Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue No. 53 - Evidence - March 20, 2019

OTTAWA, Wednesday, March 20, 2019

The Standing Senate Committee on Banking, Trade and Commerce met this day at 4:19 p.m., in camera, for the consideration of a draft agenda (future business); and, in public, to examine and report on the potential benefits and challenges of open banking for Canadian financial services consumers, with specific focus on the federal government’s regulatory role.

Senator Douglas Black (Chair) in the chair.

(The committee continued in camera.)

(The committee resumed in public.)

The Chair: Good afternoon and welcome colleagues and members of the general public who are following today’s proceedings of the Standing Senate Committee on Banking, Trade and Commerce either here in the room or listening via the web. My name is Doug Black. I’m a senator from Alberta, and I have the privilege of chairing this committee.

Committee members, I would ask if you would be kind enough to introduce yourselves to our panellists, please.

Senator Klyne: Marty Klyne, Saskatchewan.

Senator Duncan: Patricia Duncan, Yukon.

Senator C. Deacon: Colin Deacon, Nova Scotia.

Senator Wetston: Howard Wetston, from Toronto, Ontario.

Senator Duffy: Michael Duffy, Prince Edward Island.


Senator Dagenais: Jean-Guy Dagenais from Quebec.


Senator Tkachuk: David Tkachuk, Saskatchewan.

Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.

Senator Stewart Olsen: Carolyn Stewart Olsen, New Brunswick.

Senator Wallin: Pamela Wallin, Saskatchewan.

The Chair: We are ably assisted by the clerk of this committee and the analysts who work so closely with us.

Gentlemen, we’re very pleased to have you with us. Before getting under way today, I wish to express, on behalf of this committee and the Senate of Canada, our sympathy to you and your nations in respect of the horrific events that the world has recently witnessed in Christchurch. We are with you, we are appalled, but you need to know that the Canadian Senate and all Canadians identify with the terrible circumstance in which you currently find yourselves.

Gentlemen, today marks our fifth meeting on our study of the potential benefits and challenges of open banking for Canadian financial services consumers, with specific focus on the federal government’s regulatory role. We are very pleased to welcome our witnesses today. From the internationally prominent law firm of King & Wood Mallesons in Australia, we have Scott Farrell, who is a partner, by video conference from Wellington, New Zealand.

As an individual, we have Peter Harris, the former Chairman of the Australian Productivity Commission by video conference from Melbourne, Australia.

Committee members, by way of background, may I offer, for your information and for the record, that I’m advised that Mr. Harris is the recently retired head of the Australian Productivity Commission. In that capacity, he chaired two important reviews, the study on data availability and use and the financial system inquiry. The result of that work was the creation of the new consumer data right, the legislation which is now in draft form. The first section where the new right is being applied is in banking.

Once the government decided to proceed with the data right in banking, they appointed a senior lawyer, Scott Farrell, our witness, to consult widely to work out the implementation plan which is laid out in the review into open banking in Australia, which was completed in February 2018.

Gentlemen, thank you very much. We’re very anxious to hear what you have to say. We would ask Mr. Harris to start, followed by Mr. Farrell, and the senators will have questions.

Peter Harris, former Chairman of the Australian Productivity Commission, as an individual: Thank you, chair. My opening statement should be about six minutes; I hope you’ll offer that amount of time. I’ve provided it in written form so you can go back and refresh your memory later on, if you wish to do so.

As you said in your introduction, Australia is undertaking a significant structural shift in competition policy regulation and consumer rights in response to a 2017 report from the Productivity Commission in Australia, an entity which I chaired until September last year, and that report was under the rather anodyne title of Data Availability and Use.

The Productivity Commission is an unusual institution in Australia. It is not a bureaucracy or a short-term body. It has statutory powers of inquiry, and it has an influential history of providing to the Australian government evidence-based recommendations on the major public policy issues facing the Australian economy.

Our report has some crossover with open banking, which I will explain, but it is not about open banking. It is, in fact, about consumer rights in the digital economy.

The brave new world of digital data is not a comfortable place for public policy development. The active use of digital data has occurred so recently and rapidly that, from the perspective of the Productivity Commission — and we look at these things around the world — there is very little globally by way of solid public interest analysis; nor is it a comfortable space for many political leaders because the acquisition of power by social media and search engine has been simply so breathtaking.

Despite these discomforts, our 2017 report has persuaded leaders in Australia to commit to establishing a new consumer right to joint control of their digital data. By “joint,” we mean joint with the collector of the data.

In early 2019, legislation to implement this was tabled in our national Parliament.

As I said, there is some crossover between our reforms and the consideration being given in Canada to open banking, but our changes are more comprehensive than has been attempted in the United Kingdom or elsewhere. We are doing open banking, but we do so from the perspective of the primary source of the data, which is the consumer.

We are, in principle, covering the entire spectrum of data collection across the corporate world, but in practice we are only declaring the new right to apply on an industry-by-industry basis. Two other industries besides banking are currently being declared — energy and telecommunications.

Viewed as a whole, these changes provide the opportunity for safer and more effective participation in the open use of digital data by individuals.

To date, of course, it is private firms and, to some degree, public agencies that have been the principal participants in utilizing the extraordinary capabilities of digital data. But one of the unique characteristics of data in digital form is that many parties can use the same source simultaneously and for widely differing purposes.

The behavioural data considered in our inquiry suggests strongly that despite serious data breaches and increasing consumer unease about being “the product” rather than, “the customer,” individuals are and will likely in the future persist in volunteering their data in exchange for new services and in ever-larger volumes. They will do so because the products are popular and often apparently free of charge.

From an economic perspective, which is what the Productivity Commission specializes in, such data collection will consequently form a potentially vital and growing source of innovation in the future amongst small and large businesses. This innovation matters; it drives broader economic growth and ultimately national incomes.

There are, therefore, two features of digital data that primarily concerned our inquiry — growing unease by individuals in conjunction with the serious potential for economic growth. In our view, these required a deeper level of public policy consideration than has occurred to date.

Broadly speaking, governments around the world have been ad hoc in their responsiveness to the digital data revolution. For example, there is the acknowledgment that data can be uniquely effective for targeting improvements to social services or health or education, but generally governments have been poor at authorizing such access.

Far more action in support of data as an asset has taken place in the private sector. While there is a lot of hyperbole in the rhetoric surrounding the data revolution, it is clear that where big data is relatively freely available, major transformation in the form of popular services has arisen.

Coincidentally, over the same period, roughly since 2004, most First World nations have seen a disturbing drop-off in productivity, a long enough period to know it is not a temporary aberration.

This is serious as productivity is the principal source of sustainable improvement to all our economic living standards and has been for over 100 years. Most governments have undertaken some questioning or inquiry of why this has occurred, but the slowdown continues.

