The following article is an adapted transcript based on the audio recording of Season 5, Episode 1 of the Mr. Open Banking podcast, which Ozone API are proud to be sponsoring. The audio version is available here.
Much like biological evolution, the evolution of open banking is largely influenced by the environment.
Where there are extreme environmental conditions, such as massive wealth inequality or a collapse of trust in the financial system, open banking thrives, built upon the promise of a better way.
On the other hand, in places where the environment is more stable, more predictable, open banking tends to wither and decay, often painted as an unnecessary risk. Nowhere has that been more true than in Canada, a country famous for being risk averse. The major banks in Canada, the infamous Big 5, often join hands in holding safety and soundness above all other principles. The government usually tends to agree.
Unfortunately for Canada, open banking is a global wave, one that will hit them whether they like it or not. Will they be ready? Or will they be left behind?
This is a region Eyal Sivan, Ozone’s General Manager of North America, and host of Mr. Open Banking, knows something about, because he calls it home. Before he was Mr. Open Banking, he was a software architect at a major Canadian bank for 15 years, and learned the strengths and weaknesses of a large financial institution, and how difficult it can be for them to cope with technological change. But, as has happened before, with the web, with mobile, open banking gives them no choice.
To explore open banking in Canada, Eyal sits down with Abraham Tachjian, Director, Digital Banking at PwC Canada.
Introducing Open Banking to Canadians
Abraham Tachjian is the former Open Banking Lead for all of Canada.
In March of 2022, he was appointed by the Canadian Department of Finance to lead the development of a national open banking framework, and for the last two years he has been doing just that, aligning Canadian bankers, fintechs, regulators and other stakeholders around a common vision for the country’s financial future. Prior to taking on the role of Canada’s Open Banking Lead, Abraham was the director of the Financial Services Practice at PwC, where he supported early open banking efforts. But his experience is not limited to Canada.
Before joining PwC, he was one of the founders of a digital bank in Hong Kong, and was Director of Digital Banking for Standard Chartered in Singapore, giving him a uniquely international perspective.
As a common law and civil law qualified lawyer, he brings a multidisciplinary approach that bridges the gap between banking technology and law. A frequent speaker at industry events, Abraham focuses on the evolution of financial services, covering topics such as challenger banks, RegTech, and his favourite, open banking.
The Canadian open banking story actually started a lot earlier than most people think. The government had been talking about open banking as early as 2017 while Abraham was still in Singapore.
“That was a great opportunity to get into this space. And I recall in our first discussions, touching on a lot of the issues that eventually we had to iron out here in Canada. We had an opportunity to do a lot of work across jurisdictions, and the open banking mandate was predominantly focused on Singapore and Hong Kong. So from the early days, from being on the bank side, it gave me the opportunity to identify the major issues that a financial institution would have. Being a member of a data sharing ecosystem focused on Singapore and Hong Kong, I qualify that my time there as training for open banking before moving back to Canada.”
The watershed moment for open banking in Canada was the Department of Finance publishing a report entitled “A Review Into the Merits of Open Banking” in early 2019. Eyal asked Abraham to share his initial reactions to reading the report.
“At the time, I was preparing to move back to Canada, and just to see that from a financial policy perspective, that this topic was on top of mind for the government. So from a consumer perspective, I was very enthusiastic about it. I like to say I’m a voracious consumer. This gave me an indication that soon enough, there’ll be something in Canada that will help me get the best deals for myself. From a professional perspective, I think you always need to have a certain degree of academic interests, and open banking was always that element for me … From a personal and professional perspective, I found it very encouraging in the sense that it was the first steps towards an actual framework.”
In 2020, Abraham moved back to Toronto to work for PwC. The period from 2019 to 2022 for Canadian open banking was formative, but some would say a little slow. A big reason being the pandemic. So, what was the Advisory Committee on Open Banking, and what was the final report? The Advisory Committee was put together to advise the government on how to develop an open banking system in Canada, built by a variety of experts from a legal, entrepreneurial and banking perspective. This culminated in an advisory committee report, which was released August 4th, 2021.
