Open Banking in Canada: A Guide for International Merchants

While open banking won't be fully implemented in Canada until 2026, the country's financial sector is already laying the groundwork through sophisticated digital payment systems and banking innovations. With 45% of Canadians recognising the benefits of open banking and eager to embrace it, the transition is well underway, showcasing emerging payment trends in the country.

The adoption of digital payments among consumers and businesses is transforming Canada's financial interactions, turning seamless and efficient payment methods into a necessity for improving conversion rates across different types of businesses.

With open banking set to be unfolded by 2026 in Canada, this article will explore the state of this technology in the country, highlighting similarities and differences with the European and UK models, and detailing the Canadian approach to its implementation.

The Evolution of Canadian Payments

Daily, Canadians are growing more comfortable with a variety of digital payments, driven by their speed, security, and ease of use. This evolution is evident across all demographics - notably, in 2022, 46% of consumers aged 55 and older used mobile payments for purchases in physical stores, marking a significant shift in adoption patterns.

Online transfers have surged in popularity, with services like Interac e-Transfer and PayPal facilitating 917 million transactions in 2022, both online and in physical stores. This surge reflects a broader transition in payment preferences, with Interac's services particularly noteworthy as they mirror many aspects of open banking functionality.

Digital wallets have become increasingly prevalent, supported by a 90% smartphone penetration rate. Approximately 44% of Canadian consumers now use platforms like Apple Pay, Google Pay, and Interac Debit for their purchases. While these solutions offer significant convenience, their current limitations in terms of interoperability with other financial platforms highlight the need for a more integrated approach - precisely what open banking aims to deliver.

Open Banking Implementation in Canada

Canada has processed 1.2 billion transactions through services like Interac e-Transfer, demonstrating a robust payment infrastructure ready to support increased digital service demands. However, many current solutions operate within closed ecosystems or rely on outdated technologies like screen scraping - practices that the forthcoming open banking framework aims to phase out.

Major financial institutions are already preparing for this transition. Banks such as the Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD), Scotiabank, and Bank of Montreal (BMO) are advancing their digital offerings, while fintech companies target specialised niches within payment processing.

Open Banking Adoption Roadmap in Canada

• 11 August 2017: The Department of Finance released a consultation paper expressing its intention to explore the benefits of Open Banking
• 4 August 2021: The Advisory Committee on Open Banking presented recommendations for the foundational elements of Canada's Open Banking framework
• 16 April 2024: The government introduced the Open Banking framework, renaming it to Consumer-Driven Banking
• 2 May 2024: The Consumer Banking Framework, embedded in the Budget Implementation Act, finalises an extensive analysis, setting the way for a structured Open Banking rollout
• 16 December 2024: The Canadian Federal Government has announced plans to launch the Open Banking framework in early 2026

Data Source: Department of Finance Canada.

Canada vs International Open Banking Models

While the United Kingdom has led the way with 10 million users adopting open banking, Canada has opted for a more measured approach, with 40% of Canadians still familiarising themselves with the concept. This careful implementation strategy, though slower, aims to ensure robust security and system stability.

The differences between Canadian and European approaches are notable, particularly in user experience. For instance, while Interac's current process requires users to manually navigate to their bank's website for payment details, European open banking enables one-or-two-click payments, significantly streamlining the process.

Canadian consumers and businesses clearly recognise the advantages of digital payments, including speed, security, ease of use, and low cost. Additionally, 24% of all businesses in Canada see payment innovation as essential for their growth, indicating strong potential for open banking adoption once fully implemented.

Benefits for International Merchants

For merchants entering or operating in the Canadian market, open banking offers several key advantages:

• Access to a Range of Data Services: Open banking allows merchants to create personalised solutions by using open data for valuable customer insights, enabling better service customisation and risk assessment
• Customer Segmentation: Enhanced data access enables merchants to offer precise, high-value recommendations, improving customer engagement and conversion rates
• Streamlined Refund Processing: Open banking simplifies the handling of refunds, making it easier for merchants to manage transaction reversals and customer satisfaction
• Effortless Connectivity: Merchants benefit from seamless connections with leading banks across multiple regions, enhancing the financial ecosystem and enabling cross-border transactions

Navigate the Future of Canadian Open Banking with Noda

As Canada progresses toward full open banking adoption, international merchants need a reliable partner to help them navigate this evolving market. Noda offers comprehensive solutions that address both immediate needs and future requirements:

Regulatory Compliance and Technical Standards

Noda not only complies with Canadian regulations but is also establishing a robust relationship with the Financial Data Exchange (FDX). This non-profit organisation enables secure and efficient data exchange among Canadian banks, fintechs, and other financial services companies, even as the formal regulatory framework for open banking continues to develop.

Cross-Border Integration

For international merchants, Noda provides:

• Comprehensive support and integration services bridging Canadian and international markets
• Seamless handling of transactions with international customers
• Access to additional services like data enrichment
• Processing capabilities across all operational geographies

Future-Ready Solutions

As the Canadian open banking landscape evolves, Noda's solutions are designed to:

• Adapt to emerging regulatory requirements
• Integrate with both existing payment systems and new open banking protocols
• Support merchants through the transition to full open banking implementation
• Enable merchants to leverage the full potential of open banking capabilities

By partnering with Noda, merchants gain access to a platform that understands both the nuances of the Canadian market and the broader international open banking ecosystem. This expertise becomes particularly valuable as Canada moves toward its 2026 open banking implementation, ensuring businesses are well-positioned to capitalise on new opportunities while maintaining seamless operations during the transition period.