A common conclusion, for example, in work by the OECD, has been that concentrated markets, such as in banking, have led to a stifling of innovation with profitable stagnation replacing previous high levels of adaptation.

The changes we are undertaking in Australia intend to open up our concentrated markets to a new form of competition, triggered by consumers, activating their new data right; thus we are not aiming to improve payments systems as was the genesis for open banking in the U.K. For us it is one response to the productivity slowdown. Our new right is more far-reaching than just banking.

At the same time, we plan to use this new right to address consumer unease with current collection methods. Governments should pay attention to consumer unease from an economic perspective as much as a social one.

Together this means, under the new consumer data right, collectors can keep collecting but for consumer data only with stronger consent standards. And consumers will, for the first time, be able to take advantage of that asset being held in their name by a collector to seek, for example, a better pricing offer or a new service by a safe exchange of data between competitors, and all this would only be triggered by the consumer.

We are backing that new right with strengthened consent provisions, including criminal sanctions. Transfers of data will be funded by collectors and occur electronically under safe standards that are already well known to support existing data transfer undertaken by banks and telecommunications companies. We believe this will lift confidence in data collection while increasing innovation opportunities.

Our new right will not replace privacy standards. It will supplement them for the subset of data that is declared to be consumer data and apply a more rigorous set of standards to that subset of data.

These new standards will become enforceable by our competition regulator rather than the privacy regulator.

We are using the competition regulator because this will be an economic regulation targeted at high-value data, where collectors may not have any incentive to assist consumers in the application of their new right.

In practical effect, the new right allows a consumer to direct a collector, such as their bank, to transfer his or her data to one or more of its competitors, another bank, fintech or other accredited entities for the purposes of obtaining a better or new service. We call this “data trading” to indicate why it is a natural place for a competition regulator.

This is not portability of data, as recent European reforms envisage it. We are setting common technical standards across Australia for data transfer and our requirements on consent and penalties for its breach are generally clearer and stronger as befits our active interest in data trading.

We are in effect creating a set of safe data marketplaces where consumers can, if they choose, test the waters to see if there is a better offer or service that can replace today’s unmanaged screen-scraping. Benefits in Australia, from the consumer data right, are forecast to arise in better prices or better services in areas like home mortgages, small business loans, new specialized accounts or credit cards.

We expect a catalytic effect on incumbent businesses more than the better-known effect on individual fintechs.

This is simply because incumbents with large market shares will no longer be able to ignore new competitive offerings from fintechs. Indeed, mainstream, higher-value customers who generally have a richer data collection at their current bank may be much more interested in this new right than the current vision of a tech-savvy fintech customer adapting to it. Indeed, survey work by some of our banks indicates there is a substantial interest amongst older age groups.

Both the new recipient of a consumer’s data and the incumbent collector will then have a much stronger incentive to make a better offer to a consumer, transformative effects on productivity growth and their consequent impact on national income may eventuate as more industries are subject to the new right and consumers take up the option. This will not happen overnight.

The case for doing so is persuasive, based on the transformations we can already observe in non-traditional industries where data flow is relatively unimpeded; for example, in retailing, private transport and travel. Thank you very much.

The Chair: That was helpful.

Scott Farrell, Partner, King & Wood Mallesons, Australia: Thank you very much, chair. I would like to emphasize how important it is to understand what Peter has just said in relation to the consumer data right in order to understand open banking in Australia. The work of Peter’s committee was both foundational and fundamental to the manner in which open banking could be implemented. I was appointed to work out the legal and regulatory framework to implement what Peter has just suggested, in banking, but also so it can apply to the entire Australian economy sector by sector in the manner Peter described. The 50 recommendations I made were adopted by the Australian government.

What I would like to briefly explain is some of the issues and themes we found were important in implementing that framework with the real world and into real customers’ lives. The critical question for open banking in Australia was why? Not just why based on the very good points that Peter has explained, but the why from a customer’s perspective. These actually echo Peter’s remarks.

It was designed to give customers more control over their information, more choice in their banking, more convenience in managing their money, and more confidence in sharing their data. Those words — customer, choice, convenience and confidence — were so important they became the primary words on the front cover of the report of my review.

It then became a question of, well, how can that be done? Some principles emerged, the first of which is that customer focus became critical in dealing with a lot of complex issues which arise in working out how customers should be empowered to use their information.

Also, it needs to encourage competition, exactly as Peter has described, but perhaps differently to other jurisdictions. That competition, in my view, should be on a level playing field. The customers are in charge of with whom they choose to share their information with, with whom they trust it, and they may choose to share their information with incumbent entities as much as new providers. The result of my review is that the benefit given to the customer is the most important.

Further, it should create opportunities in that it should create the opportunity for an innovative data sector in Australia to emerge to use this customer-driven resource for the benefits of Australian customers.

Lastly, and perhaps most important, it had to be efficient and fair. Efficient and fair in the same way a payment system or a clearing system is efficient and fair, i.e., it must be safe. It must do what it’s supposed to do, and it doesn’t need to do anything else. Safety not only means privacy and security; it also means a broad understanding of safety so that if there is an issue at any time, there are safeguards to ensure that the system itself will survive, protecting everyone else who uses it.

I would like to finish my very brief comments with some points that came out in the implementation. The report of my review is available, and it has levels of detail in describing what is occurring, but these are some of the simple principles, which Peter has also very clearly outlined.

It is about sharing data. It is not about payments. It is about sharing information at a customer’s direction. In open banking, it’s similar in concept to the right that a customer has to direct that their bank pay their money at their direction to someone else they have chosen to trust. All you really need to do is take the word “money” out and put the word “information” in — because both are valuable to the customer — and you can see the principles of a customer-directed open banking system. That direction must be to share information with accredited recipients; so, not only must the customer trust the recipient, they must have been accredited to be trustworthy.

The recipient also needs, as Peter has described, to obtain a clearer form of consent which is not housed in pages of legal drafting but is housed in one or two screen pages using common language. What we found in the review is that there was insufficient understanding of the uses to which data was being placed, and that was causing a lack of confidence that customers’ information was being used properly.

Very important, under the Australian system, if you are accredited to be a recipient of information, then you, too, must respond to a customer’s request to share data which you have. It is not a one-way system. If you are part of the system so that you can receive information if a customer requests it, then you must also provide it to another accredited entity if a customer requests that, too.

As Peter has mentioned, there are two key regulators: our competition regulator supported by our information commissioner. We found it was important to have both elements protected, because those two regulators each have different strengths in dealing with the welfare of Australians. Also, a new data standards body is created. Peter has mentioned this, and those standards, as much as possible in our recommendations, should meet with international standards so that there is an ability for Australian businesses to also use their skills and expertise overseas to the extent that becomes possible.

There are new safeguards in liability regimes. The liability regimes are different to those that are in place in both the United Kingdom and Europe. That’s partly because, exactly as Peter has said, this is about a data-sharing regime and not a payment regime. As a result, there is no need for liability to track liability in payments. It can track liability that is more common to those who are using a framework that is a regulated framework.

