Finance Committee on Nov. 2nd, 2023

[Jessica Oliver]

It's fall.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Do you know when the government said they would have open banking legislation...?

[Jessica Oliver]

I believe they made a commitment in their platform for open banking in 2023.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Yes, in 2023. I believe it was January. We're now nine months past that.

Maybe you could also share with the committee where Canada is falling with respect to regulations and framework—just anecdotally is fine—and also why open banking is an important part of modernization that must happen to Canadians' financial framework or we'll fall even further behind, knowing, of course, that we are nearly last in productivity in the OECD right now.

[Jessica Oliver]

Thank you for the interest in open banking.

Yes, certainly. Several countries have introduced open banking. For example, the U.K. is now in its second iteration and others are in their third.

With both RTR and open banking, there is not a single country in the world that has introduced them and then removed them, and we take comfort in that. Last spring, the U.K. reported 12 billion pounds saved by individuals and 6 billion pounds saved by businesses thanks to open banking. Last week, the U.S. Consumer Financial Protection Bureau, which focuses on protection, proposed a rule to introduce open banking in the U.S.

Canada has unique circumstances, which were communicated by the advisory group. We have been very pleased to participate in the implementation working group, in the actual work into the merits of open banking and important considerations. That work has been done and was conclusive. The last step is the implementation plan, and we have seen a lot of interest from all parties in moving that forward.

When you look at just the FHSA, we had over 14,000 clients on a wait-list before we even had a product in market. We've opened an average of 1,000 FHSAs a day since we put the product on the market, and we're approaching 100,000 accounts.

The reason I mention this is that open banking and RTR will make it easier for consumers to shop around, to figure out if there is a smaller institution that has been able to drill into their unique circumstances—newcomers, renters, gig economy workers—and help de-risk them, because they may not currently fit into a box that gets them a competitive rate for a mortgage, a line of credit or a student loan. There are products all over the world that use open banking to de-risk those clients so that they are offered a more competitive rate.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much. That was some fantastic testimony. Maybe I could summarize that and then ask you a question to build on it.

I'm aware of the U.K. example. You said it's 18 billion pounds between businesses and consumers. I cannot remember the conversion rate off the top of my head, but I imagine that's around $30 billion to $40 billion Canadian in savings for businesses and consumers. We're introducing competition in the financial services market in a very competition-deprived area and sector of our economy, for one, and we are driving down costs for consumers and businesses.

The last part, which I thought was very interesting as well, is that you're going to allow individuals who may not otherwise qualify for credit to get credit, because there's additional data that can be provided with respect to open banking, allowing individuals who maybe couldn't get a mortgage before to qualify, or those who couldn't even get a place to stay to qualify for rent. We're going to help the most vulnerable. We're going to help businesses. We're going to help consumers. We're going to restore and input a bit more competition into the market.

Have I said anything incorrectly, or would you say that was fair?

[Jessica Oliver]

Yes. The data from the U.K. is based on their 2019 data and, yes, it was 18 billion pounds across individuals and businesses.

It's exactly as you said. One of the best Canadian fintechs, Borrowell, allows renters to build their [Technical difficulty—Editor] or build credit by demonstrating proof of on-time monthly rental payments. At the moment, your on-time payment of your phone bill has a bigger impact on your credit score than paying your rent, so that is the kind of product that could be improved and delivered more broadly through open banking. They've long been advocates on that, and we've been proud to work with them.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Lawrence.

This will be our final questioner for our session today, and it's MP Weiler, for five minutes, please.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Chair.

I would like to continue the questioning with Mr. Mertins-Kirkwood.

These are questions that will be squarely in your wheelhouse as well.

Both yesterday and today, there's an event in Ottawa, the Sustainable Finance Forum, where, among others, the sustainable finance action council is present. This group was set up in 2021 to provide advice to the Minister of Finance on how to build a sustainable finance system. Part of that is the development of a taxonomy that could be utilized across the sector.

We know from other countries that have brought this in, for both transition finance and green finance, that it's had a big impact. We heard yesterday that Japan has had about $20 billion of investment in the transition space in the wake of bringing that in.

I was hoping you could explain to this committee the importance of Canada's adopting such a framework, both to crowd in investment as well as to deal with issues like greenwashing in Canada.

[Hadrian Mertins-Kirkwood]

The issue with greenwashing is that it's easy to say any investment can be green in some way, and that's a real risk. We've seen in a lot of climate policy in Canada historically that you get a tiny little bit of reduction in emissions, but there's no structural change. Having a robust taxonomy that can make it clear to investors and to governments what kinds of firms and sectors are making a meaningful contribution to long-term emissions reductions is very important. Otherwise, we crowd investment into short-term solutions that can reduce emissions maybe in the next five years but actually make it more costly to reduce emissions in the long term.

Unfortunately, we see that a lot with, for example, coal-to-gas conversions and a lot of investments in blue hydrogen or carbon capture. These are the sorts of investments that might reduce emissions at a very high cost over the next five to 10 years but actually make it more expensive to get to net zero in the long term. Having a credible taxonomy can make sure that our investments are aligned with our long-term goals.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thanks for that.

You mentioned in your opening, as part of the alternative federal budget, a recommendation for further investments in cleaning the grid. Of course, in the budget this year we provided for tax credits to invest in that, so we can build on the fact that 85% of our grid is non-emitting. Obviously, we need to double or maybe even triple that to reach our net-zero goals.

I was hoping you could explain to the committee why we need this additional investment on top of the tax credits that are already there, especially considering that this is an area within the provincial jurisdiction.

[Hadrian Mertins-Kirkwood]

Thank you. That's another great question.

First of all, the tax credit, the electricity credit in particular, is very good, because it's mostly going to be useful to provincial utilities that need to build out that capacity. That's a good thing. It's a good thing for eligible Crown corporations to use that.

The reason that the federal government needs to get involved is one of the biggest limitations and also opportunities in electricity, and it's interprovincial ties and regional ties. As soon as you're crossing borders, immediately this is a federal concern. The more we can build out this grid between provinces—including between provinces and the U.S., where applicable—and between different communities, the more we can build out the connective tissue of the electricity system, the more other institutions can plug into it. There are lots of private investors who want to build wind farms, to build solar farms—it looks good and it's exciting—but they need to plug into something. If we can't provide that grid to plug into, it's going to really hamstring our ability to decarbonize.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you.

I'd like to turn to Mr. Gray along the same vein here.

I was hoping you might be able to explain, from the position of the chamber and your members, the potential for growth and wealth creation that you see in the transition to a net-zero economy.

[Alex Gray]

Sure. Very much along those lines, the taxonomy is clearly important, and the other thing is disclosure, frankly. Investors deserve to know where exactly their money is going, what exactly it's going to yield and at what level of risk. We don't have that yet.

I think concurrent with that is helping small businesses understand their own exposures. Not every family restaurant is going to have a data scientist on staff, are they?

I think there's a lot of work that could be done on this. We, as the Canadian Chamber, have called upon the government to make good on its promises to the climate data analytics centre to invest that, so that investors can have a fulsome understanding of their exposure to climate-related risk.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Weiler.

We want to thank the witnesses on behalf of all the members of this committee and all the staff—everybody who helps makes this possible for your testimony for our pre-budget consultation in advance of our 2024 budget.

I want to apologize again to Ms. Amy Nugent. She listened to all the testimony we heard from others, and if members have more questions for Ms. Nugent, please send them to her. I'm sure she will get us some answers back.

We thank you for that. We will receive your brief and your opening statement, and that will be part of our report. Thank you very much.

With that, members, we are adjourned.