Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Research
NIST Insights: GenAI Risk Management Framework
GenAI | April 30, 2024
Image: Freepik
Insights from NIST's Latest GenAI Risk Management Framework
The rapid rise and integration of artificial intelligence (AI) into the financial technology sector brings unprecedented opportunities for innovation but also introduces a raft of new risks. Recognizing these challenges, the National Institute of Standards and Technology (NIST) has unveiled an AI Risk Management Framework that stakeholders of all industries including fintech must be manage.
See: The Rise and Implications of a New AI Software Workforce
The framework has been developed in response to White House directives following President Biden's Executive Order (EO) on the Safe, Secure and Trustworthy Development of AI, this framework aims to help organizations harness AI's benefits while ensuring robust safety, security, and compliance.
Generative AI Risks in Fintech
NIST's framework delineates several risks particular to Generative Artificial Intelligence (GAI) that fintechs and financial institutions must be vigilant about:
- Enhanced accessibility to sensitive CBRN (chemical, biological, radiological, nuclear) weapon information could pose severe threats if misused within financial sectors dealing with sensitive materials.
- GAI might generate convincingly false financial forecasts or market analysis, misleading stakeholders and causing potentially disastrous financial decisions. This risks is more widely known as GenAI hallucinations.
- There's an increased risk of GAI systems inadvertently generating or facilitating access to financially harmful, illegal, or unethical investment advice or strategies.
See: How Fintechs Can Integrate AI for Efficiency Gains
- GAI simplifies the production and distribution of content that may infringe on copyright, trademarks, or licenses, raising ethical and economic concerns regarding intellectual property rights.
- In fintech, where vast amounts of personal and financial data are processed, GAI could lead to severe data breaches, impacting customer trust and compliance with privacy laws.
- Poor integration or misalignment between human operators and AI systems in fintech could result in severe operational failures or financial losses.
- The ease of generating and accessing unverified content could lead to widespread financial misinformation or enhanced cyber-attack capabilities against financial institutions. Risk of information integrity and security.
Fintech AI Safety
Embracing NIST’s guidelines enables fintech firms to not only meet current regulatory expectations but also to prepare for future industry standards. By adopting a proactive approach to AI risk management, fintech companies can safeguard their technologies, secure customer trust, and ensure a competitive edge in the rapidly evolving financial marketplace.
See: AI’s Ethical Dilemma Grows as Innovation Surges
To mitigate these risks, the NIST framework advises fintech firms to:
- Implement advanced security measures to protect sensitive financial data against breaches, crucial for maintaining customer trust and regulatory compliance.
- Regularly audit AI systems to ensure they do not perpetuate existing biases, which could lead to unfair or harmful financial practices.
- Enhance operational transparency to maintain clear, auditable AI decision-making processes to uphold accountability and compliance in financial operations.
Outlook
Fintech leaders who embrace these principles will be better positioned to lead the charge in harnessing AI's potential responsibly, ensuring that the future of finance is marked by advancements that are secure, equitable, and aligned with the highest standards of ethical practice.
The 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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Resurgence of Cryptoassets in Canada’s Investment Landscape
Survey Results | April 25, 2024
Image: Freepik
2023 Canadian Institutional Adoption of Crypto Assets
About the Survey: The latest 2023 Institutional Adoption of Crypto Assets survey conducted by KPMG in Canada and the Canadian Association of Alternative Assets and Strategies (CAASA) reveals increased adoption and innovative practices in digital currencies.
See: Investors Launch Argo Digital Gold to Tokenize Gold
The survey received 65 responses, including 31 from institutional investors and 34 from financial services organizations with operations in Canada. The institutional investors comprised a diverse group, including hedge funds, family offices, high net worth individuals, pension funds, endowments and foundations, as well as private equity and venture capital firms.
Cryptoasset Services Expand
- 2023 saw an uptick in financial institutions embracing cryptoassets, with 50% of survey respondents affirming their offerings of at least one type of cryptoasset service, a significant rise from 41% in 2021. This growth is attributed to a more robust regulatory framework and a rising inclination towards alternative asset classes.
- Cryptoasset trading surged, with 52% of financial services now providing this service.
- There was a marked increase in custody, clearing, and settlement services — from 33% to 48% — signaling an enhanced infrastructure to facilitate secure and efficient transactions.
- The quantitative trading sector witnessed the most dramatic increase, jumping from 11% in 2021 to 38% in 2023. This indicates a shift towards more sophisticated, data-driven investment strategies, reflecting an industry maturing in its approach to leveraging digital assets.
See: OSC: 2023 Canadian Crypto Survey Insights
- Conversely, there was a notable decrease in the provision of wealth management and financial advice related to cryptoassets, possibly reflecting a strategic realignment.