Last, I’d like to point out the most fundamental point, which was also Peter’s first point: This applies to other sectors. The legislative scheme that I recommended is actually the CDR legislative scheme. Open banking is a subset of that, and there is a ministerial designation, rules and standards for that, but the design is that all of a customer’s data is in their power to share, and these are not separate systems. Thank you.

The Chair: Thank you very much, gentlemen. That was extremely helpful.

We’re now going to turn to the senators for questions. I ask senators to indicate which individual you are addressing the question to, and if it’s both individuals, please indicate that as well.

Senator C. Deacon: Thanks to both of you for your very clear and focused presentations. I had a whole bunch of questions I wanted to ask, but I moved on to some others, because you answered so many in your presentation.

One of the questions I think we’re grappling with the most is the risks of not acting — the risks of Canada, or the risks you saw in Australia, of just going with the status quo. I’m wondering if you could speak to that. That’s to both of you, if you could.

Second, this is for whoever feels most capable of giving an answer around the alignment with the minimum requirements under GDPR, because you talked about global standards. To me, understanding how the actions you’ve taken under your consumer data rights strategy align with those minimum standards.

The Chair: Why don’t we start with Mr. Harris, please.

Mr. Harris: Okay. On the risks of not acting, I worked with the Privy Council Office back in the early 1990s, so I know Canada well enough to know that you are interested, as we are, in this bigger question of why is productivity slowing down and why is national income growth likely to be at risk as a consequence of that.

From our perspective, as I said as a substantial point in my presentation, if we don’t, as governments, consider from the public interest perspective what advantage we might be able to take from the newly discovered asset of the 21st century — digital data — to improve growth opportunities in our economy and income opportunities for our citizens — if we don’t take up those opportunities, we’re only losing income on a regular basis. It isn’t just the kind of money flows where you might say, “Oh, there will be more business in the U.S. if they undertake these reforms, or perhaps the U.K. will steal some of our banking activity.”

That’s the lesser part of this. The larger part of this is that we won’t know what people can do with their data until we give them the chance to use it.

As you’ve seen in many of what I would call the relatively unimpeded industries where data has flowed, people couldn’t forecast what would happen in retail, tourism or transport by the ready availability of consumer data, as exploited by a number of large companies and by many more much smaller companies. We couldn’t have said that 15 years ago. It’s a dangerous and difficult place to be forecasting.

What we do know is where that data was relatively freely made available, there were some fantastic new sources of business development. Some of them are worrying, because of the way they handle our data. They’ve been sloppy. But that’s why we’ve ensured in our system that there will be a much higher set of standards to apply.

From my perspective, the primary risk of not acting is that you’ll just lose growth opportunities in the future, and individuals may, if they access it through cross-border transactions, lose new service opportunities in the future. Neither of those is terribly desirable.

In terms of alignment with the GDPR, as I said in my presentation, we’re not copying the GDPR. Nothing we have done is anything really to do with the GDPR, except that we examined it quite closely to see what they were doing, if anything, about data trading, as I’d call it — about the ability of a consumer to initiate a swap using their data and to create a catalytic effect on competition. The answer is that they’re not doing anything in that area. They have a concept of portability, but they are not imposing the common standards that Scott described.

Once you don’t have common standards, you have a random exchange that may or may not facilitate an individual getting their bank account data. It’s certainly not going to have a catalytic effect on competition.

So we don’t denigrate the GDPR in saying this. We simply say that it’s not what we’re doing.

The Chair: Thank you very much.

Mr. Farrell: Thank you very much. Not surprisingly, my comments are going to echo Peters, although I have to say we didn’t rehearse this at all beforehand. The risks of not acting, from my perspective, are granular as well as, of course, the economic points that Peter made so well.

The first is that in considering how this works for individuals, it was very important in Australia to understand that sharing of information is already happening. This was not a case of introducing an ability to share information that didn’t exist before. In fact, it was quite the contrary. This was really about introducing a framework to protect Australians from some of the risks that already exist in what they are already doing.

An analogy — although it may not work in Canada — is that data-sharing in Australia means that a lot of Australians are really swimming in dangerous surf at the beach. Half of those Australians don’t even know they’re at the beach, because they’re not really aware they’re sharing information. This system is designed to put some lifeguards there and indicate to Australians where a safer place to swim is. That doesn’t mean you’re not still swimming in the surf, but there are people who know how to swim, who are looking after you and watching what you do.

That’s important, because from our perspective, the risk of not acting was the same as not sticking those red-and-yellow flags at the beach so that people know where it’s safe to swim.

Second, in relation to businesses as separate from customers, the risk of not acting is that the intention behind this framework is that it allows Australian businesses to become more “match fit” in being able to use data to help their customers. Exactly Peter as has said, this is a resource of this new century in which we live, and I did not feel that the businesses I worked with are yet up to the best way that they should be in doing that, and the framework, the specifications and the standardization that Peter has described help those businesses actually make investments to prepare themselves for their future.

On the points on GDPR, I agree with what Peter has said. We did not take the GDPR as a starting point. We took the goals we needed to achieve for Australians as a starting point. We did look at the difference in the specificity of standards between the United Kingdom systems and GDPR and PSD2, and we decided exactly as Peter has described, the greatest specificity in the U.K. open-banking system around standards would actually empower businesses so they could serve their customers better. Our review did not follow GDPR. Of course, we had regard to it, but we didn’t go any further.

The Chair: Thank you very much, Mr. Farrell.

Senator Wallin: We’ll reverse the order and hear from Mr. Farrell and then, in turn, from Mr. Harris on this.

I just want to try to drill down a little bit because, Mr. Farrell, this is the issue we are struggling with, which we’ve given away all this data than we don’t even know we are at the beach, to pick up on your reference, that we’re letting it go out.

How do we get it back? How does the consumer, the individual activate what Mr. Harris has called our “data right”? Who gives us that? In this country, we are looking at who manages this discussion. Government will have a role, obviously. You’ve talked about laws, criminal sanctions for this. Are they in place, or are you still thinking about that? The private sector role and the banks seem to be managing this debate and discussion in the U.K. Who will give us our data right back, given that we’ve probably given a lot of it up?

Mr. Farrell: Thank you. The governance structure you choose to implement is important, and the thing that I believe is most important is a high level of coordination between the different elements that you choose to put into place. I can describe what we did in Australia.

The legislation is currently before the Australian Parliament, and that will create the consumer data right. The main overseer of that is the Australian Competition and Consumer Commission, our competition regulator. The policy bureau behind that is a division of the Australian Treasury, our finance ministry. Underneath the prime regulator is a data standards body which is basically industry participants, but not banks and not just fintechs. It has energy representation, telecommunications representations and consumer group representation. That’s how the voice of business is heard in the implementation at the point that it should be.

