Open banking presents ‘an opportunity, not a problem’ for credit unions, Meridian CEO says

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Meridian Credit Union Ltd. is looking at open banking as “an opportunity, not a problem,” says Jay-Ann Gilfoy, who took over as president and chief executive of Ontario’s largest credit union in January.

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The St. Catharines-based financial services cooperative, with a digital banking subsidiary called motusbank that launched in 2019, has been investing in technology and working with other credit unions to prepare for open banking, which will require consumer financial data to be shared securely with third-party service providers including fintechs.

“We’re looking at it as: ‘How can this help us grow? How can this help us do the right things for our members?‘” Gilfoy said in a recent interview with the Financial Post.

“I think we’re on a good path in terms of being able to address that as it relates to fintech partnerships and opportunities,” she added.

Canada’s Advisory Committee on Open Banking completed a report last August, calling on the federal government to oversee the design, testing and accreditation of an open banking system that will allow customer data to be shared efficiently and safely between financial services providers, whether they are large banks or financial technology upstarts.

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On Tuesday, Abraham Tachjian, a director in the financial services practice at PwC Canada, was named Canada’s open banking lead, reporting to the Deputy Minister of Finance. His mandate is to work with industry, regulators, and consumer representatives to design and implement key pillars of the open banking system, including common rules and an accreditation framework for open banking participants.

Meridian positions itself as an alternative to Canada’s big banks but it’s far from an upstart, with more than 75 years in business through predecessor credit unions including Niagara Credit Union and HEPCOE.

Still, Gilfoy, who took the top job at Meridian after nearly eight years with Vancouver City Savings Credit Union including four as CEO of subsidiary Vancity Community Investment Bank, said the credit union structure gives Meridian a bit of an edge over big banks when it comes to sharing data across the financial landscape.

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“The credit union system as a whole has certainly come from a cooperative framework … and then on top of that, we also share back-end resources — all of the technical things that help with making payments happen,” she said.

Settlement and clearing, for example, are done through credit union “centrals” that are cooperatively owned by credit unions in each province where they operate.

The big banks, by contrast, have legacy internal technology systems built up over decades and many more customers across the country.

“If you have a banking system, you’ve got millions and millions of customers on it. The risks of getting off that core banking system are really high,” said Gilfoy.

“Whereas credit unions have a variety of different core banking systems, but more modern, I think, in terms of design and ability.”

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Credit unions across the country are working “cooperatively and collaboratively” to prepare for open banking, with discussions that focus on both technology and customer relations, Gilfoy said.

“What are the things that we need to be enabling in terms of data governance and sharing of information and yet protecting the privacy, obviously, of individual members in each and every organization?”

The cooperatives are also coming together to ensure credits unions, which are largely regulated under provincial rules that vary across the country, are adequately represented in open-banking decision-making. The provincial silos have largely remained in place despite a push by the federal government in the mid-2010s to bring credit unions under the Bank Act and federal financial services oversight.

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“There’s collaboration happening across the credit union system … making sure that we have a voice at the table with all the big banks around the work that’s happening, the decisions that are being made,” Gilfoy said.

When she arrived at Meridian this year, the credit union and its digital bank subsidiary had already been making investments in technology. The focus now is on ensuring the credit union will be able to efficiently and safely respond once the open banking framework is laid out and customers can direct who they want their personal and financial information shared with.

“We have been investing in middleware that will enable us to easily connect into fintech partners,” said Gilfoy.

“We’re looking at our own technology, and our abilities to share data, protect data, make sure it’s safe from  an information security perspective, but (also) we’re finding those potential partnership relationships that bring some kind of opportunity to our members, that maybe they would have had to go to a number of different places in the past to do so.”

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