Global fintech and funding innovation ecosystem

Category Archives: BaaS, Embedded Finance, API

Bank of England Launches New Data Innovation Strategy

Regulation | Jul 9, 2024

Bank of England data and analytics strategy overview - Bank of England Launches New Data Innovation Strategy

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Q&A Insights from the Bank of England's New Strategy

At the Future of Regulation (DiFoR) conference on July 5, James Benford, the at the FCA delivered a speech outlining the Bank of England's new data analytics strategy, goals, and new enterprise cloud data platform and plan to make data innovation work for everyone.

5 Insights About the BoE's New Data Analytics Strategy

Below we highlight some impactful Q&A of interest to fintechs and financial institutions regarding data innovation plans.

1. What is the Bank of England's New Data and Analytics Strategy?

With the goal of revolutionizing the collection, analysis, and application of data, the Bank of England has launched a new comprehensive data and analytics plan. This approach places a strong emphasis on utilizing data technology to promote financial innovation, increase financial stability, and improve regulatory compliance.

See:  BoE Report: Open Banking Boosts Productivity, Competition

The goal of the Bank's use of big data and sophisticated analytics is to build a financial system that is more reliable, open, and effective.

2. How Will the New Cloud Enterprise Data Platform Be Developed and Implemented?

Developing a new cloud enterprise data platform to enable real-time analytics and decision-making by facilitating seamless data integration and accessibility is a key part of the plan.  The implementation will be phased with core infrastructure added first and more sophisticated features being added in the future.  This approach ensures a safer, adaptable, and scalable environment for handling enormous volumes of financial data.

3. What Steps Are Being Taken to Improve Regulatory Data Collections?

Improving regulatory data collection is one of the main priorities of The Bank of England.  The implementation of powerful technologies that automate data collection aims to improve the timeliness and accuracy of data submissions while lessening the reporting load on financial institutions. Improved risk management and more effective regulatory supervision will also be possible with streamlined procedures and improved data standards in the financial industry.

4. How Will Artificial Intelligence (AI) Be Safely and Effectively Integrated?

AI tools will be combined to evaluate large, complex datasets, forecast trends, and spot possible dangers. Strict governance frameworks and ethical standards are being implemented by the Bank to guarantee safe and efficient use.

See:   How GenAI Is Transforming Risk and Compliance in Banking

By addressing issues with bias, transparency, and data protection, these steps will promote responsibility and trust in AI-driven systems.

5. How Will the Bank Manage the Transformation?

To succeed the bank will need to adjust its corporate culture, skill sets, and business procedures to transform the Bank's approach to operate a modernised data innovation program. The bank is investing in training and development of staff to provide the necessary skills to work in a data-centric environment. Also, cultivating a culture of creativity and cooperation is necessary for the new approach to be implemented successfully. This entails interacting with stakeholders from the financial industry as a whole and promoting candid discussions on industry best practices and new developments.

What Outcomes Are Expected?

  • More timely and reliable data can be expected by using automated data collection systems and advanced analytics. This lowers errors and improves the accuracy of the financial data available.
  • Improved transparency and confidence.  Clients can feel secure knowing that their data is managed ethically, reducing the possibility of bias and privacy issues.
  • The strategy's focus on effective risk management and regulatory supervision helps to create a more stable financial system.  The bank will use AI and machine learning to forecast consumer behaviour, market trends, and possible financial hazards.  A safer financial environment lowers the possibility of systemic risks and financial disasters, which benefits consumers.

See:  FCA’s Shift to More Transparent Investigations

  • The use of automated data collection tools and standardized data formats will minimize data requests and reduce the reporting workload (administrative burden) and costs for both industry and regulators, thus improving regulatory compliance and supervision.
  • Stronger data infrastructure will boost collaborative innovation between regulators, fintechs and the Bank of England around financial inclusion, cybersecurity, and other initiatives drawn by insights from shared data, creating an environment that encourages growth.
  • Higher quality compliance related data will empower fintechs to make informed data-driven decisions that will improve operational efficiencies and strategic planning, leading to better customer experiences, and ultimately more competitive financial products.