That coordination structure on cascading levels of detail but coordination all through is fundamental. The information commissioner joins the competition commissioner so that we don’t have regulations in Australia which will pull in opposite directions, in the same way as you can find regulations in Europe which seem to be slightly inconsistent with GDPR, if you look hard enough.

I think that for there to be a right in the way that each of Peter and I have described, it must be reflected in the will of Parliament and created in that way. That is why that legislation is there and it becomes extremely powerful for putting the customer at the centre because as soon as it is a right, then you can say this is a right of every Australian, so now you can make decisions on what happens next by reference to Australians and not other commercial interests which might have a different perspective on what each Australian should have.

Mr. Harris: I can start at the final point. Who will give you your data back? The answer is no one, actually. What we’re proposing here is that the data as currently collected will go from being the asset of the bank or the telecommunications company or the electricity company or, indeed, in the future, say, in Australia we have private health insurance, the health insurance company, will go from being their asset to a shared asset. It will be yours to use as much as that entity can use, but add to this in the future the consent arrangements for how those businesses collect that data will be stronger, because the data trading activity requires far more authority — you mentioned criminal sanctions — and it requires far more policing than today’s “tick the box on the website and see your data sucked up and managed by somebody else in the future.” We are consciously changing that arrangement for consumer data because it’s going to be a joint data asset in the future. It will be one in which you have the same rights of control — it’s not actually ownership in legal sense in Australia. It’s control, but the same rights of control in the future as the data collector. Moreover, that right is inalienable. It cannot be taken off you by ticking a box on a website, which today you can’t actually do. If you tick the box on a particular website for a data collection, you’re not only consenting to receive a service today; you are also consenting to a whole bunch of unregulated activity for where that data can be subsequently transferred.

In the case of the consumer data right, that will no longer be able to happen and the criminal sanction that applies is if you purport to have created it yourself as a recipient of consumer data and you are not such a recipient, the sanctions will be substantial fines and/or criminal penalties, and the consumer regulator will be enforcing that rather than the privacy regulator.

While I started out in saying something potentially disappointing — you are not getting your data back — in fact, what we are trying to do is emphasize that you will have continued control over it, and the parties managing it will have to manage it in future with your interests at heart as well as their own.

Senator Wallin: One follow-up: I think you put it brilliantly — control, not ownership in that sense. But when it is just a question of control, wouldn’t the circumstances for criminal sanctions have to be pretty extreme?

Mr. Harris: No, in fact the legislation is pretty simple to draft. I’ve read it and I’m not a lawyer; Scott is. I think that they have done a pretty good job in describing the circumstances. Control in a legal sense is important in Australia, and I think it is in Canada as well. If you attempt to apply to data the direct concept of it as property, as something, in which your activity is buying and selling a property, for a start you potentially trigger legal obligations that relate to our states, to your provinces, and so you end up with a potentially shared regulatory regime, and I know from my time in Canada a couple of weeks ago that this is an issue for you. Control potentially helps you avoid all of that. If you want a national standard, it is probably best applied as control. Scott is the lawyer, so if you want some free legal advice I would get him to comment on what I have just said.

Senator Wallin: Go ahead, Scott. Please reassure us.

Mr. Farrell: I’m still struggling with that phrase “free legal advice.”

Of course, in applying a criminal sanction, you do have to have regard to the rights of everyone and the manner in which we apply criminal sanctions in Australia is influenced by the basic principles in all of the common law world, but the point is relatively clear. This applies not only for entities that don’t follow the rules in relation to data they received, but also in relation to rules around when those with the data must start to comply. In the implementation of this policy, there are strict obligations to perform. These are not voluntary and there are consequences, and the consequences are not minor. The reason for that is not in the hope that we will ever have to apply them but to focus the minds of the organizations involved that this is not an optional thing. This is not a risk-management thing, this is a law you need to comply with and that’s probably more important than the nature of the sanction itself.

Senator Wallin: Thank you both very much.

Senator Wetston: Thank you, Mr. Harris. It’s good to see you again even though yours thousands of miles away. We did have the benefit of meeting at that lunch where we talked about open banking. You will recall the question I asked, which I thought was intriguing, was the use of your competition authority to be a regulator along with your information authority. Something we should think about here when examining this issue.

The question I wanted to ask was in the context of data. I think you both agree and Mr. Farrell, I think I’ve had some work with your law firm which is an incredibly good law firm in Australia, a very well-known firm in Australia. The context of data as a new asset class is key to underpinning any notions of open banking. One of the matters that comes up here at this committee and is of importance is — and I’m not sure who would want to answer this question — but how would open banking help solve consumer problems?

I’ll give an example of some problems we see, and there are many more, obviously, but for example, on not really understanding the issues associated with savings accounts, getting the wrong mortgage, bad loans and things of that sort. Without pointing a finger at the banking institutions, but attempting to solve some of the consumer’s problems. Is it your opinion that open banking will go some way to help solve some of those consumer problems in Australia, and if we adopted it here, potentially in Canada?

Mr. Harris: As I said, in our inquiry report this was front and centre. Equally, it’s difficult to speculate, as I said at the end of my opening statement, about exactly what services will be affected by the future transfer of data, but here are some highly plausible cases which are supported by our consumer bodies in Australia. Consumer bodies in Australia have been strong supporters of this change. Indeed, they think we have not included all the data they would like to see readily transferred. They think we have been more conservative than we ought to be. Consumers are strong believers in Australia of the potential value of doing this.

Here are some examples of the consumer problems in Australia. For a start, in Australia we have been running for over 20 years different regulatory interventions to make it easier for people to switch bank accounts. I think it’s true to Canada as well, in Australia it’s 70 per cent of people remain with the bank they started out with at 18 years old. As a consequence, for competition, banks can rely on that. They can rely on the fact that it will take a hell of a lot to make you move. Now, it will be literally an electronic snap of the fingers for you to change a bank account. You will still have old account but you will have your new one and you can choose which you’ll keep operating. While that looks like a piece of duplication and as an economic entity we don’t like to see too much of that. In fact, in the electronic world it’s a next to no cost duplication, but would be an advantage to a consumer to swap and test and see if a new-style bank account is better for them than a standard traditional one.

Going on to credit cards. The hardest thing to do is if you want to change a credit card is you have all the regular payments tied to it. If you want to change a credit card you have to change every one of those individually, whereas in the future it will be plausible under this data right to see the whole package, not just of your history of being a credit card operator, but you get your individual suite of payments tied to a credit card lifted up and moved to a new credit card or alternative payment supplier. In fact, the threat is potentially from alternative payment suppliers to current credit card operators and you potentially only do that if you get a better service, lower fee or something else like that. In Australia, unlike in North America, we don’t have the very active competition you have between credit card suppliers. Maybe that’s an Australian unique thing, maybe not.