Kunal Bhasin, partner and co-leader of KPMG in Canada's Digital Assets practice:
"The last time we did this survey in 2021, it was a strong year for cryptoassets. The following year was a turbulent year, marked by fraud and collapses of major cryptoasset trading firms, but those events had a cleansing effect on the industry. Rising U.S. debt combined with increasing inflation likely provided a catalyst for the crypto rally of 2023, and it appears investors are looking for alternative asset classes that act as a debasement hedge and a reliable store of value. Our survey findings suggest cryptoassets are increasingly seen as an investible alternative asset class among such institutional investors and financial services organizations in Canada."
Institutional Investors Broaden Their Crypto Horizons
Institutional investors have expanded their exposure to cryptoassets. Nearly four in ten (39%) reported having either direct or indirect exposure in 2023, up from 31% in 2021. This growing interest is particularly pronounced in direct ownership, where 75% of institutional respondents now hold cryptoassets directly, a substantial increase from just 29% two years prior.
See: CSA Updates on Value-Referenced Crypto Assets Regulation
Investment strategies have diversified as well, with a significant uptick in the adoption of derivatives and crypto-related public equities. Exposure through derivatives has seen a remarkable rise, from 14% in 2021 to 42% in 2023, offering investors tools for hedging, speculation, and accessing the market in a risk-managed manner. Similarly, investments in crypto-related public equities have escalated, reflecting a strengthened confidence in the crypto market's integration with traditional financial systems.
Looking Forward
The cryptoasset market in Canada is positioned for continued growth, with supporting regulatory actions and increasing institutional acceptance. Innovations such as the approval of spot Bitcoin ETFs in the U.S., and anticipated Ethereum ETFs signal a maturing market ready to offer more diversified and secure investment opportunities.
See: Chainlink Transporter Launches: Secure Cross-Chain Crypto Bridging
As Canadian financial institutions and investors increase interest, the emphasis will likely remain on education, strategic investment, and the development of robust infrastructures to support these digital assets. The integration of cryptoassets into mainstream portfolios suggests that investors recognize their potential to reshape investment strategies amidst a digitally transforming world. The insights from the 2023 survey sums up Canada's approach to cryptoassets — from cautious observation to proactive engagement.
The 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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The Transition Towards Open Finance in the UK
Open Finance | April 19, 2024
Image: Innovate Finance and KPMG, The Roadmap to Open Finance in the UK (cover)
Balancing Innovation and Privacy in the UK's Open Finance Evolution
As the UK steadily advances towards the implementation of Open Finance, a delicate balance is being sought between pioneering financial services and the imperative protection of individual privacy. Drawing insights from the KPMG report "The Roadmap to Open Finance in the UK," this article examines the transformative potential of extending Open Banking principles to a wider financial landscape. While Open Finance promises to enhance accessibility and efficiency across financial services, concerns about privacy and increased surveillance present significant challenges.
How Open Finance Differs from Open Banking
Open Finance refers to the extension of Open Banking data-sharing principles to a wider range of financial products beyond just banking, such as investments, pensions, and insurance. It allows third-party providers to access financial data across different sectors, provided they have the consumer’s consent. This broader scope aims to create a more integrated, transparent financial services environment where consumers have better control over their financial data and can benefit from personalized financial products.
See: BoE Report: Open Banking Boosts Productivity, Competition
While Open Banking focuses primarily on banking data, allowing third-party applications to access bank account information to provide consolidated views and innovative services, Open Finance extends this to virtually all aspects of a person's financial life. Open Finance seeks to create a holistic view of a person's financial situation, leading to more tailored advice, better financial planning, and easier management of personal finances across different platforms.
Building Blocks for Open Finance
These components collectively enable a secure and consumer-centric Open Finance ecosystem. Regulatory frameworks and standardized protocols ensure that all parties follow a uniform approach to data handling and sharing, which simplifies integration and cooperation. Security measures protect data integrity and build consumer trust, which is pivotal for the acceptance and success of Open Finance.
See: Small Step Forward As Feds Publish Straw-man Open Banking Framework
Consumer consent management empowers users, ensuring they remain in control of their data and who accesses it. The technological infrastructure supports the actual delivery of services, ensuring that the system is both resilient and scalable. Lastly, stakeholder collaboration ensures that the system is comprehensive and benefits all parties involved.
- Comprehensive regulatory frameworks ensure that all participants in the Open Finance environment adhere to strict guidelines regarding data sharing, privacy, and security. This includes updates to existing financial laws and the introduction of new policies tailored to the complexities of managing multi-dimensional financial data across different sectors.
- To facilitate seamless data sharing, standardized protocols are essential. These protocols define how data is exchanged between different financial entities, ensuring that systems are interoperable and can communicate without friction.
- Advanced and robust security protocols such as encryption, secure APIs (Application Programming Interfaces), and authentication mechanisms are necessary to protect sensitive financial data against breaches and unauthorized access.