Conclusion

By using the latest technologies to improve data collection/quality and automate regulatory processes while promoting cooperation, regulators and industry may expect better compliance, streamlined reporting requirements, and a smarter and more agile and resilient operating environment.


NCFA Jan 2018 resize - Bank of England Launches New Data Innovation StrategyThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Zum Rails’ Major AI-Driven BaaS Initiative and Strategic Hire

Release | Jun 7, 2024

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Image: Zūm logo

Zūm Rails hires Miro Pavletic to lead new AI-driven banking project

A scaling Canadian fintech business Zūm Rails has announced the hiring of Miro Pavletic who joins Zūm to manage its large-scale AI-driven Banking-as-a-Service (BaaS) project. This is a key move to expand Zūm Rails' unique financial offerings and solutions.

Miro Pavletic

Fintech expert with a wealth of banking and finance experience, Miro Pavletic joins Zūm Rails as a key player in their newest project. Previously, Pavletic was the Co-founder and CEO of Stack, a digital challenger banking app that was acquired by Credit Sesame in 2020.

See:  Züm Rails’ $10.5M Boost for North American Expansion

Pavletic will lead Zūm Rails’ BaaS product roadmap, which will integrate with Zūm Rail’s current payment services and include real-time fraud assessment, identity validation, and transaction settlement capabilities. Pavletic is committed to accelerating the development and implementation of these features on a unified platform, enabling businesses to surpass regulators' open banking deadlines and utilize artificial intelligence to effectively manage risk.

Key Developments and Financing

Since founding in 2019 Zūm Rails self-funded its way to profitability and has become a significant player in the North American payments market. Their 'omni-rail' solution combines instant payments with open banking to create a streamlined transaction process that supports multiple payment methods like Visa Direct, Mastercard, direct bank account linking, and Canada's Interac network.

In February of this year, Zūm Rails was in the spotlight when it successfully completing a $10.5 million CAD Series A fundraising round led by Arthur Ventures. The purpose of this capital infusion was to strengthen their open banking and quick payment capabilities, as well as to increase their market share in the United States.  The company intends to launch new BaaS capabilities and a FedNow service in the United States that will allow companies to process FDIC-insured payments in a matter of seconds.

See:  Implications of the BaaS Synapse Collapse

Firms like Plaid, Finicity, and established banks that are pursuing open banking are a few of Zūm's core competitors. Zūm Rails stands out in a crowded market thanks to its seamless integration of quick payments and open banking. This is the core of its unique value offer (in a fragmented market).

Closing Outlook

Zūm Rails is in a strong position to grow its market share and accelerate its creative activities, thanks to the smart hiring of Miro Pavletic and recent funding injection. As Zūm continues to innovate, stakeholders can expect a wave of new developments that will enhance the efficiency, security, and scope of financial transactions across North America.


NCFA Jan 2018 resize - Zum Rails' Major AI-Driven BaaS Initiative and Strategic HireThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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VoPay Launches TXB Solution for Banks and Credit Unions

VoPay | Release | May 29, 2024

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VoPay announces TXB, an API-first solution to enhance transaction banking and cash management for banks and credit unions

Canadian fintech, VoPay, just announced the release of its Transaction Banking (TXB) solution, which aims at assisting banks and credit unions to implement API-first transaction banking and cash management systems.  The TXB solution offers an API-first architecture, which makes it seamless to integrate with existing systems. With this approach, banks and credit unions can take advantage of automated transaction workflows, which will result in enhanced operational efficiency​.

Highlights

  • TXB enables North American financial institutions to launch a range of API-first solutions that address virtual accounts, multi-layer ledger management, multi-currency cash management, process automation across various payment rails, and real-time visibility and centralization of cash.
  • White-label global payments to send, receive, and manage accounts and payments anywhere in the world, building modern, automated, and API-led experiences with dynamic payment tracking.  Receive end-to-end visibility across the chain, from initiation through to beneficiary credit, and information about the movement of the payments, charges, and even the timing of credit.

See:  Canadian Fintech VoPay and Mastercard Partner to Move Money

  • Smart routing optimization for cost-effective and rapid delivery with better principal protection.
  • Initiate API payments and collections on-demand with US ACH, CAD EFT, Push-to-Card, RTP, and more.

