Canadian banks embracing fintech: report
Canadian banks are actively pursuing opportunities to play an integral part in the growth of fintech, despite the fact that 81 per cent of global banking CEOs see the pace of technological change as a threat, PwC says in a new report.
The consulting firm says the big banks in Canada are “laser- focused” on responding to both threats and opportunities presented by fintech companies, many of which combine technology and readily available online data to offer competitive products and services, such as personal and business loans.
There are now more than 80 fintech companies in the country, mostly headquartered in Toronto, Waterloo, Ont., and Vancouver, which have attracted investments of about $1 billion since 2010, according to PwC.
Canada is also attracting competitive firms such as New York- based small business lender OnDeck, and Chicago- based “nearprime” lender Avant, that have found success in the U. S. Some fintech firms are working with banks on in- novation, while others are bound to present “a series of disruptions and threats” as they make inroads into banks’ traditional territory, PwC says.
“If Canada’s banks don’t keep up, they run the risk that outside competitors will bring their proven, successful offerings to Canada and slowly erode market share,” the report warns.
PwC notes that Canadian banks have already been dipping into fintech in a concrete way, some since early last year. Canadian Imperial Bank of Commerce, for example, entered a partnership to create a corporate innovation hub at MaRs in Toronto. The bank then teamed up with online small business lender Thinking Capital in a referral partnership.
Bank of Nova Scotia made an investment in Kabbage, a U. S.- based online small business lender, and created an internal “digital factory” to focus on technol- ogy and mobile banking — often in partnership with external startups.
Toronto - Dominion Bank, meanwhile, partnered with Moven, a mobile personal financial management platform, to establish an innovation lab at Communitech. TD is also collaborating on technology innovations targeting customers and employees in Cisco’s new Toronto Innovation Centre.
Royal Bank of Canada is testing of payments technology with Nymi Wristband, and forged an alliance with Uber for loyalty rewards.
Earlier this year, Bank of Montreal launched SmartFolio, a digital portfolio management service designed to compete with both traditional players and “robo-advisers.”
As for the fintech companies, the PwC report suggests their rapid growth could eventually attract regulatory scrutiny.
The report suggests this scrutiny is likely to pick up once fintech risk models and loan- approval algorithms, some of which use “social” data, are put to the test in a downturn.