I will finally mention mortgages were are, generally speaking, if not the largest then way at the top of the consumer’s most significant economic decisions to be made in the banking system. In Australia, more than 50 per cent of mortgages are entered into an engagement between you and the mortgage broker. People do this because they find the banks intimidating or difficult to deal with, or they are just unsure. Brokers run the large part of the mortgage market. Brokers specialize in knowing your particular circumstances. We have just finished a commission in Australia that says there is no obligation on those mortgage brokers to act in your best interest. Many of them do act in your best interests, but if you want to be sure that you are getting the best deals available from mortgages, you could be able, under this system, to use four or five different mortgage brokers at once. You would be able to see what better offers you get by enabling the clear transfer of your data. In that particular case, bear in mind you are providing that data, generally in paper copy form, to that broker anyway. It’s not as if we are opening up a wider transfer of information, we are saying imagine the capability if you, as an individual, were electronically able to induce that to occur.

The Chair: Thank you very much.

Mr. Farrell: I have a short thing to add. This question is partly why convenience was such an important principle in my review. That convenience meant that choice of itself is not necessarily enough. You can provide people with too much choice if it’s not tailored to their circumstances and it won’t lead to knowledge or understanding. The ability to provide data to another service provider, in a form which they can quickly understand you and then provide you with what works best for you, to be able to be on your side is fundamental. The result is not supposed to be that customers now find there is 1,000 different things to choose from which they can’t understand as much as the 10 choices they have now. The idea is they are presented with 10, but they are the ones that work best for them because the data provider knows what works best for them and that helps with issues in relation to people being provided things that they shouldn’t have.

The Chair: Thank you very much.

Senator Klyne: Thank you to our two panel guests here. Very informative.

I have two questions if I may, they are probably both for Mr. Harris, but I would welcome the other gentlemen to respond as well.

Senator Wetston talked about that competition regulator and at first glance I thought you took that over the privacy regulator. It made sense to me what I had a quick look at what the competition regulator does and they cut a wide swath of responsibility, including being the national consumer champion helping make markets work for everyone and also regulating where there is limited competition to strengthen markets and processes. This leads me to ask the question, I have to assume that Australia has rural and remote communities that are not connected via high-speed Internet or fibre optics, and perhaps may not even have a bank let alone rich data collection. Thinking back to the regulator being a champion helping markets work for everyone, how are these people in the rural and remote areas going to be benefited by this?

Mr. Harris: I think it’s a good question because it is an area of weakness in the Australian banking system. We should start from that position such as in the answer I gave earlier back at the start. Here is one the risks of not acting, and I assume Canada will be the same position, but you can judge that better for yourselves.

If we don’t take advantage of the benefits of you being able to hold your data electronically, and you live in remote area, you will not get a better service. That should be the starting position: You are not going to get a better service. You’re not getting one today or in future, because you are a small and powerless customer.

The great benefit of digital data is that we can enable that transfer of the data that you do have on your interactions with the financial system as long as it’s held digitally. It may be with an entity that is not a bank; it may be another entity. But if you have data that can be transferred electronically — and obviously I’m not able to say how you can improve your telecommunications system for the purposes of that transfer, but we are engaged in a big and ugly project today in Australia to do just that. I’m sure investments are being made.

But the bottom line is that if you hold the hold data digitally and it can be provided to an alternative party, you may well get a better offer. It would be speculative for me to say what that offer would be, but there are entities that specialize in providing services to smaller communities. We have financial institutions in Australia that emphasize their purely online nature, and a subset of those entities interact heavily with rural communities. They are, in fact, the primary source of loans to farming operations and things like that. One of the biggerst ones in Australia is substantially online-based.

You would be empowering opportunities for an entity that is interested in being in those markets to become even more in with those markets.

Essentially, what I’ve said is somewhat speculative but I think it’s a plausible argument.

The Chair: Mr. Farrell, do you have anything you wish to add?

Mr. Farrell: One of my 50 recommendations was specifically on that point. Australia does have a significant number of people who do not bank online. The recommendation, which has been adopted by the Australian government, is that the access or the ability to direct that information, which is held digitally by the bank must be provided in whatever form the current bank customer interaction works. This is not a question as to how we get banking to more people, but for those who don’t bank online open banking must be available to them through the same mechanism they use to currently bank. For example, there are branches in regional Australia, and it may be that the way they will give directions is that they will end up doing so on a tablet provided by a teller in that branch.

We recommended you follow the same process as you normally communicate with your bank. You should have the same right, regardless of the method of communication.

Senator Klyne: I will pull an extract out of the paper you presented to us:

Despite serious data breaches and increasing consumer unease about being the product rather than the customer, individuals will persist in volunteering their data in exchange for new services because the products are popular and often apparently free of charge.

That leads me to this question: How does this get monetized? Who is paying for this? Is it one of those sub-par things within the customer’s mortgage, or are the banks paying somebody to spin it out there and aggregate it?

Who is paying for this?

Mr. Harris: The customer will get the service of data transfer for free; in other words, they won’t pay for it. However, you and I are both reasonably experienced-looking people, I say, looking across the table electronically at you, so we know that someone is always paying in the end. The question is who is paying.

I want to emphasize that consumers will not be paying directly for this service, but someone is clearly going to be paying.

In practical effect, our banks have been required to adapt their systems to ensure the supply of this data safely, and fintechs will need to meet accreditation standards in order to receive it. The third category on which this depends, which is neither a fintech nor a bank, but other entities could be accredited as well. They will have to pay to adapt their systems. Just as in every area of our economy where trading occurs, the participants will have to decide how much of that cost they are going to have to incur if they want to operate here, how much of that cost they are going to try to pass on consumers by other services they provide and how much will be absorbed by shareholders, because shareholders will ultimately benefit — they know the business will benefit in the long term — because those businesses expect to acquire larger market share.

It’s the standard operating characteristic of businesses, here, in Canada, in the U.S., in the U.K. and throughout the developed world. Decisions will have to be made. This is a cost. Someone will have absorb that cost.

But if you look at the fintechs, if they only have the one service, the answer is that they are not going to be passing that cost on; they’ll be absorbing it at the shareholder level in the hope of becoming a bigger entity. If you think of a party that wants to break into accessing banking data in the future — and there are lots of guesses in Australia as to who that might be, and the U.K. has had some guesses about that too — but there are plenty of entities that might want to do this, and they will probably absorb that cost as well, because they are not going to impose it on the consumer.

Then when it comes to incumbent banks, in Australia, we tend to look upon this cost imposition as being something that should be part of the bank’s services to its customers. But how the bank goes about recovering that cost will be hard to forecast, I think. They certainly won’t be able to apply it directly to the consumer, though.

Senator Klyne: Thank you.

The Chair: Mr. Farrell, is there anything you’d care to add on that?

Mr. Farrell: Not on that question, thank you.