Hamed Abbasi, Co-Founder and CEO of VoPay:

"We are thrilled to unveil TXB, the latest evolution of the VoPay platform. This launch is a direct response to the evolving needs of businesses as we continually strive to anticipate and address the next frontier in business solutions, empowering organizations to scale and operate with greater efficiency. I am immensely proud of the innovative spirit exhibited by our team and the unparalleled uniqueness of this product. With unwavering support from our partners and customers, TXB is poised to elevate VoPay to new heights on a global scale."

See:  NCFA Congratulates Canadian Fintechs Selected for the UK’s Fintech CTA Program

Why This Matters

VoPay’s TXB technology transforms transaction banking for financial institutions that use API-first structures to improve security, efficiency, and operational performance while enabling banks and credit unions meet growth goals and offer better services to their customers.  TBX will become available July 1 to existing customers.   Not a customer?  Speak with a specialist here.


NCFA Jan 2018 resize - VoPay Launches TXB Solution for Banks and Credit UnionsThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Implications of the BaaS Synapse Collapse

BaaS | May 29, 2024

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The Synapse Collapse and What It Means for up to 10 Million Consumers and the Fintech Industry

Synapse's shutdown is sending ripples throughout the fintech space

The fintech sector has been rocked in recent weeks by the failure of Synapse Financial Technologies, which has surfaced huge issues within the fintech sector’s Banking-as-a-Service (BaaS) model of doing business. Synapse, a high profile BaaS player backed by Andreessen Horowitz (a16z) filed for Chapter 11 bankruptcy in late-April 2024, potentially affecting up to 10 million consumers per TechCrunch.  So lots of customers are unable to access their funds exposing vulnerabilities within the BaaS middleware model providing crucial lessons for the entire fintech ecosystem.

Banking-as-a-service (BaaS)

Banking-as-a-service (BaaS) is the delivery of banking services in partnership between a licensed bank and a fintech or nonbank entity. By and large, the services offered are a range of online banking, payment processing, money transfer, lending, and tools to help budget, save, and invest. BaaS allows fintech firms to innovate at speed and to provide financial services at a lower cost of entry. BaaS does have additional risks in the areas of compliance, security, and operational resilience.

What caused the collapse?

Synapse's failure can be attributed to a number of operational and partnership issues. Among these was a €13 million deficient reconciliation problem with its major banking partner, Evolve Bank & Trust, highlighting inherent risks where middleware can delay real-time financial reconciliation.  This was further complicated by Synapse using For Benefit Of Accounts (FBO),a common setup with BaaS firms where FBO accounts hold customer funds under a single account on behalf of multiple end-users, which made reconciliation and tracking of customer funds more difficult.

See:  Bank-Fintech Partnerships and Trends 2024

To add fuel to the fire, there was a lack of proper management of such technological and operational bugs which eventually resulted in the freezing of the accounts of Synapse as well as the winding up of its operations. So millions of end customers across a variety of fintech applications like Juno, Yotta, and Copper woke up one day and were denied access to their accounts, with no apparent solution in the near term.  For customers, it is a cautionary tale of the risks involved when banking with fintech company relying on a BaaS model.

Industry Implications

The implications for the fintech industry and its investors are significant.

  • Greater regulatory scrutiny is also likely to follow, with regulators possibly seeking to impose greater constraints to hold fintech companies to account to high expectations of compliance and risk management.
  • Andreessen Horowitz, a leading investor in Synapse, and other investors are now cautious and applying more rigor to the commercial sustainability and risk mitigation systems of BaaS providers. There may be less money on offer for new fintech startups and a more risk-averse strategy towards investment.

See:  Bain & Co Embedded Finance Report: What It Takes to Prosper in the New Value Chain

  • The failure has also sparked a debate as to whether such failures are the nature of the BaaS model or whether such shortcomings can be averted by more effective governance and operational controls.  Experts are of the opinion that while the BaaS model itself is not having any fundamental flaw, management of partnership workings, and particularly with banking institutions, has to be managed closely.
  • Fintech companies must work out sound reconciliation process, maintain frank communications with banking partners and ensure fulfillment of regulatory requirement.
  • Consolidations and M&A may increase across the market as smaller struggling companies are forced out of the market or into the arms of larger, stronger companies, leaving fewer but more robust providers of BaaS.

