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Open Banking boost in N America as Canada announces review & NACHA-IFX combine


Open Banking is coming to North America as Canada announced a government review as part of its 2018 Federal budget, and NACHA and IFX Forum unveiled plans to combine in the US to support the development of standardised Application Programming Interfaces (APIs).

NACHA looks after its automated clearing house (ACH) facility in the US, and the Interactive Financial eXchange (IFX) Forum is trade body whose mission is to develop the IFX interoperable business message specification for financial data exchange. It also has an Open Banking API Working Group, and this will align with NACHA’s API Standardization Industry Group (ASIG) as the two bodies combine.

IFX Forum says it will retain its global non-profit status and operate as an independent group within and supported by NACHA, with its own governing board in the near-term. The merger will complete by the end of Q1 2018

The link-up is driven by both organisations desire to encourage and support a Service Orientated Architecture (SOA), where new products and services can be plugged in or out of core bank or shared infrastructure systems, such as real-time payment (RTP) backbones, via standardised APIs.

The combination will also make both bodies ready for data sharing as third-parties in the US perhaps gain access to customer data via regulatory mandated API access protocols, as has happened in the UK with its Open Banking drive and the European Union (EU) with its second Payment Services Directive (PSD2).

“The powerful combination of IFX Forum’s established leadership in financial industry standards, along with additional technical expertise in the area of API message development, and NACHA’s leadership in payment and adjacent standards will accelerate innovation,” said NACHA President and CEO, Janet O. Estep, in a statement. “The organizations will be able to build relevant standards in existing and new business domains.”

News analysis: Canada
The Canadian government is also keen to boost Open Banking and API knowledge after announcing a review in its 2018 Federal Budget unveiled this week. The review will examine the merits of introducing an open banking regime, akin to the UK regime, which would give consumers the ability to share their financial data with third parties, if they gave permission for their data to be shared over accessible APIs.

Regulators would mandate this access and ensure appropriate minimum security, privacy and other standards by financial technology (FinTech) firms wanting to access the customer data in the care of incumbent banks. The Canadian Bankers Association raised concerns about these issues last year when the official review was first mooted, but now says it “welcomes the opportunity” to work with the government to mitigate these risks.

On page 355, Annex 3, of the 2018 Canadian Federal Budget it notes that: “A number of international jurisdictions are implementing open banking platforms.  At its core, open banking is about empowering consumers to share their financial data between their financial institution and other third-party providers through secure data sharing platforms. This in turn enables financial service providers to offer more tailored products and services, on a more competitive and innovative basis.”

“Open banking also has the potential to provide consumers with greater transparency on the products and services offered by financial institutions, thus allowing them to make more informed decisions, and makes it easier for consumers to move and manage their money.”

“Recognizing these potential benefits, the Government proposes to undertake a review of the merits of open banking in order to assess whether open banking would deliver positive results for Canadians.”  


Author: Neil Ainger