Canadian banks embracing fintech even as global CEOs see threat in technology: PwC

Canadian banks are actively pursuing opportunities to play an integral part within the growth of fintech, even though 81 percent of global banking CEOs begin to see the pace of technological change as a threat, PwC says inside a new report.

The consulting firm says the large banks in Canada are “laser-focused” on answering both threats and opportunities presented by fintech companies, a few of which combine technology and easily available online data to provide competitive services and products such as personal and business loans.

There are actually a lot more than 80 fintech companies in the united states, mostly headquartered in Toronto, Waterloo, and Vancouver, that have attracted investments of about $1 billion since 2010, according to PwC.

Canada is also attracting competitive firms for example New York-based small business lender OnDeck, and Chicago-based “near-prime” lender Avant, which have found success in the United States.

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Some fintech firms are working with banks on innovation, while some 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 continue, they run the risk that outside competitors brings their proven, successful offerings to Canada and slowly erode market share,” the report warns.



The consulting firm predicts Canadian banks will ultimately pursue parallel strategies. In some instances, they will collaborate with and “leverage” the expertise of fintechs. Simultaneously, they’ll concentrate on internal innovation in order to compete with others.

PwC notes that Canadian banks happen to be dipping into fintech inside a concrete way, some since early this past year. Canadian Imperial Bank of Commerce, for example, entered a partnership to create a corporate innovation hub at MaRs in Toronto. The financial institution then teamed up with internet small company lender Thinking Capital inside a referral partnership.

Bank of Quebec made an investment in Kabbage, a U.S.-based online small company lender, and created an interior “digital factory” to pay attention to technology and mobile banking — often in partnership with external start-ups.

Toronto-Dominion Bank, meanwhile, partnered with Moven, a mobile personal financial management platform, to establish an innovation lab at Communitech. TD can also be 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 season, Bank of Montreal launched SmartFolio, an electronic portfolio management service made to compete with both traditional players and “roboadvisers.”

As for that fintech companies, the PwC report suggests their rapid growth could eventually attract regulatory scrutiny.

“Currently as peripheral players, some fintechs can navigate without the same burdens” as banks, the report said. “As they continue their evolution, the regulatory environment might evolve to bring constraints that will likely impact their progress.”

The report suggests this scrutiny will probably pick up once fintech risk models and loan approval algorithms, most of which use “social” data, are put towards the test in a downturn.

Financial Post

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