Insights for Fintech

To avoid running into the same problem that Synapse Inc. encountered, fintech companies are advised to undertake some proactive measures:

  • Provide clear and transparent as well as well-documented agreements with banking partners. Periodically review and update such agreements, so that new risks are addressed.  The goal is to foster positive, sustainable relationships.
  • Test and verify that middleware systems can effectively process complex financial transactions and reconciliation processes.

See:  How GenAI Is Transforming Risk and Compliance in Banking

  • Compliance. Compliance. Compliance. Adhere tightly to the specifications of the regulatory bodies to avoid major operational gotchas.
  • Establish and follow extensive risks management frameworks with contingency plans for operational breakdowns and partnership failures.

The Road Ahead

As the sector looks on amid the ruins of Synapse’s collapse, it is obvious that fintech firms and their financiers will need to re-establish trust and a high degree of operating resilience. The appointment of an unaffiliated Chapter 11 trustee will serve to manage the immediate crisis, but the fallout will be felt among BaaS participants for some time.


NCFA Jan 2018 resize - Implications of the BaaS Synapse CollapseThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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API Magic: Empowering Payment Services Providers and Fintech Innovators to Scale

DC Bank | Jeffrey J. Smith | April 24, 2024

Jeffrey J. Smith DC Bank - API Magic: Empowering Payment Services Providers and Fintech Innovators to Scale

Jeffrey J. Smith, Co-Founder, CEO & Director, DC Bank

In today's fast-paced digital world, scaling efficiently is a must-have for your business. As technology continues to reshape the financial industry, Application Programming Interfaces (APIs) are revolutionizing the game. APIs make it easy to connect systems, ensuring secure and smooth data exchange. When it comes to payment solutions, APIs are the secret sauce for businesses to scale effortlessly. At Digital Commerce Group of Companies (DC Group), we're trailblazers in digital payment solutions for financial innovators. Our API developer tools are top-notch, giving you extended functionality and full control over the services you provide. As experts in the field, we’re sharing some thoughts on how to leverage API payment technology to grow your business.

Embracing the Power of an API

API-driven solutions offer a wide range of opportunities for financial services providers and fintech entrepreneurs alike. They bring flexibility, speed, and open exciting avenues for boosting revenue. With APIs, you can easily integrate with your existing systems, allowing you to enhance your technology stack while reducing development time. This lets you focus on delivering value back to your customers, while reducing your time-to-market.

Finding a Trusted Technology Partner

When it comes to integrating payment solutions, choosing a trusted partner is key. First, look for a solid reputation, top-notch security measures, a range of cutting-edge products, and easy integration. At DC Group, our dynamic platform offers state-of-the-art APIs with advanced features that let you take control of your technology to customize the payment experience. We build adaptive programs that give fintech innovators the means to scale and pivot with ever-changing business demands.

See:  Embedded Finance: Banking Meets the Customer

Second, when scouting a potential partner, be sure to ask questions — can they handle increased transaction volumes and adapt to evolving industry standards? (Hint: we can!) You’ll also need responsive customer support to address any concerns. By choosing a reliable API partner, you can rest easy knowing your transactions are in good hands, allowing you to grow your business, and stay ahead in a competitive market. Our tech-obsessed team at DC Group works with you to uncover challenges that are holding your technology back or slowing your business down. We help dream up a solution that ensures you succeed in today's fast-paced digital landscape.

Enhancing Your Customer Experience

Whether you're a payment services provider or a fintech entrepreneur, API-driven payment solutions offer exciting possibilities to level up your customer experience and streamline operations. With APIs, you can incorporate third-party applications, giving your customers access to a diverse range of financial products all in one place. This seamless integration not only simplifies the customer experience but can also expand your product offering with a trusted interface that's sure to attract new customers.

