Open banking’s philosophical war is being waged on the foggy hill of context

By: Alex Vronces, Executive Director, Fintechs Canada 


Depending on whom you ask, Canada is either lagging behind the world in open banking or leading it. 

“We’re already past the point of falling behind other countries,” said Colin Deacon, a Canadian senator, at a virtual event about open banking this year. “It disproportionately negatively affects marginalized Canadians — underbanked and more vulnerable Canadians.”

Open banking is a safe and seamless way for Canadians and businesses to share their financial data with technology companies. Technology companies often use these data to bolster their own offerings, such as personalized financial advice or account-aggregation services. Open banking is essentially a framework that defines the who, what, when, and how of data-sharing in the financial sector.

The Canadian senator isn’t the only one who thinks Canada is behind. 

When the federal government first consulted on open banking in 2019, it pointed to jurisdictions ahead of Canada, including the UK, the European Union, and Australia. During the consultation, the government’s advisory committee uncovered that millions of Canadians already share data with technology companies by giving up their online-banking usernames and passwords.

Still, you’d have found contrary opinions about Canada’s place in the race to open banking if you looked hard enough.

“Although some commentators have gone as far as to say Canada is ‘lagging behind’ open banking in comparison to other jurisdictions, this is simply not the case,” said Lisa Ford, legal counsel at Royal Bank of Canada, in 2019. “While most Canadians are not familiar with the term ‘open banking,’ per se, the reality is they have been participating in it for some time now.”

Fast forward to 2021 and the Financial Data Exchange, or FDX for short, is saying something similar. FDX is an industry-led body developing a voluntary technical standard for Canadian financial institutions to share customers’ financial data. Don Cardinal, managing director at FDX, said the idea that Canada is “somehow behind on open banking is just wrong.” According to FDX, Canada is “leading” because of how widely adopted its technical standard is.

Canada is simultaneously lagging and leading, which is impossible if we’re talking about Canada’s place in same race. In our post-truth world, it’s no surprise that people are describing so differently the same state of affairs.

As polarized as these views are, however, neither is actually a lie. Both of these polarized views are sticking to the facts. 

How, then, could they be so diametrically opposed? The answer is that each view starts with the same facts, but diverges from the other in how it pieces the facts together.

“Facts are pieces of the puzzle, not the puzzle itself”

In a recent piece of writing, Zeynep Tufekci — the computer programmer-turned-sociologist — showed readers why the same set of facts can tell two very different stories. 

According to Ben Thompson at the New York Times, Dr. Tufekci has a habit of getting the big things right: social media and their complex effect on political mobilization, media coverage of school shootings and the copycat effect, how technology can be used as a tool for radicalization. Lately, she’s been getting the big things right about COVID-19. 

She recently took aim at media reporting on pandemic studies when the reporting is “just the facts, in order.”

“We want to understand what the studies mean, and we want to be informed of the developments,” she wrote. “But studies and data make sense only when we figure out where they fit: they are pieces of a puzzle that make sense when we find their correct place.”

To elaborate, Dr. Tufekci picked a headline from the New York Times:  “An unvaccinated worker set off an outbreak at a U.S. nursing home where most residents were immunized.” She also pulled excerpts from the article about how 22 vaccinated people got sick and how one vaccinated person died.

She wrote that nothing from the article was, factually speaking, “inaccurate.” But the facts, as pieces of a larger puzzle, weren’t put in the right place. A naïve observer would stare at the pieces, misplaced as they were, and conclude that vaccinations don’t guard against outbreaks. 

Dr. Tufekci rearranged the pieces.

“Here was a worst-case scenario: elderly, congregate living, a variant with mutations associated with partial immune escape,” she wrote, emphasizing that even in this worst-case scenario only one vaccinated person died. “This was a lot of words to say: this was very, very encouraging news about the vaccines.”

Under the New York Times’ old arrangement of the puzzle pieces, a naïve observer would walk away with the view that vaccinations aren’t effective. Under Dr. Tufekci’s new one, a naïve observer would walk away with the view that vaccinations are effective.

The same set of facts can tell two different stories. Their interpretation varies with how they’re placed: good news can become bad news, and bad news can become good news. 

In other words, context matters.

Establishing context is messy — and high stakes 

Open banking’s philosophical war is being waged on the foggy hill of context. 

The facts are the facts, but the two contexts within which the facts are pieced together tell two very different stories: one about a Canada that leads, and another about a Canada that lags. 

One of these contexts is thin. The other is thick.

The thin context is that open banking is little more than the adoption of technical standards for data-sharing. 

When you piece together the facts within the thin context, Canada has been leading all along. 

Let’s not forget there was “open banking” before the federal government even started its work on open banking. The standard was screen-scraping. Adoption was in the millions. Now, with FDX’s standard displacing screen-scraping bit by bit, Canada is even further ahead than it was in 2019.

The thick context is that open banking is about more than technical standards. It’s about particular outcomes for consumers and businesses, not their banks’ adoption of particular technical standards. The thick context requires someone, somewhere, to more comprehensively define the who, what, when, and how of data-sharing in the financial sector. 

When pieced together in a thick context, the facts portend a long and winding road to open banking in Canada. 

The legislative foundation of open banking — new privacy legislation tabled in 2020 by then-Minister Navdeep Bains — has been slowly working its way through government. It has been a magnet for criticism. Just ask consumer groups, business groups, and Jim Balsillie.

What’s more, the legislative foundation is just a foundation. More work by the government may be necessary to define the who, what, when, and how of data-sharing in the financial sector, which is why, to steal a term from David Skok, the consultations since 2019 have been a bubbling vat of “stakeholder soup.”

So which context is the right one? Unless you’re on the foggy hill of context, fighting for the future of open banking in Canada, it’s hard to know. From afar, all you can see is fog. When someone tells you Canada is leading or lagging, it’s hard to know whether they’re right or wrong.

This is dangerous.

The federal government needs the facts in the right context to make good decisions. Financial-sector policy is not the same as pandemic policy, where the difference between good and bad decisions is the difference between life and death. But the financial welfare of Canadians is no trivial thing.

Millions of Canadians have already given up their online-banking usernames and passwords in search of better financial services from technology companies. That’s a fact. 

Sharing financial data by giving up your online-banking credentials is unsafe. Doing so voids your legal agreement with your bank. Technology companies find it unsafe, too, as they invest in securely storing your online-banking credentials. No good will come to anyone — neither consumers nor technology companies nor banks — when something goes wrong.

That’s why context is a hill worth dying on.

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