moved that Bill C-365, an act respecting the implementation of a consumer-led banking system for Canadians, be read the second time and referred to a committee.
Madam Speaker, when I was a young boy, growing up, like many Canadians, I fondly remember playing the game Monopoly. I loved owning all the utilities, collecting Park Place and Boardwalk, then putting hotels on them and bankrupting all my brothers, sisters and family members. It was really great.
The game, of course, was developed in the early 1900s by Lizzie Magie. She wanted it to be an educational tool. It was meant to show the negative aspect of property held in the hands of a very few. One hundred years later, Canadians see that Canada has a monopoly problem. Canadians pay the highest cellphone bills on the whole planet. When it comes to groceries, we only have three Canadian grocery chains and two American chains that are driving prices up. When it comes to a lot of industries, like the Internet, we have a monopoly in the sky overhead. We have satellite, which is the only accessible Internet a lot of our six million rural Canadians can get from Elon Musk's Starlink.
Then we look at the main one, which is banking. We only have five Canadian banks that control 87% of all the mortgages. Excuse me, but it was five. Two weeks ago, the finance minister approved the merger of HSBC and RBC. The number one bank bought the number seven bank, which means that five banks now control 90% of all the mortgages in Canada.
Talking about how bad it is with monopolies, we can go back to 1776. Adam Smith talked about monopolies in The Wealth of Nations. He talked about the invisible hand and the many buyers and sellers who negotiate and dictate prices. If we remove that invisible hand, and if we take away sellers and keep it to a very few, then prices go up and wages go down. We are seeing that across Canada. Canada is the country that has the most monopolies per industry sector.
Oligopoly was a word created in 1930, and it means “few sellers”. It actually comes from the word “oligarch”. When we talk about an oligopoly, that is what we are talking about in the banking sector. When we have few sellers, prices go up, services go down, wages go down, start-ups go down and innovation goes down.
We only have a month to look back at what happened, with RBC announcing it was going to buy HSBC, and to see exactly what happened from that. Before the announcement, HSBC had interest rates of 6.4% versus RBC at 7.15%. After the announcement, those rates went up 6.55%. That meant if someone had a mortgage of $500,000 in Vancouver, they just paid $750 more a year. Monopolies benefit only the very few. The shareholders and the owners are the only ones who benefit, while Canadians lose. We certainly have that problem.
When it comes to the banking sector, we do have major problems because of this oligopoly. One-third of Canadians are upset with their financial institutions. Canadians pay some of the highest banking fees in the world. Because of economic conditions, J.D. Power stated that 50% of banking customers are “financially vulnerable or stressed”. That is an increase of 6% from only a year ago.
The banks will not share people's financial information. If people want the freedom to deal with another bank or institution, the banks feel that they own that information and will not share it with whom people want it shared. Canadians are nickel-and-dimed by the big banks for basic financial services, which Brits, Australians and Americans get for free.
The answer to our monopoly and oligopoly problem is right in front of us. A robust, open banking framework or consumer-led banking would allow the industry to overhaul its outdated systems and to modernize payment infrastructure, and would allow a platform for fintechs to fill the gaps left by Canada's oligopoly with one simple method. The banks would have to share one's financial data with one's consent.
Consumer-led banking makes the banks have to use an API, application program interface, so that companies could bank with people, and Canadians would get financial freedom. It is just common sense. It is freedom to decide who to bank with, which apps people want to use, how long their data is going to be used for and for what purposes.
It would mean that hundreds of financial institution applications and even new banks would be able to ply for Canadians' business, and Canadians would have the freedom of choice to decide who gets their banking business.
However, consumer-led banking, open banking, has already been delayed by this Liberal government for six years. My bill, Bill C-365, would end this six-year delay, and there is not a moment to lose. Other countries get it. South Korea implemented this in 2019, India in 2011, Australia in 2020, Japan in 2017, New Zealand in 2018 and the U.K. in 2018. Through consumer-led banking, we have seen countries other than Canada empower their consumers by allowing them, through security access, to share their own financial data. Other countries have reaped the rewards that Canada has lost out on.
In the U.K., with consumer-led banking implemented, with only 14% market share, consumers pay zero dollars for monthly transactional fees or for overdraft fees. Consumers in the U.K. pay zero dollars to their bank in general. The savings per year for the people in the U.K. is 12 billion pounds, and for small businesses, it is eight billion pounds. There have been over 250 companies created and over 4,000 jobs.
The reality, much like the industrial policy that Canada has lost out on, is that the most competitive and forward-looking leaders are based in other countries. Canada has some really great financial tech companies ready to lead the world, but if this is not implemented, they are going to leave Canada. This government has stalled, and the industry is losing patience, but let us walk through what has happened with this.
The government announced in 2018 that consumer-led and open banking would be in place by 2023. It is way past 2023.
The government hired an expert panel. Does that sound familiar? It hired an expert panel to weigh in back in the summer of 2021, which had a comprehensive recommendation of how to set up the system, including an 18-month implementation schedule.
The government hired a new expert to then come up with the framework in 2021. The expert reported back to the government in early 2023, but the report was never made public. In fact, it sits on the finance minister's desk. The minister sat on this report for six months and stalled this legislation, and now promises that it will be implemented. Strangely enough, after my private member's bill, Bill C-365, to get the government to implement consumer-led banking, it was tabled. However, this patient fintech industry is losing its patience, and we risk losing these companies, potentially worth hundreds of billions of dollars to this economy, at time when we need it the most.
