Canadian credit unions seek a leg up through open banking

Canada’s largest credit unions are joining forces to prepare for the implementation of open banking in the country, giving them a new competitive tool in a nation where the retail banking market is dominated by six large banks.

The Canadian government plans to mandate that federally-regulated financial institutions participate in open banking in the years ahead, enabling consumers to share their financial data securely between financial institutions and fintechs. The vast majority of Canada’s 434 credit unions and caisses populaires (the equivalent in French-speaking Canada) are provincially-regulated and aren’t obliged to participate, but they still see open banking as an opportunity to gain new members.

Lacking the technological resources and political influence of Canada’s six big banks, the credit unions are collaborating through trade associations and credit union service organizations to influence open banking regulations, develop API standards, and create interoperable systems for exchanging customer data.

Current provincial regulations typically limit membership to residents of the credit union’s home province. This stifles competition with large banks and neobanks, which can offer accounts nationally. Credit unions hope they can use open banking to reach new members in other provinces without going federal and becoming subject to federal regulations, said Michael Hatch, the vice president of government relations at the Canadian Credit Union Association. The CCUA represents 219 credit unions and caisses populaires. 

But this use of open banking may require provincial credit union regulations to change.

The CCUA has already helped persuade the government to allow credit unions the opportunity to opt into open banking from the start, Hatch said. The CCUA’s recommendation was included in an August 2021 government report which drew up a roadmap for implementing open banking.

The Large Credit Union Coalition, which represents Canada’s largest credit unions, is pushing to align provincial credit union regulations with federal regulations. 

“There’s a concern that provincial regulations will conflict with the federal open banking framework, for example on privacy legislation and consumer protections laws,” said Patrick Barr, the LCUC’s director of strategy and programs. “This would delay or complicate credit unions’ participation.” 

“As our member base includes smaller communities that larger FIs may overlook and SMEs which are typically underserved, we can secure open banking partnerships that big banks won’t cater to,” said Jay-Ann Gilfoy, president and CEO of Meridian Credit Union in Toronto.


Fintech collaboration with credit unions is another example of where provincial regulations may need to change, Hatch said. In some provinces, there are limits on credit unions’ exposure to third-party investments. 

Canadian credit unions are keen to cooperate with each other in implementing the technology necessary to keep up with financial services developments. Open banking will be introduced in tandem with two other key initiatives: the launch of the Real-Time Rail instant payment system in 2023 by payments infrastructure operator Payments Canada, and the rollout of the Verified.Me digital ID platform by Canadian debit network Interac. In October 2021, Interac acquired the Canadian rights to Verified.Me from its developer, Toronto, Ontario-based SecureKey Technologies.

Credit unions hope to compete with banks by using open banking to form partnerships with fintechs that increase the range of products they can offer. 

Toronto-based Meridian Credit Union is looking for partnerships to bolster areas where it has product or service gaps, said president and CEO Jay-Ann Gilfoy. In preparation, Meridian, Canada’s second largest credit union, is investing in middleware to enable it to connect with fintech partners.  

“As our member base includes smaller communities that larger FIs may overlook and SMEs which are typically underserved, we can secure open banking partnerships that big banks won’t cater to,” Gilfoy said. “Also, being a co-operative gives us an advantage in being able to share investments with other credit unions to enable the infrastructure needed for open banking.”  

Equitable Bank, which is based in Toronto, provides banking services to Canadian credit unions through its subsidiary Concentra Bank. 

“Open banking is a huge opportunity for small FIs,” said Andrew Moor, president and CEO of Equitable. “While big banks can offer a wide range of products, credit unions have more narrow product offerings. Through open banking, they can offer their members products from other suppliers in areas they are weak in such as wealth management.” 

Vancouver-based Central 1 Credit Union, which provides services to credit unions in British Columbia and Ontario, is investing in technology such as middleware, application programming interfaces, data security and digital ID to ensure the digital banking platforms it supplies to its clients will encompass open banking, said James Crickmore-Thompson, Central 1’s director of product management.

The LCUC has been working with industry bodies such as the Financial Data Exchange, which has created an increasingly popular open banking standard in North America, to develop technical API standards, and the Digital Identity and Authentication Council of Canada to enable the development of an interoperable digital ID framework to support open banking. 

A key part of preparing for open banking is providing access to clean data, said Jeremy Trask, chief digital officer at Regina, Saskatchewan-based Conexus Credit Union. Conexus has developed a cloud-based data hub and policies covering data cleansing, governance and ownership.

“We see opportunities to provide members with account aggregation services using open banking data to generate insights about them, leading to sales opportunities,” said Trask. “For example, we might see that they don’t have a credit card and can offer them our credit card.”

As well as working on cybersecurity and digital ID initiatives, Servus Credit Union has been investing in data virtualization platforms to pull together multiple internal data systems for open banking, said Atul Varde, chief information and payments officer at the Edmonton, Alberta-based credit union. 

“Improving our data management will provide us with ‘one version of the truth’ for customers’ data,” he said. 

Canada’s largest credit union, Vancouver-based Vancity, is preparing to  take advantage of the opportunities open banking offers, said Kirsten Sutton, Vancity’s chief technology and information officer. “We’re implementing technologies to support open banking including real-time rich data exchange, flexible integration through APIs and enhanced security,” she said.

Vancity is involved in joint credit union open banking initiatives and sits on the CCUA’s open banking working group. “We’ve also independently been in regular contact with federal and provincial officials working on open banking,” Sutton said.

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