Offering More Services

API-driven payment solutions have revolutionized the financial industry, empowering businesses to scale effortlessly. Through our best-in-class API developer tools, we work with businesses to integrate a wide range of services — from payment and E-transfer capabilities, to card services and digital wallets.

See:  FinTech’s Role in Modern Treasury Management: Streamlining Operations and Capital Optimization

We’re passionate about helping businesses build faster and level-up the services they provide. Embrace the power of APIs and propel your business into the future of finance with DC Group's comprehensive API-driven payment solutions.

About the Author

By Jeffrey J. Smith, Co-Founder, CEO & Director

Mr. Smith, the co-founder and CEO of DCBank, is a seasoned entrepreneur with over 30 years of experience in international financial services. He has an impressive track record of operating, financing, and expanding large-scale businesses. Mr. Smith has successfully sourced, negotiated, and integrated numerous acquisitions in Canada and abroad. He was recognized as the Industry Person of the Year for Prepaid & Payments by Payments eXchange in 2013 and received the Ernst & Young Entrepreneur of the Year award for the Prairies Region in 2005. Additionally, he served as a Board Member of the Interac Association from 2012 to 2017.


NCFA Jan 2018 resize - API Magic: Empowering Payment Services Providers and Fintech Innovators to ScaleThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Canadian Fintech VoPay and Mastercard Partner to Move Money

Release | April 15, 2024

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VoPay's Partnership with Mastercard Will Offer Near Real-Time Money Movement in Canada and Globally for Consumers and Businesses

Mastercard and VoPay have announced a strategic partnership leveraging Mastercard's comprehensive money transfer solutions, known as Mastercard Move, to facilitate rapid, secure, and efficient monetary transactions both domestically and internationally. This partnership aims to redefine the landscape of financial exchanges, improving accessibility and convenience for both businesses and consumers.

See:  VoPay Launches VoPay360 – Embedded Financial Technology

Hamed Arbabi, CEO and Founder of VoPay:

"This partnership delivers on both companies’ commitment to provide more choice and greater transparency for people who need to send money. The platform will also transform the way businesses and consumers transfer money internationally. Be it personal remittances, small business payments or commercial disbursements, with Mastercard Move, VoPay will enable businesses, financial institutions and consumers to send money to bank accounts, mobile wallets, cards and cash-payout locations in over 100 countries. The joint solution between Mastercard and VoPay will transform the user experiences for both the sender and the recipients."

  • Mastercard Move integrates domestic and international money transfer capabilities, offering various payment methods including direct bank transfers and payments to debit or prepaid cards. This diversity supports a wide range of transaction needs across different sectors.
  • Through the partnership, VoPay will utilize Mastercard Move to facilitate all domestic payments within Canada. This includes direct payouts to bank accounts, debit cards, and reloadable prepaid cards, catering to needs ranging from gig-economy compensations to healthcare payments, thereby enhancing the efficiency of domestic economic activities.

See:  NCFA Congratulates Canadian Fintechs Selected for the UK’s Fintech CTA Program

  • The partnership significantly improves cross-border payments by providing secure, fast, and transparent money transfer options. These improvements are crucial for Canada, given its substantial engagement in international trade and its growing immigrant population relying on remittance services.
  • The collaboration ensures high security for transactions, featuring trackable payments, transparent fee structures, and real-time updates on transaction statuses. Such features are critical in building trust and facilitating smoother financial interactions globally.

Ramesh Jayakrishnan, Vice President, New Payment Platforms, Mastercard Canada:

“There is a growing demand for interoperable technology that allows consumers and businesses to move money seamlessly across networks domestically and internationally.  By leveraging Mastercard Move, including Mastercard’s technology and connectivity to global and domestic networks, VoPay, with its focus on providing a globally interoperable platform with embedded finance capabilities, will deliver significant value to Canadian consumers, businesses and government entities.”

See:  Feds Promise Open Banking Laws in 2024 and to Broaden Access to Payments Canada

Why This Matters

By improving the speed, security, and transparency of payments, VoPay's collaboration with Mastercard supports Canada's economic growth and global financial innovation.


