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The promise of “open banking” has been a long time coming — when it does finally arrive in early 2026, it will take time to transform the Canadian banking business, according to Morningstar DBRS.

In a new report, the rating agency noted that open banking, which was first promised in the federal budget back in 2018, has the potential to boost competition by lowering barriers to entry, particularly for smaller banks, credit unions and fintechs.

Open banking aims to facilitate data sharing by bank customers, making it easier for firms to develop products and services tailored to their needs.

“We expect open banking to help financial institutions deepen client relationships, one of the key retail banking strategies, by offering tailored products, advice and solutions for clients,” DBRS said in the report.

However, it will take time for open banking to be adopted in the Canadian market, it cautioned — and, in the meantime, the Big Six banks will continue to dominate the sector, it said.

In the U.K., which has been the global leader in open banking, the fintech sector has enjoyed steady growth since the introduction of open banking, but, “it has still hardly made a dent in the market share of the largest banks,” the report said.

Additionally, the introduction of open banking also raises privacy and data security risks, DBRS noted.

“As more than 50 jurisdictions globally have already implemented legislation and regulations related to open banking, best practices and comparison studies are readily available, which Canada can leverage,” it said.

When the phenomenon does finally come to Canada, “Open banking is likely to slowly but surely change the landscape of the banking sector, providing a somewhat more level playing field between large and small players, while opening the sector to new entrants,” it said.

By reducing the scale advantages that are currently enjoyed by the big banks, the increase in competition could take a bite out of the relatively high returns generated by the large Canadian banks, compared with their global rivals, it said.