“The biggest takeaway for me at the time was a recommendation around governance, in the sense that a new entity would be necessary. There was a recommendation around an Open Banking Lead. Little did I know then that would eventually become me. There was very good information, a lot of good insight with respect to the scope of the system and the sense of who should be part of the open banking system in Canada and importantly, what information should they share. So a lot of detail with respect to that eventually became a road map for my work.”
The final report, published in August of 2021, identified as one of the first steps, the appointment of an Open Banking Lead. On March 22nd, 2022, the government announced it was Abraham Tachjian, who had been named Canada’s Open Banking Lead.
“It’s the first experience I’ve ever had with a journalist calling me to ask me about potential work that I’d be doing. Throughout my career I was very much in the background type of work, not really getting any attention for the type of work I was doing … I was in love with the process of my job, whether I was a lawyer, whether I was in banking. Up until that point, had never been in the spotlight very publicly.
I was very happy to be even in consideration. I remember as I was reading the report and seeing this reference to an Open Banking Lead for the first time, the recommendation, I was thinking to myself, what a cool job, I think I could do it. So when we started having a conversation about me potentially taking on the role, it was a validation in terms of all the efforts that I put in throughout my career, some of the risks I had taken to move to the other part of the world. To this day, I look back on the journey and I still can’t believe that I was given the role, and I still can’t believe how much we delivered throughout that time.”
Broken Promises, Thorny Problems
Among other things, the final report laid out a clear schedule for open banking implementation, including a live date of January 2023, just ten months after Abraham joined. Ambitious, even if you account for the delay between the report being published and Abraham being selected as lead. Eyal asked Abraham what he felt about the date going in.
“I knew it was going to be a challenging date, only because of the fact that the advisory committee report, dated 2021, the expectation around the 2023 date was you would have an Open Banking Lead in place relatively fast, and they would begin their 18-month term. And unfortunately, I only started my term almost a year later. So off the bat, that challenging timeline became even more challenging.
But my goal was never to rush this. My goal was never to try to get to the finish line as soon as possible. Because I think when you’re building a system, there’s an acknowledgment that a data ecosystem is not something you could do overnight. You can’t cut corners. So my focus was predominantly on making sure that what I was recommending to the government, in terms of the output as the Open Banking Lead was complete, captured every single element and addressed all the issues that I was hearing from stakeholders that we were discussing with, be it banks, consumer agencies, regulators, credit unions, fintechs, you name it. We had a very broad group of stakeholders with whom we consulted. I was never concerned with respect to meeting that timeline. My focus initially was to make sure that we were giving a complete system to the government.”
This led Eyal to ask how Abraham broke the problem down, structured the work, and employed the working groups mentioned in the final report.
“That was quite a bit of work. I did not anticipate the amount of lift required, but I’m glad we went through it because it was necessary to get to where we are. Essentially, the advisory committee report was a roadmap, which was something that I tried to stick to as much as I could. And in the roadmap, there were discussions around some fundamental elements around open banking, what you absolutely need to set up the system, according to the advisory committee based on that approach. I built up our open banking working groups. We split them into four groups.
One group addressed accreditation issues. Essentially, if you’re not a bank or if you’re not a credit union, what are the requirements that you’ll have to fulfill to be able to access the open banking system and have access to consumer permissioned data?
The next point was on privacy. Now, the challenge with privacy was making sure that we weren’t recreating additional privacy requirements because we have privacy legislation in Canada. And during my term, Parliament was updating that legislation. So I had to make sure that we weren’t creating duplicative requirements and creating a parallel privacy system. So that working group focused on more of the practical considerations related to privacy. Essentially, how do you visualize the consent process? How many screens do you go through? What type of information does a consumer have to be presented with, and how are they consenting to it? And essentially, how are they managing all their various consents that they give out at stakeholders? That working group focused on the practical elements around privacy.
We had a security working group which focused on mitigating the risks associated with open banking.