Senator Dagenais: I want to thank our two guests. My first question is for Mr. Harris. The banks generally fiercely guard the information in their possession, which gives them some control over their clients. In any event, that’s the case here in Canada. Giving information also means taking the risk of losing a client. Can you provide some examples of acceptance or hesitation in the banking sector in Australia, and of how things proceed in your country?


Mr. Harris: Thank you, senator. Our experience to date is limited because our new right is in front of the federal parliament but has yet to be applied. I will give our analysis and best plausible case for what will occur.

You will have noticed in my opening presentation that I emphasized that when we talk about the impact of this at a national economic level on something as important as productivity, we expect that will occur more by the reaction of the incumbent collector, which is the large bank. The possibility that their current absolute control of customer data is genuinely being threatened by being required to pass that data on to a potential competitor. So we expect a reaction from the largest banks in Australia to offering much better services to customers in anticipation of otherwise losing a substantial part of their business if they sit there and do nothing.

You will have noticed in my opening presentation that I mentioned that the concern that exists, not just in Australia but around the world, at the fact that we have had these declining circumstances in concentrated industries of what I call “profitable stagnation.” That means not a lot of change going on, a high level of profitability and yet, in the business of banking, there’s a great deal of capacity for information to be exchanged very quickly in a digital form.

So we expect that banks, for example, might improve their offers to consumers in terms of the rapidity of clearance of deposits. I understand that, in Canada, this remains a significant issue. In Australia, it’s a less significant issue; it’s been solved relatively recently.

But how quickly you obtain clearance of money transfers between one bank and another — the delays of four or five days in that needn’t occur. Every large bank knows that in an electronic world, it’s able to ascertain that those funds are readily available in the transferring account and, therefore, should be available to you in a matter of minutes, not in a matter of many days.

I expect that even services like that will rapidly alter in the face of this threat. Otherwise, a customer might get that offer from a new fintech, a company that has an arrangement, for example, with a bank in the U.S. They will give you instant clearance of money deposited into our account.

You will get improvements of that kind, and I expect the incumbents will respond very quickly to the thought, “those kinds of new services are coming, and we better offer them in anticipation.”


Senator Dagenais: Mr. Farrell, in recent years, we’ve seen an increase in the number of registrations for all types of sites. We provide personal information to these sites each time we register. In Canada, Canadian citizens are identified by their nine-digit social insurance number, or SIN. In my opinion, the SIN system is starting to become outdated. In Australia, do you have more modern and secure ways to identify Australian citizens, and do Australian citizens have more ways to communicate with service representatives without exposing too much information?


Mr. Farrell: Thank you.

Chair, would it be acceptable if I just had 30 seconds to also respond to the previous question?

The Chair: Absolutely.

Mr. Farrell: It may be helpful to you, but what we have found in Australia that has led to a higher engagement of our banking system than perhaps existed in either the European or U.K. banking systems is the fact that the Australian system is multi-sector, there is built-in reciprocity and there is crystal-clear liability. These are things that exist in a normal marketplace and marketplaces that banks understand. Those differences have been recounted publicly by Australian banks as the reasons they actually welcome the Australian system.

I’ll now move onto the question about identification. I do not think Australia is in a better position than the one you have described existing in Canada in relation to being able to identify themselves digitally. In my review, I pointed out that the authentication mechanism that is required to give instructions in order to transfer data, particularly when that authentication mechanism starts to apply to different sectors, has the potential to build into a clear identification system that Australians use digitally and that they chose to use. It’s not a system where a single company or a government has told them that this is their identity, but because it has to be a safe identification framework. It is quite possible that the authentication framework used for the consumer data right will develop into something that is used more broadly as digital identification in Australia.

But the point you raise in relation to the fact that identification information is being shared across lots of different platforms at people’s choice, that would also exist in Australia. Indeed, that’s part of my analogy around Australians swimming in dangerous surf and sometimes not even knowing they’re even at the beach.


Senator Dagenais: Thank you.


Senator Tkachuk: My questions are to both of you. In practical terms, I’m kind of fascinated by both presentations. If data can be moved to a competitor, for example, can people who want to shop around for how their RRSPs, their retirement savings account or their investment accounts are handled, can they then ask their banker to send information — their data — to the competitors to see if a person would get a better deal on service charges, interest rates or something like that? Is that what you envisage outside of the fact of shopping around for mortgages or a business loan, et cetera?

Mr. Harris: In principle, the answer to that is “yes,” that’s what can occur under this system.

Again, I’ll distinguish between principle and practice. In practice, the individual data source that is related to that would need to be declared under the system, and it would need to be able to be safely transferred to an accredited party. There will be, probably, a different group of accredited parties that are interested in retirement income accounts, for example, than might be interested, say, in mortgages.

The same system, as Mr. Farrell has eloquently described, will apply regardless. It’s just that the data set itself, if it is substantially different — and retirement income accounts in Australia are substantially different than savings accounts, credit cards or mortgages — were they to be declared and the transfer of data to be authorized as being in the public interest — in other words, in the individual’s interest — then yes, we could see that information being transferred, and the potential for people to gain better advice to manage their retirement savings would occur.

Senator Tkachuk: I’m just going to follow up, and then have a really small next question.

So the data is moved to, say, two other competitors on my retirement account — to two other investment banks. They now have it, or a consumer may do the same thing with mortgages. So it’s gone from my bank to two other competitors because I’m looking for a better price on a mortgage, say, or how my retirement account is handled. How do they get it back? Once it’s there, it’s sent there. Is there some kind of a contractual relationship that is expected or are penalties paid if you don’t get it back? Do they have to destroy it? If I say, “Oh, I’m happy with the two. Get rid of the other two it was sent to.” Is that the way it works?

Mr. Harris: I know the answer to this in principle, but you’re really asking quite an important legal question, so I’m going to let Scott have a crack at this first.

Mr. Farrell: Thank you very much, Peter.

The answer to the question is that our existing law is pretty good in this regard, and our existing law continues to apply. So once the reason for you collecting data has expired — and in the hypothetical you’ve given us, it’s been to provide an alternative quotation — it cannot be used for any other purpose. Based on some technical issues around what can physically be done with it and regulatory obligations, it must either be destroyed or anonymized.

So the answer to the question is that you don’t need to have a contract to have that right; it is reinforced through the consumer data right legislation. But this goes to what we were discussing earlier in that the consent mechanism has to be quite tight and quite simple, and you don’t get to use the information for any other purpose other than that for which you have given. It actually ends up being tighter than our current law, but even under our current law, you can’t just use information for other purposes once the original purpose is discharged.

Senator Tkachuk: I have one last question. I find it fascinating that you say the data has to be sent without charge, but as you said earlier, there’s no such thing as without charge. I always find if you say things have to be free, it’s mandated by law it has to be free, it’s going to pop up somewhere that no one can find out exactly what you are being charged. I think that’s a more difficult problem.

