Fintech drives innovation in banking
Investment in the Canadian fintech sector has exploded over the past five years. By 2018, technology spending by the Canadian financial sector is expected to reach $ 14.8 billion — compared to $ 12 billion in 2013. This boom can be attributed to several key i nfluences — digitization and growing consumer demands for frictionless and personalized mobile financial solutions ( affected largely by millennials).
Advancements in technology infrastructure, such as the birth of cloudbased services like AWS, also factored largely in the industry’ s growth and made it possible for startup fintechs to scale and reach customers around the world at unprecedented rates.
Under this new world order, size is no longer a fullstop barrier to entering the financial game. Disruptive financial startups are now able to compete with the ‘ big boys,’ those established banks that have long dictated the terms of Canada’s financial scene.
And these startups have done so by doing what their banking predecessors have largely failed to do — listen to contemporary consumer needs and create the digital tools to match.
Giving customers what
they want In today’s digital world, people expect instant gratification at nearly every touchpoint in their l ives — including their banking and financial activities. No longer do they find it acceptable to wait hours for money transfers. Today’s retail bankers want to be able to instantly transfer their funds on- the- go via their smartphones. And they also want greater control, transparency and personalization throughout their financial journey.
Fintech startups f rom across a broad spectrum of financial services are responding to these expectations through tech products built to suit the digital consumer. Take, for example, the fact that nearly half ( 47 per cent) of Canadians don’t know where to check their credit score. Vancouverbased Mogo has responded by creating a digital finance app that gives users access to their credit score for free, along with free monthly updates. And not only is Mogo’s app easy- to- use and understand, it’s also addictively fun. Designed in the sort of sleek aesthetic we’ve grown accustomed to in apps like Uber and Airbnb, Mogo’s dashboard provides an innovative gamified experience that motivates users to take control of their finances through a series of interactive graphics that respond to the user’s financial performance. The free credit score feature is just the starting- off point; with t he MogoAccount, users also have access to personal loans, mortgages and newly launched Mogo Prepaid Platinum Visa Card.
Addressing the millennial factor A large portion of millennials are now moving into the first phases of financial independence. They’ve graduated university, have moved into their careers and are starting families. They’re looking to purchase their first homes and begin investing. And l ike most everything else in their lives, these digital natives expect to perform their financial activities online.
For t hem, t he bricksand- mortar branches and lingering paper- based services of traditional banking present an archaic offering that’s largely out of touch from their digital lives — so much so that traditional banking in the industry is anticipated to be at the highest risk of disruption from millennials, according to the Millennial Disruption Index ( a three- year global study that analyzed industry disruption caused by millennials). Fintech, on the other hand, gives millennials exactly what they want: the ability to control their finances conveniently and on the go.
A quick look around the fintech market today points to the industry’s keen awareness of changing millennial needs, with innovative offerings like Mogo’s appbased mortgages and free credit score checks representing just a few of the exciting developments now on the market.
Banks are slowly showing signs of catching up with shifting consumer expectations. Following in Mogo’s f ootsteps, CIBC recently launched its own mobile credit score service. While the launch is encouraging in the sense that it shows a loosening up of big banking’s traditionalist mentality, several nagging flaws persist that indicate the old guard hasn’t completely shaken off its old ways.
To partake in the credit score service, users must have an established bank account with CIBC. Considering that 33 per cent of millennials believe they won’t need a bank in five years, the forced account sign- up shows a lack of responsiveness to the real needs of today’s consumers. CIBC is also flagging their new offering as a ‘ free service,’ but given that most bank accounts charge a fee, this sales point fails to stick the landing as well. And then there’s the issue of credit score update frequency — which CIBC is currently issuing once a quarter. Compared to services like Mogo, which provides updates on a monthly basis with no account fees, CIBC’s offering doesn’t fully reflect customer expectations for real- time updates.
Following the fintech innovators Technology has transformed finance and banking as we know it. Established traditional institutions must change how they’ve l ong done things in order to maintain their market hold. Fintechs are defined by their entrepreneurial and daring spirit. And it’s through this spirit that they’re driving innovation i nto our traditional notions of banking. To keep up, established banks must take a nod from fintech and start diving into the innovation pool.