And finally, everybody’s favorite topic, liability. Who’s on the hook for something going wrong when inevitably it does?
In addition to those, we had a steering committee that invited every single one of the stakeholders from those working groups, into a general discussion to understand the progress of the project and essentially, how it was advancing.”
When asked if there are any decisions or outcomes that are especially unique, or that he is especially proud of, Abraham had this to say:
“I’m proud of all the work. It’s hard to ask me to pick one thing out. I feel like open banking, the work I did was my baby. But I do think that one of the major takeaways on open banking with respect to the government’s decision, as well as the views I shared throughout my term, is with respect to governance.
For a while, as the system was being developed in Canada and how was being portrayed as an upcoming made in Canada system? There were discussions around who would have oversight of the system. Would this be an industry driven model where essentially the industry players determine the rules of the game? Or is this a government led model with a degree of participation from the government? Midway through the term, as we had done a lot of the consultations, we had a lot of one on one discussions, and we had considered the uniqueness of the system as it will be implemented in Canada. It became pretty clear that the governance of the system cannot be managed by the industry. It’s not the industry’s responsibility to determine the rules by which consumers share their data. This is a fundamental right and a right that can only be governed by the government.
We needed to design a governance system that was inclusive of both the federal and provincial powers. Only governments can work together to make sure that happens, not the industry. It’s not the industry’s job to be working with provincial regulators to make sure we reached our outcomes. So that was a major deciding factor in terms of determining that the oversight of the system had to be managed by the government.”
Since the beginning, which was around 2017, Canada’s open banking journey has been defined by peaks and valleys.
Bright spots include the release of the original Merits of Open Banking paper, the establishment of the Advisory Committee, and, of course, Abraham’s appointment as Open Banking Lead.
Low points include missed deadlines, broken promises and years of little-to-no progress, so much so that even the regular press started reporting on the constant delays.
Through it all, Abraham and his team have soldiered on. The four working groups he created, to cover Accreditation, Privacy, Security and Liability, engaged with stakeholders of all stripes. The finished product, completed at the end of last year, presents all that accumulated knowledge in a handbook, a guide, an encyclopedia on how to best implement open banking.
Along the way, certain decisions have been made. That Canada should lean towards government-led, rather than market-driven. That distribution of power across provinces remains paramount. And that the Big 5 need to play fair.
Part of Abraham’s role has been capturing those decisions, in a way that makes them stick.
A fear in the challenger part of the industry started to emerge that open banking was going to be usurped by the infamous Canadian banking oligopoly known as the Big Five. For many, that fear still exists today. So how do you ensure all stakeholders have a say and that you achieve the goal of a level playing field? For Abraham, it comes in a couple of angles, the first of which being governance.
“In my view, the system has to be overseen by the government, but that’s not an exclusive responsibility. I think it’s incumbent upon the government to make sure that they have a continuous dialogue with the industry. There will be issues anytime you implement a major technological innovative project. And open banking won’t be any different. It’s important for the government to maintain a dialogue with the industry, to make sure they see where the challenges are coming from, and they can take remedial action to address those.
Now, coming back to your question with respect to dominant voices, that’s one way of addressing it. If the government maintains a continuous pipeline of discussions with the industry, I think we can identify issues early on and address them. Going back to my work, I was conscious about that as well as we were setting up the working groups. You cannot have productive conversations with 100 people on the line. So we purposely kept that small and we made sure we maintained equal representation in the sense that we tried to make sure that we had the same amount of banks, credit unions and fintechs, and where available, consumer agencies to be part of it, just to make sure that no single organization was dominating the conversation.”
The US has also begun to move towards regulated open banking, but the rhetoric surrounding their efforts is quite different. Director Rohit Chopra of the US Consumer Financial Protection Bureau (CFPB) warns incumbents against “rent seeking and weaponization”. Eyal asked Abraham why the messaging is so different in Canada, and more generally, how he sees the relationship between Canadian and American open banking.
