Unlocking business value with open banking

Praveen Sharma,

Sr Director, Head of Banking and Financial Services Solutions - Americas 

Published: April 12, 2024

Open banking has emerged as a revolutionary force reshaping the financial industry, promising increased transparency and customer empowerment. In this blog, we will unravel the intricacies of open banking, shedding light on its customer-centric aspects and providing valuable insights gathered from Virtusa's experiences in the global open banking arena.

Potential benefits of open banking:

Open banking presents a transformative opportunity for financial institutions by fostering competition and enhancing customer experiences. It can also help create new revenue streams, optimize business processes, drive product agility, and strengthen customer relationships.

Understanding customer consent in open banking:

Consent management solution is pivotal in securely and transparently facilitating financial data exchange. It empowers customers by giving them control over their data, ensuring their consent is explicitly obtained before their data is shared with consented parties.

With a robust solution, financial institutions can not only comply with regulations but build a comprehensive engine that provides the flexibility to enables customer with self-serve options to grant, refresh, validate and revoked access across all their customer touch points there by building trust, and deliver enhanced value to their customers in the evolving landscape of open banking.

Navigating the regulatory landscape:

A crucial aspect of the open banking journey involves navigating the ever-changing regulatory landscape. Canada emerges as a focal point for regulatory changes, with the US already having regulations like CCPA, CPRA, CFPB, CDPA and the amendment of Article 1033 Dodd-Frank Act. In addition, compliance with the General Data Protection Regulation (GDPR) and Customer data rights (CDR- Australia) adds another layer of complexity and significance. GDPR, a robust data protection framework, originated in the European Union but holds implications for any organization handling EU citizens' data. CDR gives Australians greater control over their personal data enabling them to access and share their data with accredited third parties to access better deals on everyday products and services. 

Consumer-driven banking: Transforming financial access and security

Consumer-driven banking, synonymous with open banking, revolutionizes financial systems by allowing individuals and businesses to transfer their financial data to diverse service providers securely. These encompass applications that utilize data to offer automated budgeting and savings advice. However, the current practice demands Canadians to share their banking credentials with financial technology companies, posing inherent security, privacy, and liability risks in case of data breaches or losses.

In response to these challenges, the 2023 Fall Economic Statement outlines the federal government's commitment to introducing legislation through Budget 2024. This legislation aims to establish a comprehensive consumer-driven banking framework regulating access to financial data. The envisioned framework ensures Canadians and small businesses have safe and secure access to financial services and products, fostering improved financial management.

Concurrent with this announcement, the government releases a policy statement delineating key policy objectives and core framework elements. These include governance, scope, accreditation, common rules, and technical standards. This policy statement is a guiding beacon for the industry as the consumer-driven banking framework unfolds. Canada proposes a framework aligned with its major trading partners, including the United States, acknowledging Canadians' frequent cross-border activities.

Empowering Canada through a consumer-driven banking framework

The forthcoming implementation of a consumer-driven banking framework promises substantial benefits for Canadians:

  • Secure access and sharing: The framework empowers Canadians by providing a safe avenue to access and share their financial data.
  • Fee-free transactions: Canadians accessing and sharing their data will not be subject to fees, enhancing accessibility and encouraging widespread adoption.
  • Protection against risks: The framework addresses risky practices like screen-scraping to safeguard Canadians and the overall financial system.
  • Liability measures: Ensuring accountability, the framework specifies that parties at fault are liable for any damages or data breaches, instilling a sense of responsibility in data handling.
  • Access to innovation: Canadians can safely explore innovative products and services. This includes apps that build credit scores, account aggregators providing a comprehensive financial picture, budgeting tools offering spending insights, and platforms furnishing automated financial advice tailored to individual financial situations and needs.

In essence, the consumer-driven banking or open banking framework promises enhanced security and regulatory oversight and envisions a future where Canadians can seamlessly access and benefit from a spectrum of financial services, fostering a more dynamic and responsive economic landscape.

Creating opportunities for financial institutions:

Through open banking, banks can leverage external financial service providers, third-party developers, and FinTech companies to enhance their service offerings. The collaborative exchange of financial data allows banks to provide customers with more personalized and innovative products experience embedded within the banking product offering. By embracing open banking, financial institutions can tap into new revenue streams, improve customer experience, and stay competitive in a rapidly evolving economic landscape. Additionally, it facilitates the development of integrated financial solutions, encouraging partnerships that benefit both the banks and their customers. This collaborative approach opens avenues for strategic collaborations and partnerships within the financial industry.

Virtusa's approach to open banking initiatives:

Virtusa, a key player in the open banking arena, takes a unique approach by focusing on frameworks that serve as accelerators for financial institutions. Rather than merely developing products, Virtusa advocates creating ecosystems enabling financial institutions to swiftly adapt to open banking requirements. With our extensive knowledge of the banking industry and expertise in navigating regulatory frameworks, we empower financial institutions to chart a course toward successful open banking implementation. Our consulting services provide strategic insights, technological solutions, and a roadmap for banks to harness the full potential of open banking, ensuring a seamless and value-driven transformation. As a trusted partner, Virtusa enables banks to adapt, grow, and thrive in the digital age of open banking.

Our strategy involves:

  • Vigilant monitoring of changes in the financial and regulatory landscape.
  • Ensuring compliance.
  • Providing financial institutions with the tools to adapt.

We focus on delivering a consent management solution that enables banks to securely navigate the evolving data sharing landscape. 

As the Open banking journey unfolds, financial institutions must remain agile, leveraging technology and strategic partnerships to stay at the forefront of this transformative wave. The collaboration between industry players, coupled with a commitment to compliance and customer-centricity, will define the success of financial institutions in the dynamic landscape of Open banking.

Open Banking Solutions

Virtusa's open banking solutions suite can help accelerate and streamline your open banking adoption.

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