Wouldn’t it be better if the cost were reflected in the transaction? In other words, if I’m interested in moving my data, I know it’s going to cost me $5 to send it to one bank and $5 to another. I pay the $10 and then know where it is. Otherwise, it’s coming out of my accounts somewhere to pay this or, as you say, the accounts of the shareholders. It’s got to be paid for somehow.

I don’t know how you do that, but I’d like your thoughts on that.

Mr. Harris: Perhaps I can add a comment to Scott’s comments on your previous question. Let me give you the example of direct marketing, which is what a lot of people worry about when their data is transferred from one party to another. In the draft legislation in our Parliament, if you receive consumer data you cannot use it for direct marketing. I want to get the clarity about that across. When Scott says you can’t use it for any other purpose, you might say, “Yes, but we all know what they do. They all do this.” It is specifically barred in the legislation that if you get somebody’s consumer data that you are able, as an accredited party, to effectively use it for direct marketing purposes. There are other examples, but I thought I would put that clarification in.

In terms of “without charge,” senator, I’m an economist. We believe in transparency pricing. It’s a belief thing. You’re right, it would be nice to imagine that we could have a system where everything is priced transparently and everybody, therefore, understands the cost of what they are doing directly. In practice, that’s not the economy that any of us have. No economy operates that way around the world. Indeed, if you did allow for price to be applied up front, you’d provide a strong incentive for a bank to say, “Instead of the $10 million or so this is costing me to set up this system and the $200,000 a year to operate it, it’s, in fact, hundreds of millions of dollars. So the upfront charge is not $5 but it is $150.” Then you’re challenging the competition regulator in our case, or some other party managing this in the U.K., to go back and prove that the bank is a pack of liars. That’s going to be quite difficult. That’s what we call information asymmetry in economics. No one can really know what it’s costing the banks.

However, in the submissions that occurred to our treasury — the equivalent of your finance department — in developing this legislation, a number of smaller banks indicated the cost of this system was not large. In fact, in their submissions they gave advice about what it will actually cost.

There is going to be some information to offset the idea that $5, as you put it, might be a reasonable charge, but I don’t think there’s ever going to be enough if you allow, from the outset, the price to be fixed by the parties who do not have a strong incentive to make this system work, which is the incumbent banks holding the data sets today.

If you were to do this, you’d probably have to set the price yourself. That is, the political system would have to make the call. Instead, we are going with the nature of the economy in which we operate — and I described this in an earlier answer — which is shareholders will have to decide where they’re going to absolve this cost and how much of it is going to appear in some area. But I would counsel you that, if you believe it is possible to set a charge via the banks themselves determining this, I strongly suspect that isn’t going to be the case.

Senator Tkachuk: Isn’t that in the case that you used? In the example you used, the only way that would happen is if there was a monopoly or collusion. If you’ve got half a dozen banks and they collude, they’re going to come up with that system. If you have real competition, however, one of the banks is going to say, “I can get the customers. I can do it this way.” You either believe in the market system or you don’t. I do.

Mr. Harris: I don’t know whether you have but in Australia we’ve just gone through an inquiry by the Australian Productivity Commission. After the data inquiry, we went on to do an inquiry into competition in the financial system. We have determined — I mentioned it earlier in the advice we’ve given and really there is no strong challenge to this — that banking in Australia is sufficiently concentrated with four large banks holding about 80 per cent of market share that they don’t need to collude, literally, under the competition law. They don’t need to do this. They have a herd mentality that says one follows the other. The prices that are set. There is a cluster around a common point and that information is readily transferred by commentary, for example, in the media. Therefore, it doesn’t require collusion in the sense of breaching competition law. It becomes accepted practice that this is what we’re charging for a service and they’re all pretty similar.

Perhaps in Canada you have a much more competitive banking system. However, as I mentioned in my remarks, we don’t. Regarding the Productivity Commission, I should emphasize we are with you, senator. We agree. A market system is desirable. We want to make the thing work. But where it’s not working, we have to do something about it. Here’s the catalyst — I’m becoming my impassioned self.

Senator Tkachuk: I don’t want to get into a debate about it.

Mr. Harris: It’s a fantastic opportunity to break up that kind of ability to cooperate.

Senator Marshall: We just finished with the costs and I’d like to pick up on it. You talked about the banks. I’ll accept the banks will have to look after themselves and they’ll have to pay for it. What else is there? Who else is going to pay? The material that we got indicated that the federal government in Australia put in around $45 million for the Australian Competition and Consumer Commission. It seems money is put upfront. Where else are the costs? There’s costs for the banks. There’s going to be costs for regulators. There’s going to be costs for the privacy people who are going to oversee it. Have you got a handle on the costs so far and in the future? We’ll forget about the banks. We’ve talked about them enough. They can look after themselves. What other costs are there?

Mr. Harris: As you’ve correctly observed, there will be costs for regulators because we expect enforcement. As Scott mentioned earlier, there has to be an incentive which says you need to comply with this law. It’s not the optional law — and, frankly, it’s lore not law — that applies across the Internet. This is real law. This is what we expect you to do. We will have a regulator enforcing the fines.

There will also be costs on setting data standards. In Australia, we have an entity called the Commonwealth Scientific and Industrial Research Organisation which has a subset of people inside of it who are very competent in setting technical standards for the safe exchange of digital data. They are widely acknowledged as such. They have helped to develop the technical standard. It is a small incremental cost to them. Nevertheless, it’s a cost and we have acknowledged it.

I think there will be additional costs for the businesses that expect to take advantage of this in marketing their services. From an economic perspective, we’d say that’s a cost for this kind of innovation. So it won’t just be a government-based cost.

Overall, I’d like to emphasize this. By the analysis that we did at the Australian Productivity Commission — and we’re pretty good analysts to the extent anybody can be in this area — and by the subsequent comments of those who are having to implement this, the costs are not of a magnitude that would come anywhere near the potential benefits of individuals saving $100 a year on their mortgage, $50 a year on their credit card or those sorts of things. We do benefit from this cost.

Senator Marshall: What would the magnitude be? For the banks, it’s going to be in the millions. I just mentioned the $45 million that the federal government put in. Some of those costs will be ongoing, aren’t they? You’ve talked about regulating, but standard setting will be ongoing. What would you see as the magnitude? Are we talking about hundreds of thousands a year or hundreds of millions or tens of millions? Give us an idea of what you think the magnitude would be.

Mr. Harris: In those submissions I referred to earlier, regarding our treasury and the development of legislation, I think one set of mid-tier Australian banks estimated that the potential costs ongoing in a management sense would be about $250,000 to $500,000 for each of them annually.

These are entities that — costs are registered in the 10s if not hundreds of millions of dollars, so you would say it’s potentially relevant, but I wouldn’t call it material costs.

Senator Marshall: Okay.

