A long-promised revolution in banking is headedto Canada, but you might not notice when it arrives.
Change is in the works that will give Canadian consumers and businesses significantly more control over their financial data, including who they share it with, in what’s known as open banking.
The federal government has promised framework legislation in next month’s budget to bring the system to Canada after years of kicking the possibility down the road.
Evangelists for the open banking shift underway globally praise it as a way to boost competition, dramatically shift how payments are made and overall move to a more people-oriented financial system.
“It’s about having that fairer, more inclusive, more open society,” said Helen Child, founder of Open Banking Excellence, a forum for those working in the system.
Open banking works by giving consumers the option to share their banking data with other firms. The most common use is granting access to budgeting or money management apps and companies, so that a customer can pool different bank accounts and credit cards into one place.
Other emerging uses include simpler payments, automated accounting, and business finance management.
One of the biggest areas of growth is in credit assessments. Under open banking, lenders could directly access an individual’s banking data, so they can look beyond credit scores. Consumers can also use it to build their credit scores, for example by proving reliable rent payments.
“It drives financial inclusion,” said Child. “It’s democratizing data.”
The model, which the federal government refers to as consumer-driven banking, is part of a wider shift to giving people more control over the data companies are gathering about them, said Abhishek Sinha, national banking technology leader at EY Canada.
“It’s a significant social movement and social progression, following the steps of what’s happening in the rest of the developed world and even a lot of developing countries.”
5:34 2024 Personal Finance Outlook
But while there’s potential to shake up the current system, some are skeptical as to how much, and how quickly any change might happen.
Even with safeguards in place to make it secure, it will likely take a lot of work to convince Canadians to trust the system — and new competitors, said Sinha.
“I think gaining trust in Canada is going to be extremely hard for the fintech community; that is their Everest to climb.”
The system also had fairly low pickup when it launched in Europe in 2019, said Aris Bogdaneris, Scotiabank’s head of Canadian banking, at an investor day.
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“We prepared for it, and we tried to make sure we were ready and resilient,” said Bogdaneris, who worked at ING in the Netherlands before switching to Scotiabank last year.
“It didn’t really materialize at all. It was like Y2K.”
Even in the U.K. where it was pioneered in 2018, only about 11 per cent of British consumers were using open banking as of last June, according toOpen Banking Ltd., tasked with implementing the system in the country.
In Canada, with more bank concentration and a conservative banking culture, adoption will likely be slower, said Marc-André Pigeon, assistant professor at the Johnson Shoyama Graduate School of Public Policy.
“The banks just have so much influence that it will be hard for others to get in there.”
The government seems to be most of all pushing the security benefits of the shift, said Pigeon.
Competition seems to be a lower priority, he said, with a cautious approach that will see startups in the space needing accreditation.
“I’d say the design, the way we conceptualize the design, is a go-slow approach.”
There is also the question of how much consumers bother to comparison shop, or to look into alternatives without something going wrong with their existing providers, Pigeon noted.
“We have to get a step back from the rhetoric and remind ourselves that hey, we’re dealing with people, and we all have our weaknesses and strengths, but we often don’t have time to do these things, right?”
Osler financial services lawyer Elizabeth Sale said she wasn’t sure how much it would change things once in place, beyond for those people already using these systems through less secure means.
“Typically, when I see consumers and people talking about it, it’s clear to me that it’s not well understood,” said Sale.
She said terms like open banking or consumer-driven finance don’t really help with that because they don’t give any intuitive sense of what it is.
“That needs to be overcome, people need to actually understand what it is.”
Proponents say it takes time for momentum to gather and for people to understand and trust it.
“We have to be realistic when we are talking about disrupting one of the world’s oldest and most established industries,” said Nicholas Schiavo, director of federal affairs at the Council of Canadian Innovators.
There is an education component needed, but overall Canadians don’t need to understand the system itself so much as its benefits, he said.
The current lack of competition in banking means high fees, which a report out last month from North Economics estimated run upwards of $7.7 billion a year.
“Canadians know very well, whether it’s with telcos or grocery stores or banks, what a monopoly looks like, and what that means for them and their wallet,” said Schiavo.
He also pointed to growing momentum elsewhere, including the U.K. where payments under the system were up 88 per cent in the first half of last year from the year before, while small business use stands at about 17 per cent and growing.
As open banking spreads globally to places like Australia, India, Singapore and progress is made toward it in the U.S., there are also signs that new entrants are catching on faster.
It took about five years for the U.K. to reach five million connected accounts, something Brazil reached less than a year after launch.
The more companies that enter the space and provide more useful solutions, the more it will catch on, even if people don’t quite understand how it works, said Child.
“You need to know it’s convenient. It makes your life simple and fast,” she said. “That’s what it’s about.”
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
