Open Banking: A crucial shift for Canadian accountants

Mike Cascone is vice president, government relations and public policy, Americas, with Xero.

OPEN BANKING (also known as consumer-driven banking) is set to profoundly transform financial realities for Canadian small businesses and their advisors. While Canada's progress on a regulatory framework has been uneven, a clear implementation timeline is eagerly awaited by the financial community. This isn't just a regulatory adjustment; it's an opportunity to significantly enhance client services, elevate the strategic role of financial advisors, and open up a world of possibilities for Canadian businesses. 

Currently, Canadian small businesses and their advisors face significant hurdles due to inconsistent bank feeds, manual data entry, and a lack of real-time cash flow visibility. This leads to delayed insights, limited data access, strained client-advisor relationships, and time-consuming data reconciliation. This is all amplified by a tight capital environment for small business owners looking to make critical decisions and investments. 

The reality is: beyond direct bank feeds, there's no safe way for Canadian businesses to share financial data with modern fintech applications. When taken together with the challenging economic environment facing many Canadian small businesses, it is abundantly clear that open banking is not a “nice-to-have”, but a critical pillar in ensuring the long-term viability and advancement of Canada’s small business economy.

A Breakthrough for Your Practice

In an open banking system, clients can share the full spectrum of their financial information between banks and accredited fintech platforms, like accounting software providers, securely and in real-time. This small shift represents a powerful change for accountants and bookkeeping professionals. 

With open banking, you'll experience automated, real-time, precise data feeds directly into your software, significantly reducing manual reconciliation and errors. Access to real-time financial data will enable you to provide up-to-the-minute cash flow insights, allowing for proactive financial management and advice. This efficiency frees up time for higher-value advisory services, helping clients with strategic decisions, forecasting, and business growth. Open banking also fosters seamless integration with innovative fintech tools and will allow both alternative lenders and traditional financial institutions to provide expanded capital access for your clients. While a reduced administration burden may seem like a minor improvement, for accountants and bookkeepers, the efficiencies that an open banking system will make possible represent a critical turning point, transforming modern practices and setting the stage for a new kind of advisory.

Preparing for the Transformed Landscape

Canada has been actively working on an open banking system, with the Financial Consumer Agency of Canada (FCAC) designated to oversee and administer the framework. However, legislative approval and regulatory development remain critical steps, and it is unclear how far away we are from a go-live implementation date. The longer the delay, the greater the competitive disadvantage for Canadian businesses and the advisors who serve them.

Importantly, transformation of this scale cannot happen in a vacuum. A Canadian open banking system will require the collaboration of consumers, regulators, legacy financial institutions, fintechs, advisors, and the broader business community.

For accountants and bookkeepers, the transition will be swift, and preparation is critical — here’s how to prepare:

1. Embrace the Shift from Record-Keeper to Advisor: Open banking allows you to move from reporting on what has happened to advising on what could happen, enabling proactive cash flow management and strategic decision-making.
2. Explore New Service Offerings: Real-time data fosters new fintech innovations, enabling integration of specialized apps for expense management, payroll, or direct financing solutions. Understanding these integrations can lead to value-add services beyond traditional models.
3. Invest in Upskilling Your Team: While data access simplifies, the new landscape demands a deeper understanding of financial technology, data security, and advisory skills. Continuous learning is crucial for competitiveness.
4. Review Your Current Tech Stack: Assess how your existing accounting software and other fintech tools might integrate with future open banking frameworks, staying informed about new tools and workflows.
5. Start Client Conversations Now: Educate your clients about open banking and the benefits of secure data sharing consent, building trust for smooth adoption.

Open banking will empower the bookkeeping and accounting industries to deliver exponentially greater value, assume a more prominent advisory role, and become indispensable assets to clients' financial success. Proactive preparation is the key to harnessing this transformative shift.

We are expecting more news on development timelines from the federal government in the near future, but as we move closer, practices that embrace this change, educate their client base, and prepare for updated workflows will be in the best position to take advantage of this massive opportunity.

Mike Cascone is vice president, government relations and public policy, Americas, with Xero. Author photo courtesy Xero. Author photo courtesy Xero. Title image: iStock ID 2219201142.