NCFA Jan 2018 resize - Canadian Fintech VoPay and Mastercard Partner to Move MoneyThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Canadian Loyalty to Financial Institution Reveal ‘Soft Satisfaction’ 62% Open to Change

Survey Insights | April 9, 2024

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How digital transformation is influencing Canadian loyalty to financial institutions

The digital age is transforming the landscape of financial services, compelling Canadian financial institutions to reassess their strategies for maintaining customer loyalty. A recent survey by Abacus Data, conducted with 3,550 Canadians, shows the evolving relationship between Canadians and their financial service providers. With the imminent implementation of open banking legislation, this article looks at the current state of financial institution loyalty in Canada, offering insights into consumer behavior, preferences, and potential industry shifts.

How Consumers Look at Loyalty to a Financial Institution

Consumer loyalty to financial institutions refers to a customer's continued preference for and engagement with a specific bank or financial service provider over others. This loyalty can stem from various factors, including satisfaction with the institution's products and services, the perceived value these services offer, the quality of customer service, and the level of trust the consumer places in the institution. Loyalty is not just about a reluctance to switch to another provider; it often involves a deeper emotional connection, where the customer feels a sense of allegiance or commitment to their financial institution.

See:  Open Banking Insights: Decoding Canada’s Financial Future

According to the survey results, the top reasons for 'remaining with a financial institution' are:

  • 51% Long standing relationship
  • 46% Convenient branch / ATM locations
  • 44% Satisfactory customer experience
  • 42% Familiarity with Bank's online and mobile platform

Let's break it down further and look at the key dimensions typically characterize consumer loyalty in the context of financial institutions:

  • Trust is a foundational element where customers believe their financial institution acts in their best interest, keeps their money safe, and maintains confidentiality.
  • The contentment or satisfaction experienced or perceived from the institution meeting or exceeding customer expectations in terms of products, services, and customer support.
  • The convenience or ease of accessing and using the institution's services, including branch locations, online banking, and mobile apps, which can significantly influence loyalty.
  • Personalization of services and communications to individual needs and preferences, making customers feel valued and understood.
  • The frequency of engagement and communication between the institution and the customer, including feedback mechanisms, responsiveness to inquiries, and the overall customer service experience.
  • Loyalty programs designed to reward customers for their continued business, such as points, lower fees, or higher interest rates on savings accounts, which can enhance the perceived value of staying with an institution.

See:  Open Banking: Revolutionizing Financial Data Sharing

Loyal customers are likely to use more of an institution's products and services, recommend the institution to others, and are less sensitive to price changes. In the competitive financial services sector, fostering consumer loyalty is crucial for retaining customers and achieving long-term success.

Are Canadians Satisfied with their Bank?

According to the survey results, most Canadians—about 7 out of 10—say they're happy with their main bank. Also, 77% are happy with how easily they can access their accounts and do banking online, and 69% like the products and services their bank offers.  However digging into the details shows that people aren't exactly satisfied with their full experience:

  • Only about half or 52% of the people feel like their bank really values them as a customer
  • Only half  or 51% think their bank is looking out for their best interests when it suggests products or advice
  • People also have mixed feelings about whether the fees they pay are fair for what they get

See:  CBDCs in Canada and Impact Drivers on Banking Choices

This points out a problem: It shows there's a big difference between what customers hope for and what they actually get from their banks, especially when it comes to personal attention. Banks need to focus more on making their customers happy, building trust, and making them feel valued. If they don't, they might lose these customers to competitors, especially as more choices become available in the banking world.

How about their willingness to switch?

The hassle associated with switching providers is a significant barrier, cited by 35% of Canadians. This includes the inconvenience of transferring direct deposits and updating account information, indicating a need for streamlined processes to facilitate customer mobility.

One of the survey's critical insights is the identification of the hassle associated with switching providers is a significant barrier, cited by 35% of Canadians. This includes the inconvenience of transferring direct deposits and updating account information, indicating a need for streamlined processes to facilitate customer mobility.  Some of the other top barriers to switching that were cited include:

  • 35% too much of a hassle / time consuming
  • 21% difficulty in transferring payments/deposits
  • 21% loyalty with current institution
  • 20% concerns about penalties or fees/fines for switching

As a follow-up question, consumers were asked about their willingness to switch if the process were more streamlined (aka Open Banking) and a total of 62% said that they would be open to switching.

