September 26th, 2018
Can Canadian Banks Survive the Latest Onslaught?
NCFA Guest Post | Sep 21, 2017
In recent months, traders and investors alike have shunned traditional financial instruments in stocks, commodities, indices and currencies, and have switched their focus to cryptocurrency. The meteoric rise in Bitcoin, Ethereum, Litecoin and other Altcoin options is unprecedented. Consider that at the start of 2017, BTC was trading at $997.69 per unit, and it appreciated as high as $4,950.72 on 1 September 2017 (it briefly spiked above $5,000 per unit) before retreating to its current level of $3,567.59 per Bitcoin. The rapid appreciation in Bitcoin is not limited to this premier digital currency.
Other popular options include Ethereum which has appreciated dramatically for the year to date. On 1 January 2017, Ethereum was priced around $8.31 per unit, and it spiked to $392.54 on June 14, 2017, and subsequently declined before climbing again to $380.72 on 30 August 2017. By mid-September, digital currencies retreated further as tensions with North Korea subsided, and various countries have indicated their reluctance to authorize ICOs on markets. Recently, the Financial Conduct Authority (FCA) of the UK cautioned against initial coin offerings, for fear that they are a get-reach-quick-scheme for the companies offering these digital tokens to the market.
See: New Frontiers in Capital Innovation - Initial Coin Offerings, Toronto Event Nov 16 (Limited tickets)
The British regulatory authority’s opinion mirrors that of the Chinese authorities which have banned ICOs in Chinese markets. Cryptocurrency startups have been using the ICO avenue in much the same way as newly listed companies use the IPO option to raise investor capital. The explosive popularity of digital currency options as an alternative to investments with banks (certificates of deposit, savings accounts, checking accounts etc.) is well known throughout Asia, Europe, and the Americas. Even Canadian banks have been feeling the pinch as investors look elsewhere for managing their financial affairs.
Why are banks taking a hit?
A big part of the problem with traditional banking enterprise is regulation. Traders, investors and laypeople are tired of funding bank profits by paying exorbitant transactions fees, overdraft fees, late fees, hidden fees, commissions, currency exchange fees, and brokerage fees. Banks are finding it increasingly difficult to compete with FinTech companies that offer a wide range of inexpensive, efficient, and rapid trading and transacting options. These include money transfer services, currency exchange services, peer to peer payments, and other blockchain technologies which do not require intermediaries for transactions to be processed. FinTech enterprises have outpaced banks in the popularity department, and their mobile focus is their saving grace.
As a result, only the best banks in Canada will survive this latest onslaught. Studies have been conducted regarding the rapid rise of online banking services with Canadian banks. For starters, online banking offers a highly convenient, cost-effective and competitive way for Canadian banking consumers to manage their personal and financial affairs. There is no need to wait in line, no need to commute to/fro, and there are no high fees associated with accessing money that is yours. People are also growing increasingly weary of interacting with inefficient customer service personnel, and would prefer to use artificial intelligence programs which are geared towards customer satisfaction.
Disruptive Tech Hits Banking
Disruptive banking enterprise in Canada is no longer the exception, it is the rule. People are tired of the old paradigm – it simply doesn’t work anymore. Canadian online banking options have been around for quite some time, but the truly immersive, engaging and all-encompassing forms of online banking have only recently begun to take root in Canada. As more online banking services are provided, so the costs of the services are decreasing. Additionally, customers get to access higher interest rates on their savings accounts, lower interest rates on lines of credit, and a wider range of services overall.
It is foolhardy to assume that all Canadian bricks and mortar banks will vanish from the pages of history; rather we should expect to see a more varied range of services from these banks including a strong emphasis on the mobile banking option. Banks are teaming up with FinTech enterprises to offer the widest possible range of financial services to clients across the board. Crypto is slowly merging with traditional banking since blockchain technology is being adopted by retail, e-commerce, peer to peer transfers and now banks as well. The efficiency of operations is but one of many reasons why banks are cottoning on to this new trend.
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both investment and social crowdfunding, blockchain ICO, alternative finance, fintech, P2P and online investing stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a vibrant and innovative online financing industry in Canada. Learn more About Us or visit ncfacanada.org.