Can Canada agree on an approach to API standards?

Speakers from Raidiam, Mastercard, FDX and TD Bank offered their takes on API standards in Canada, during a panel debate moderated by Darren Stevens, chief executive officer of Avato Systems.

“Many institutions have started taking a path already towards what they feel might be an appropriate standard, with the hope that will be close or be adaptable to what is eventually chosen for Canada,” said Stevens, speaking at Open Banking Expo Canada on June 15.

“Should Canada go with a single regulated standard, or legislate data content and user experience and allow industry to choose their own market-driven standards? And what are the downsides and upsides of each approach?” he asked the panellists.

Tom Carpenter, senior vice president, global Open Banking at Mastercard, said: “Mastercard’s perspective, in general, is that the industry is best suited to design technical standards.”

He added: “Industry is able to keep pace with innovation, be nimble, to adapt to market needs – government is typically not set up to do that.”

Carpenter said he thinks of Open Banking as “a what and a how”, with the “what” referring to “hard questions”, such as “should there be a Consumer Data Right? What is the data scope? that have to be determined, either by the marketplace, industry consensus or sometimes, regulation”.

Referring to Stevens’ opening question, Carpenter said: “I think this question still exists and plagues Canada and other markets, because when the ‘what’ hasn’t really been figured out yet, standards that are supposed to define the ‘how’ can become stuck on some of the burden and the friction points until they are settled.”

For Ted Spencer, full stack architect, Open Banking APIs at TD Bank, there is still a role for government in “setting a minimum bar”.

“Where the minimum bar makes sense and there is rough industry consensus, setting that bar is an easy decision for privacy and security standards – especially security. So that at least from a customer point of view, people know the government… is playing in the game,” he added.

Eyal Sivan, vice president, Open Banking and Smart Data at Raidiam, replied to Stevens: “Obviously, you want lots of people to share that common standard, that’s the whole point. If you have competing standards, then you’re going to shortcut your interoperability.”

Sivan described Open Banking standards as coming in “layers” – starting with “foundational layers”.

“Only once you get to the top of that stack do you get to payloads, where you’re talking about the way you describe something, like an account or transactions,” he explained.

“By and large, around the world the foundations are the same. Even though the payloads change at the top of that pyramid, every single Open Banking standard in the world uses the Open ID foundation, which you can roughly call a stack,” Sivan told delegates.

“On top of these common security standards, you have payloads which can differ from region to region. It’s important to understand that you can start to move the needle – as we’re trying to do here in Canada – by adopting some of those standards closer to the foundation and then, as you go up that stack, have the right debates on how you do ‘made in Canada’ payloads.”

Barriers to entry

Avato’s Stevens added: “I think that’s one of the things that fintechs in Canada are seeing as an existential threat is not really knowing where to start – which protocols to code to, how do they begin to get connections into financial institutions – and the delays that we see going on with the implementation of Open Banking.”

Delegates also heard from Jason Chomik, Open Banking lead, Canada at FDX about Canadian fintechs.

“If you have a unified approach, you lower the barrier to entrants for fintechs – especially if we have a unified standard, then these fintechs won’t have to build multiple times as they enter the marketplace,” said Chomik.

“Lowering the barrier for fintechs, smaller banks, credit unions is what’s key to standardisation… and allow everybody to play in the marketplace.”

In another panel session at Open Banking Expo Canada 2023, representatives from the country’s largest banks, including CIBC, BMO Financial Group and RBC, revealed how they are preparing for Open Banking, through strategic partnerships, building APIs and use case testing.

Main image L-R: Darren Stevens, chief executive officer of Avato Systems; Tom Carpenter, SVP, global Open Banking at Mastercard; Eyal Sivan, VP, Open Banking and Smart Data at Raidiam.