\/b><\/h3>\n<ul>\n<li>Enables customers to share their financial data with third party providers. This allows access to a wider range of tailored products and services than they may receive from traditional banking<\/li>\n<li>Allows instant payments without the need for credit or debit cards<\/li>\n<li>Helps customers save money on loans and mortgages \u2013 provides instant comparisons<\/li>\n<li>Improves financial inclusion by providing access to financial services to underserved populations<\/li>\n<li>Helps prevent financial fraud by giving customers more control over their data and who can access it<\/li>\n<\/ul>\n<h2 class=\"wp-block-heading\"><strong>Open banking challenges<\/strong>:<\/h2>\n<p>Not everything is perfect in the world of Open Banking. Still a relatively new innovation, Open Banking has yet to address these important disadvantages:<\/p>\n<ul>\n<li><strong>Security fears<\/strong>: By design, Open Banking gives third-party financial services providers access to customers\u2019 confidential data. As a result, many business and personal customers remain worried about security breaches that could occur because of increased sharing. This is mainly driven by customers\u2019 lack of understanding as to how Open Banking works, but it has nevertheless created a wariness among some customers that is proving difficult\u00a0 to eliminate.<\/li>\n<\/ul>\n<ul>\n<li><strong>It removes the interpersonal relationship with the customer<\/strong>: Because everything is handled digitally, old-style, face-to-face encounters between the customer and their bank are getting fewer and fewer. This can lead to a breakdown in the relationship and brand loyalty between customer and provider, which can disproportionately impact older and less technically savvy customers.<\/li>\n<\/ul>\n<h2 class=\"wp-block-heading\"><strong>Find out more with Swoop<\/strong><\/h2>\n<p>Open Banking can give businesses fast access to a range of financial services and products \u2013 loans, mortgages, investments, leasing and more. Swoop is at the forefront of this new financial freedom. Our mission is to provide Canadian SMEs with the best and most cost effective financing options when they need it and with the minimum of fuss. Call us today to find out how your business can benefit from the biggest change in business financing since money was invented.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Open Banking has changed the way Canadian businesses and individuals can use and grow their money. Fast, efficient, and more innovative than traditional financial systems, Open Banking puts the customer firmly in control. But what exactly is Open Banking, how does it work, and what can it do for you? Read on to find out [&hellip;]<\/p>\n","protected":false},"author":26,"featured_media":31945,"comment_status":"closed","ping_status":"closed","template":"","category":[337,334,59],"class_list":["post-31942","blog","type-blog","status-publish","has-post-thumbnail","hentry","category-sme-support","category-swoop-guides","category-blog"],"acf":[],"featured_image_urls_v2":{"full":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled.jpg",2560,1427,false],"thumbnail":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled-150x150.jpg",150,150,true],"medium":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled-300x167.jpg",300,167,true],"medium_large":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled-768x428.jpg",768,428,true],"large":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled-1024x571.jpg",1024,571,true],"1536x1536":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled-1536x856.jpg",1536,856,true],"2048x2048":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled-2048x1142.jpg",2048,1142,true],"image_blog":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled-408x252.jpg",408,252,true],"image_podcast":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled-397x298.jpg",397,298,true],"image_banking":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled-36x20.jpg",36,20,true],"image_blog_internal":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled-840x480.jpg",840,480,true],"image_blog_medium":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled-1024x500.jpg",1024,500,true],"image_single_banking":["https:\/\/swoopfunding.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/05\/buildings-with-glass-windows-351264-scaled-80x45.jpg",80,45,true]},"post_excerpt_stackable_v2":"<p>Open Banking has changed the way Canadian businesses and individuals can use and grow their money. Fast, efficient, and more innovative than traditional financial systems, Open Banking puts the customer firmly in control. But what exactly is Open Banking, how does it work, and what can it do for you? Read on to find out all you need to know about this financial revolution. What is Open Banking? Open Banking has been gaining traction in Canada, following similar implementations in other parts of the world. It allows major banks to let you electronically share your financial data with other third-party&hellip;<\/p>\n","category_list_v2":"<a href=\"https:\/\/swoopfunding.com\/ca\/category\/sme-support\/\" rel=\"category tag\">SME support<\/a>, <a href=\"https:\/\/swoopfunding.com\/ca\/category\/swoop-guides\/\" rel=\"category tag\">Swoop guides<\/a>, <a href=\"https:\/\/swoopfunding.com\/ca\/category\/blog\/\" rel=\"category tag\">Blog<\/a>","author_info_v2":{"name":"Chris Godfrey","url":"https:\/\/swoopfunding.com\/ca\/author\/chris-godfrey\/"},"comments_num_v2":"0 comments","_links":{"self":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/blog\/31942","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/blog"}],"about":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/types\/blog"}],"author":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/users\/26"}],"replies":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/comments?post=31942"}],"version-history":[{"count":2,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/blog\/31942\/revisions"}],"predecessor-version":[{"id":31947,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/blog\/31942\/revisions\/31947"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/media\/31945"}],"wp:attachment":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/media?parent=31942"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/category?post=31942"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}