Mr. Harris: And for regulators and data standards developers in the Australian government context, again, $45 million is a notable amount of money, but I wouldn’t call it material.

Senator Marshall: No, I agree.

The Chair: Thank you very much. That’s very helpful.

Senator C. Deacon: Absolutely. Thank you to both of you for your very clear and concise answers. I’m impressed at the pace at which you moved. From looking at the timeline you accomplished quite a bit in two years. Can you give us insight into your biggest lessons learned and where you found the odd pothole or tripwire that you’d like to give us a heads-up on?

Mr. Harris: I’ll offer one which is going to embarrass Scott. So the Productivity Commission can come up with excellent public policy ideas and we attempt to make them practical to implement as far as we possibly can, but particularly when we interact with the law it’s quite difficult to translate economic concepts into realities and certainly we’re not equipped to do so.

The thing that the Australian government did that most surprised and impressed me — and I’ve been in the chairmanship job for nearly six years — was they went to a private sector law firm and said, “we’ve got this fantastic idea that’s really going to be transformative. You design us a set of legal advice which is readily translated into legislation and, for that matter, readily translated by IT and data people into a reality,” and they gave it to Scott.

It was a remarkable piece of work. It breathed life into concepts that my entity, the Productivity Commission, believed in very strongly and that was very important to the long-term health of the Australian economy, but could as easily have languished on the shelf as here’s a good idea but it’s so hard to implement.

So I think the Australian government did a very good thing. Scott, you can’t comment on that, but I’ll offer this as being the most important thing: Translating the idea to the substantive reality could and should be given to a party who can turn economics into legislatively practical drafting.

The Chair: Thank you.

Mr. Farrell, anything you wish to add to that?

Mr. Farrell: Gosh, thank you, Peter.

That wasn’t rehearsed, either.

There are a couple of things that I learned, one which Peter touched on. It was so good to know why we were doing this, and the reason why was not because another country had; it was because we had an objective. Those principles from Peter’s commission were things you could target and you could always come back to them. This is why we’re doing this and this is how I make a decision as to what is the right practical outcome.

I dare say in some jurisdictions of the world they remain in the theory of “why” and never get to the practice of “how”, and the practice of how requires dealing with a lot of real people and businesses.

What works really well is if the system is designed to have something to make it work for everyone. Where we came from was we wanted broad participation. We did not want this to be a compliance issue. We wanted this to be a competition issue and that people would want to be in it. I come back to that reciprocity, liability and multi-sector nature. That was fundamental for people understanding this is not about “picking on me”; this is about a new system for our country, and “I can see some benefit in there, too.”

I would also suggest you do something, which obviously you are, and that is to try and learn as much as you can from the mistakes made in other countries. Certainly, the Government of the United Kingdom was very generous with its time with me. For example, they pointed out to me, “Please, Scott make sure you spend a lot of time on consumer education around this.” Consumer education is not just around the benefits, but it is also the responsibility that comes with choice so that consumers in Australia will understand this is their valuable resource they’re making a decision about, in the same way as other decisions they make with valuable resources.

The last thing I would suggest is I learned, through exactly the process you’re going through, that a broad consultation with both the public and private sectors meant that we learned a lot. And the fact that I’m not a data lawyer or a privacy lawyer, so I had a relatively open mind, also certainly helped a lot. They’re the ones that occur to me right now.

The Chair: Thank you. Senators, we are now over time. I know there are two excellent and short questions coming from Senator Wetston and then Senator Duffy, and then we really must allow these gentlemen get to their coffee.

Senator Wetston: This is short and I’ve been waiting, chair, to put the concept to Mr. Harris of conscious parallelism. As an economist, you would understand — and Mr. Farrell, you would as well — that we have a concentrated banking sector as well. You’ve described the one in Australia. You’ve also indicated that you did not feel that enforcement from the point of view of collusion would necessarily follow from that, but clearly there is parallelism and conscious parallelism is the concept I think you were describing and I can’t just wait to get this in the record.

So I have done that now. Thank you, chair. I hope you both agree with me with respect to that concept.

Mr. Harris: I wish I had heard the term about 12 months ago when I was trying to be very polite about this in our final report on competition and banking. Thank you.

Senator Duffy: Thank you both for being with us. Your excellent TV presence is partly due to competition. There’s now so much dark fibre across the Pacific that we’re able to have your video here without any technical glitches or problems because so many companies went into the fibre-optic cable business and here you are. So competition does work even to what comes on our TV screens.

Australia, like Canada, has vast open spaces. I can see how open banking would help the younger generation and people in populated areas. How do you make this work or provide benefits to those who live in remote and faraway regions and people who are vulnerable populations?

Mr. Harris: You again have asked a very difficult, good and important question. I’m not going to suggest, as I did earlier, that we will simply see this resolved by the actions of the market itself. I would like to reiterate the point I made earlier that in Australia, at least, there are smaller businesses that are very keen to be active in regional and remote areas in providing better financial services, but I’m not going to suggest that we will see transformation occur, particularly amongst older people who are less digitally literate.

I will at least offer you one piece of positive support for this concept that came, again, not out of work that we did, but out of work that some of our financial institutions did in response to this. Survey work that they did suggests that it’s actually older Australians who have a stronger belief in the fact that the data is theirs and they should be using it.

Younger Australians are, broadly, pretty cynical about what goes on in the digital market and they know that they’ve pretty much lost control. But they agree entirely that it’s their data and they should be able to get it back whenever they want.

But it’s older Australians. It’s curious. I might say that in the survey work that I saw this wasn’t emphasized by the financial institutions. They emphasized a different conclusion they drew from the same information. It’s older Australians that believe in this. It is quite possible, senator, you might find older Canadians faced with the option of saying, “Should I have the ability, regardless of whether I use it or not, in future to access my data held digitally by whichever financial institution or equivalent that I deal with.” You might well find that’s a stronger view held by older than younger Canadians. I don’t know, I haven’t seen survey work done for your country, but it is true in survey work done for our country.

Mr. Farrell: I have a small observation. There are a number of smaller deposit-taking institutions in Australia, banks and credit unions, who have specializations in helping people in remote areas. The reason that they are quite encouraged by open banking is because what is holding them back from expansion is that under the current regime, they feel they have to offer services to all people in order to be able to expand beyond their home. But open banking allows them to reach people on the other side of our country who actually have the same needs they are servicing in their home state. And so what it means for those smaller targeted institutions is that they can effectively reach out to customers that need what they have without having to build all the way across the country to do it.

The Chair: That’s very helpful.

Mr. Harris and Mr. Farrell, we are indebted to you both for taking the time you have this morning to help us with our deliberations. It’s extraordinarily helpful. Thank you both very much. You, of course, know you are always welcome to Canada.

Mr. Harris: Thank you very much, senator.

Mr. Farrell: Thank you very much, senator.

The Chair: Good morning.

(The committee adjourned.)