For Canadians out there who are asking what “fintech” is, it stands for financial technology companies, and more Canadians have used a fintech app than they might even know. If a person cannot qualify for a loan because they do not have a Canadian credit history, they can share their monthly rent payments information with Borrowell's Rent Advantage to build their credit store. QuickBooks uses a person's transaction data to automate their bookkeeping, and there are one million small businesses using this app. Wealthica tracks a person's investment accounts at different banks while Wealthsimple is a Canadian online investment management service. Shakepay allows people to pay friends, buy Bitcoin and send money. KOHO is a no-fee spending and savings account with the perks of a credit card. Wise allows people to send cross-border currency quickly and efficiently.
The fintech industry in Canada is worth $9.4 billion with 169 investments in 2021 worth $1.75 billion, but it is despite this government, not because of it. Companies exist, but is almost in a black market.
Nine million Canadians have been simply giving away their online banking usernames and passwords, or what we call “screen scraping”, because the banks will not pass that information on. Screen scraping is illegal in most countries. Can members imagine having to share their safe word with another company because the banks just will not share their information? It is incredibly dangerous. As part of the U.K.'s open-banking reforms, the U.K. scrapped it, banned it and made it so that it could not happen. However, for nine million Canadians, it is happening each and every day.
Consumers need laws that force the banks to allow them to, on request, transfer their data from a bank to a financial tech organization, or to move it from bank to bank in order to give them financial freedom. It defines how the consent should be obtained, as well as the cybersecurity requirements that banks and apps must meet. Perhaps most importantly, open banking also helps customers hold their banks or fintechs liable if and when they are unreliable with their data.
Canada's reluctance to embrace open banking has recklessly allowed Canadians' private data to be at risk or compromised. Competition would help fix fraud. It makes companies sharper and makes them invest in better technologies. Currently, with fraud increasing, there has been a decrease in satisfaction with how banks handle fraud-related problem resolution. With competition, we would solve that.
The financial institutions that rank the highest in J.D. Power are those that effectively communicate about fees, fraud and savings; provide tools and information about budgeting and debt reduction; and address security and fraud problems in a timely manner. members can imagine that competition would also fix fraud. It is the lack of competition that is making Canadians have to put their data at risk, and this is compromising Canadians and Canadian businesses.
Let us be clear. Canadians want this. It is not just the cost savings, but the service. When we look at what Canadians want out of their banks, they want to be able to have the tools they want, when they want them. They want a bank that looks after their needs, and one that gets back to them. A lot of these fintechs are open during the weekends. We have seen other industries explode when they have competition. We see the service go up. We see wages go up. We make sure that we create good jobs that stay in Canada at a time when we need them.
Here are some comments we received when I put this bill forward. We have had a lot of good, positive feedback from fintechs that are desperately trying to get this legislation through. They have been asking for it for six years.
We have Sherri-Lee Mathers, an automation-obsessed accounting technologist, which are her words, in craft brewing technology. She writes, “Open Banking will bring improved Data-driven insights, and cashflow planning so desperately needed by Canadian Small Businesses. Especially, as they weather the challenges in the financial climate especially those industries that are still trying to recover from the pandemic!!...I SAY YES to OPEN BANKING!
Tanya Hilts is a CPB whose business name is Rev Up Your Business with Tanya: The Cloud-Savvy Bookkeeper & Efficiency Evangelist! These are great names. They are obviously entrepreneurs. Tanya writes, “Thank you...for your support....This is a game-changer for Canadian businesses, offering unparalleled transparency and control over financial data.”
Almost everyone I have met with supports this initiative and wants to make sure we get this right, get it through and get it going.
The other part right now is that start-ups in Canada are at a 20-year low. We have 100,000 fewer start-ups from entrepreneurs in Canada than we did 20 years ago, and this is at a time when we are seeing massive layoffs in the Canadian economy. We had announcements even in the last couple of weeks of thousands of jobs that are coming to an end and workers being laid off. We need this industry to grow. We need it to prosper. We certainly need it to excel with the right framework from the government, but we need that to happen right now.
The solution to Canada's monopoly problem is a Canadian consumer-led banking initiative and legislation that we want before the House within six months of this bill passing. In the United Kingdom, consumer-led banking has saved individuals 12 billion pounds per year and businesses over 6 billion pounds per year, with improved access to financial services, lower fees and greater control of their financial data.
Canadians know what a monopoly is, but they hardly know what a free market is. I talked about the board game Monopoly, and there is another board game called Anti-Monopoly, which is supposed to talk about the free-market system. It was supposed to teach our kids and families about a free market and what it is.
After 100 years of monopolies in Canada, it is time we open the free market. Today, Bill C-365 is calling for the government to reaffirm a promise to enact consumer-led banking and introduce legislation within six months so Canadians can have a free market in the banking sector and, with it, financial freedom and better prices, because Canadians and the Canadian fintech industry deserve more.
As the Conservative Party, we want to bring home savings and freedom to consumers. Let us bring home open banking to Canadians and the Canadian public.
