Canadian Banks’ Epiphany
Canadian Banks are waking up to Financial Technology (Fintech) with a 50 percent market adoption rate compared to China and India’s 87 percent.
Although this a late start, as the saying goes, ‘better late than never.’ However, compared to 2015, with only 8 percent, 2019’s adoption rate of 50 percent is indicative of the fact that Fintech is only accelerating with the advancement in technologies, a piece of welcoming news for the Fintech sector because companies can now collaborate with secure banking infrastructure and customer bases with new innovative technologies.
Impact of Canadian Banks boosting the Fintech Arena
Most Fintech companies focus on money transfers and payments. Typically, 75 percent of consumers, as surveyed by Ernst & Young, uses financial technologies for money transfer and payment services.
However, in recent years, several banks have initiated a collaboration with Fintech start-ups. Some of these banks include:
- Royal Bank of Canada partnering with EvoNexus, Southern California’s leading start-up technology incubator. The focus of the incubator to serve financial technology start-ups that will impact financial services in the coming years.
- According to RBC news release, the area of technology that the incubator will focus will include “artificial intelligence/machine learning, bank/wealth/payment technology, capital markets technology, cybersecurity, blockchain, mobile payments, P2P lending, digital cash, InsurTech, RegTech, data science, predictive behaviour analytics and key telecommunication enablers such as 5G, IoT and edge computing.”
- Global Alliance Fintech Link is an alliance of three (3) banks. National Australia Bank, Australia, and New Zealand’s largest business bank; CIBC, large Canadian bank with 10 million clients; Bank Leumi, leading financial corporation of Israel.
- These large financial institutions from different parts of the world formed a joint initiative to partner with fintech start-ups and solve problems that banks are facing presently.
The banks now aggressively entering the Fintech arena will give a boost to the competition. Fintech start-ups partnering with large established banks will be offering more innovative services such as mortgages, car loans, student loans, and other financial services, which up until now have been restricted to innovation by the slow-moving banking sector.
Small and Medium Enterprises (SMEs) and Fintech
Another key finding in the EY survey revealed that only 11 percent of SMEs were reluctant to share their financial data with a financial technology company. This trend shows that stigma around data sharing, especially, financial data is reducing among small businesses.
The sharing of data and improvements in Machine Learning (ML) technology will also improve the quality of service that will be provided by the fintech companies.
For example, a restaurant owner with a physical location has different financial needs compared to a ghost kitchen. With smarter algorithms, the companies will be able to provide services tailored for each individual rather than in bulk.
One benefit for banks partnering with start-ups is that small start-ups tend to innovate and deliver products faster than a large company where decisions often have to crawl through the bureaucracy.
Overall, this is good news for the Canadian Fintech start-up because, in addition to boosting local competition, it will also stop the current brain drain and improve the Canadian economy.
Are the Canadian banks doing enough to innovate the financial sector?