Abacus data willingness to switch if the process were streamlined - Canadian Loyalty to Financial Institution Reveal 'Soft Satisfaction' 62% Open to Change

Image: Abacus Data survey

Keeping Customers Happy in the Digital Era

Key findings reveal a marked readiness among younger demographics to consider alternative financial services, hindered primarily by the perceived hassle and administrative burdens associated with switching providers.  Notably, many Canadians base their choice of financial institution on convenience and reputation rather than the financial benefits or service quality offered. This decision-making pattern suggests a market ripe for disruption, where open banking could catalyze a shift towards more informed and value-driven consumer choices.

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Key stakeholders can immediately focus on improving their offerings such as:

  • FinTechs and banks should streamline online onboarding, making it easier for consumers to switch or open new accounts, possibly through a unified digital ID system. This could significantly reduce the administrative hassle associated with switching providers.
  • Leveraging data analytics and the power of artificial intelligence, institutions can offer personalized financial products and services. Tailored solutions could attract those who may not have considered switching due to a lack of compelling alternatives.
  • Educational initiatives to improve financial literacy can help consumers make informed decisions based on more than just convenience or familial ties. This is particularly relevant for younger demographics who show openness to change.
  • Focus on improving the overall customer experience, from digital interfaces to customer service responsiveness. Satisfied customers are more likely to remain loyal despite the allure of alternatives.

How Canada's Open Banking Regulations Complement Current Consumer Trends

Open banking regulations are expected to streamline the process of sharing financial information between institutions with consumer consent, thus minimizing barriers. This facilitation could encourage more Canadians to consider alternative providers if the process is perceived as less cumbersome and time-consuming.

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By allowing third-party developers to access financial data through APIs—with consumer consent—it promises a new era of financial services characterized by increased competition, productivity, consumer choice and personalized offerings.

1. Enhance Competition and Consumer Choice

The survey's revelation of a significant openness among Canadians to switch financial institutions aligns perfectly with open banking's ethos. By facilitating easier data sharing and simplifying the transition between providers, open banking is poised to lower the barriers highlighted in the survey, potentially ushering in a wave of consumers ready to explore alternative financial services.

2. Drive Financial Innovation

Open banking's emphasis on data sharing and consumer empowerment could directly address the survey findings that highlight a preference for convenience over financial benefits. It offers Fintechs and traditional banks an unparalleled opportunity to innovate, providing consumers with solutions that offer real value, from personalized financial products to comprehensive management tools that enhance financial literacy and decision-making.

3. Address Barriers to Switching

The administrative hassle associated with switching financial providers—a significant barrier identified in the survey—could be mitigated through open banking regulations.

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Streamlined processes for sharing financial information between institutions could encourage more Canadians to consider their options, making the financial landscape more dynamic and competitive.

4. Impact on Banks, Fintechs, and the Economy

For traditional banks, the survey and open banking present both a challenge to retain customers and an opportunity to innovate. Fintechs, on the other hand, stand to benefit significantly, as open banking levels the playing field, allowing them to offer new services that directly address consumer needs and preferences.  The broader implications for productivity and the economy are equally promising. Enhanced competition and innovation in the financial sector can lead to more efficient services, potentially lowering costs for consumers and businesses alike. This efficiency can contribute to economic growth by freeing up resources for investment in other sectors.

Conclusion

The findings from Abacus Data illustrate a 'turning point' for the Canadian financial services sector. As consumer expectations evolve, so too must the strategies of financial institutions. The emerging trend of openness to alternative providers, particularly among younger demographics, signals a shift towards a more dynamic and competitive banking landscape.

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Traditional banks and emerging Fintech firms must navigate these changes by fostering strong customer relationships, enhancing digital offerings, and simplifying the switching process. Doing so not only secures customer loyalty but also positions these institutions to thrive in the era of open banking.


NCFA Jan 2018 resize - Canadian Loyalty to Financial Institution Reveal 'Soft Satisfaction' 62% Open to ChangeThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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