“I think the fundamental element there is with respect to policy objectives. Oftentimes, stakeholders have heard me say that I’ve looked at what other jurisdictions have done very closely. I think one person told me that we are conducting some sort of forensic analysis of open banking, a cross-jurisdictional one. I took a lot of inspiration from what other jurisdictions have done from the implementation perspective, from the slip ups and from successes, for a couple of reasons. Number one, there’s an acknowledgment here that our system is behind others, but no one’s gotten it perfect. So I’ve tried to learn about the hang ups elsewhere and try to not make the same mistakes here. So that was one element of it.
But another takeaway was with respect to the policy objectives. I think it’s all fair and good to say we can look at other jurisdictions and simply implement the same. There’s stuff you have to be very careful about when you do that. And the policy objectives behind those systems is the major consideration.
Now, if you look at the UK, in Australia, which I think Australia actually is some of the leading jurisdictions, the policy drivers for implementing those systems are quite different from Canada in the sense that in those countries, open banking is developing in the backdrop of certain financial institutions behaving poorly, whether it’s in Australia with the Royal Commission or in the UK with respect to bank bailouts. That’s not poor behavior, I’m just putting it in terms of the context that led to the policy decisions to implement open banking.
Coming back to Canada here, we never had those issues. We’re not trying to redress market behavior here. What we were trying to do was implement a system that empowers the consumer. Our primary focus is that – to empower consumers with utter control over their financial data.
Now those are also outputs of other jurisdictions. But the genesis is different. And the genesis is essentially the policy objectives.”
Zooming in further on the US, Eyal wondered how Abraham sees our approach or policy objectives comparing or contrasting to the US.
“I think in both cases, the consumer is the prime driver for the policy objectives. I think for a few years, the US was held up by certain industry stakeholders as a model for a market driven approach, in the sense that the government did not intervene in open banking or data sharing. Essentially, the industry was free to develop their own rules, and after a few years it became quite obvious that the consumer was not coming out on top in the system.
The challenges for system participants to be able to access consumer data were just increasing. It was becoming increasingly difficult to empower consumers. I think it’s important to note, that shift in thinking aligned with the Canadian version, in the sense that we’ve always been consumer focused here, and the intervention of the CFPB to announce that they’re developing rules was also driven by that, in the sense that the market was not properly enabling consumers, empowering consumers.
So although the thinking around their open banking system may be different, my thinking, the genesis, I think were aligned in the sense that our objective is to empower consumers.”
It takes a lot of creative minds to accomplish what Abraham led, and he’s often expressed great pride in the team who worked with him to make this happen. When asked about the Secretariat, Abraham had this to say:
“I was lucky enough to come into a fantastic team. The Secretariat and the Department of Finance had been on this file since day one. In fact, a lot of members of that team were there when I was still in Asia. One of the biggest advantages I had, and why I think we were so successful in engaging the industry and handing over something very thorough to the government, was the depth of knowledge, and the quality of the team that we had within the Department of Finance, which I was working side by side with in terms of advancing this project, in terms of engaging stakeholders and just getting the messaging out. Genuinely, I don’t think we would have gone as far as we did without that quality of people within the Department of Finance.”
The Guidebook to Open Banking in Canada
Despite the challenges, Abraham and his team put in the work and produced a finished product. He’s called it a handbook on how to implement open banking. Eyal asked Abraham to speak a bit to the finished product.
“We had the benefit of many years of consultations before me. We have the benefit of an advisory committee report that held their own working group discussions and their own research.
And between that, between the engagements I did within the working groups and outside of them, between the discussions we had with my counterparts in other jurisdictions and just general industry developments. I’m confident that we addressed every single major fundamental element to set up an open banking system in Canada.
As I mentioned, the working groups were a very good start. There was other work that was being done in parallel to those with respect to the technical standards, with respect to the governance of the system, and all those are captured in terms of the work I did, which were reflective of all the discussions we had.”
Finally, on November 22nd, 2023, as part of the fall economic statement, Finance Minister Chrystia Freeland outlined her plan to deliver consumer driven banking in Canada, adding that it would have a place in the 2024 federal budget. Abraham shared why this day will remain an unforgettable professional milestone for him.
“I’ll never forget that day for a couple reasons. It was, number one, a validation of all the work that we had done between myself and the team, as well as all the stakeholders. I think oftentimes we forget that these people that joined our working groups that contributed had day jobs.
It was a validation of all the effort that had gone into developing the system. I think it was also unique in terms of the specificity in terms of the information the government disclosed in the Fall Economic Statement, with certain decisions and outlining when Canadians can hear more about it and dates that we can work towards. It was genuinely one of the greatest days professionally that I’ve witnessed.”
With all of this said, what are the next steps the Canadian government needs to take to make this happen? In Abraham’s view, the Fall Economic Statement was a major step.
“We also have the benefit of the industry starting to move. I think there’s a misconception that when open banking goes live in Canada, it’s a switch, and everybody’s going to be scrambling to be ready for it. There might be some of that to a certain degree, but we also have the benefit of being an ecosystem that’s been trying to prepare for this for many years.
There’s a form of open banking that’s enabled via screen scraping. It’s not the best way of doing it, but you’ve got the muscle memory already in place that organizations have been developing over the last couple of years. So I think we’re on the right path.”
Eyal asked Abraham to elaborate on the aforementioned muscle memory organizations have in place to prepare for open banking.
“They haven’t been resting on their laurels. They haven’t just been studying this. I think if you scan the market you could see pockets of capabilities that have been developing within banks, credit unions and fintechs. Be it from a strategic perspective, getting ready from a tech perspective. There’s a lot of good pockets of work that’s already there.
So I think we’re already on that path. I don’t think that we’re behind in terms of preparedness. I think, you know, obviously there’s going to be some efforts that will have to be put in for full readiness, but we have the advantage of seeing what’s worked elsewhere and somewhat import some of those practices here.”
To close out the conversation, Eyal asked Abraham what it was about the future of financial services that inspires him.
“Whatever you do in terms of your day to day job, in terms of your career, you need to have a bit of academic curiosity. I think open banking fulfills that for me. The other element of it is, more selfishly speaking, to have any impact, any contribution on the development of financial services in Canada, as minute as it is, as minor as mine has been, is really humbling. It’s really something that I’ve been very proud of, just to have been given this opportunity.
I’m drawn by how this empowers consumers, the contribution to our financial system, the innovation that it will introduce in Canada and importantly, our global competitiveness. I think you rarely come across a financial project that has all these angles, and I suspect that I’ll be in this space for a while.”
On March 26th, 2024, the Bank of Canada warned that the country is facing a ‘productivity emergency’ caused by low investment in R&D, training and innovation. In terms of trade, investment capital, and intellectual property, Canada continues to fall behind its G7 peers.
As the world becomes more and more driven by technological innovation, safety and soundness seems to be falling short. Open banking has been no exception. Over the last several years, complacent incumbents and risk averse regulators have been using stability as a reason not to move forward.
Fortunately, this has started to change. Today, most players, government and market alike, now recognize that open banking is the beginning of a much larger story, leading to a whole new segment of innovation and skilled opportunities, as Canada begins to build its own version of digital public infrastructure.
As you heard, the most recent chapter in this story happened on November 22nd, 2023, when the Federal Government released their Fall Economic Statement, committing to a budget for Consumer-Driven Banking. The details for the budget were announced on April 16th, after this episode was recorded. The community waits, with fingers crossed.
The pressure to make progress is high, and the road ahead will not be a smooth one. But if we do it right, it will become the foundation for a more prosperous, more productive, more competitive Canada, for generations to come.
Learn more about Abraham and his work on LinkedIn.
To listen to the full podcast episode and & subscribe via your favorite player, click here.
Visit Mr. Open Banking @ http://mropenbanking.com.
If you missed the first season of the podcast, click here: https://www.mropenbanking.com/podcast