- A central component of Open Finance is the empowerment of consumers to control who can access their data. This requires a transparent mechanism for consumers to grant and revoke consent as needed, ideally through an easy-to-use interface that provides clear options.
See: CIBC Partners with U.S. Fintech to Enable Open Banking API
- IT infrastructure to support the high volumes of data exchanges and the complex processing required to deliver personalized financial services. This includes cloud services, data centers, and support systems to handle the load and provide uptime guarantees.
- Open Finance requires the active participation of banks, fintechs, insurance companies, investment firms, and other financial services providers. Holistic stakeholder collaboration is crucial to ensure the ecosystem is inclusive, catering to all aspects of consumer and business finances.
A Day in the Life Examples
These scenarios demonstrate how Open Finance can streamline financial management, making it more integrated, intuitive, and responsive to the needs of consumers and businesses alike, marking a significant evolution from traditional financial services.
See: Canada’s Open Banking Journey: Interview with Brenton Charnley, CEO and Founder of Open Finance Advisors, Australia (Ex-TrueLayer ANZ CEO)
Consumer
Imagine Sarah, a freelance graphic designer. With Open Finance, she starts her day by checking a financial dashboard app that integrates data from her bank accounts, investment portfolios, and freelance income management tools. She reviews her monthly budget, which is automatically adjusted based on her recent spending and earnings. The app suggests ways to optimize her savings and alerts her about better mortgage rates, thanks to a comprehensive view of her financial health. She approves a switch to a new insurance provider offering a better rate, all within the same app, secured by her biometric authentication.
Small Business
Consider a small business, 'Bloom Coffee Roasters.' The owner, Tom, uses an Open Finance-enabled platform to manage the business's finances. He reviews real-time data on his supply chain financing, business loans, and cash flow all from a single interface. The system uses AI to forecast cash flow for the next quarter and suggests applying for a short-term loan to cover a predicted shortfall. Tom can compare loan offers from multiple providers directly through the platform and secure financing quickly, without needing to provide extensive documentation, as lenders already have access to the necessary data through Open Finance protocols.
Privacy and Surveillance Concerns
Open Finance represents a significant shift in how financial data is accessed and shared, bringing with it immense benefits such as enhanced financial services, better personal finance management, and increased market competitiveness. However, the adoption of Open Finance in the UK, or any region for that matter, is not without its complexities, particularly concerning privacy and surveillance.
See: Embedded Finance: Banking Meets the Customer
Privacy concerns are paramount, as Open Finance by its very nature involves the sharing of sensitive personal and business financial information across a broad array of platforms and institutions. The apprehension that this data might be misused, or that it could increase the risk of surveillance by government entities, is a significant concern for many. These fears are not unfounded, given the increasing capabilities of technology and the interest of governments in monitoring financial flows to combat fraud, money laundering, and tax evasion.
Is Open Finance a Near Reality or a Distant Vision?
In the immediate future, the UK is likely to see incremental advances towards Open Finance. The groundwork laid by Open Banking, which has already been implemented with a fair degree of success, provides a foundational framework. However, extending this to a broader Open Finance framework will require not only technological and regulatory adjustments but also a significant cultural shift among consumers and institutions regarding data sharing. Ultimately, Open Finance is envisioned as a fully integrated system that could revolutionize financial services. Achieving this vision will involve overcoming not just technical and regulatory challenges, but also building public trust and ensuring robust privacy protections are in place.
Conclusion
In conclusion, while Open Finance in the UK holds the promise of transforming the financial services sector, its full realization as a ubiquitous system remains a longer-term goal. Immediate future developments are likely to be gradual, focusing on building the necessary infrastructure, regulatory frameworks, and public trust.
See: Canadian Loyalty to Financial Institution Reveal ‘Soft Satisfaction’ 62% Open to Change
Given the complexities and potential resistance due to privacy concerns, it is realistic to view Open Finance as a long-term vision with real hurdles to overcome. Time will tell. However, like most 'new things' in life, with careful planning and commitment to privacy and consumer rights, these challenges can be overcome.
The 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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Double-Edge Sword of AI’s Impact on Workforce Experience
Survey | April 15, 2025
Image: Deloitte Digital and Natter report cover
The Dichotomy of AI in the Workplace and Strategies to Manage it's Impact
According to a recent Deloitte Digital and Natter report called "AI can cut costs but at what cost to the workforce experience", while AI promises substantial improvements in efficiency and productivity, it also raises significant concerns regarding job displacement, privacy, and the dilution of human interaction. This article delves into the cost-benefit analysis of AI in professional settings, guided by insights from Deloitte's comprehensive survey, and discusses effective strategies to manage its impact on the workforce.
The report outlines a nuanced debate on the workforce implications of AI across four key areas, each representing a tension between potential benefits and risks:
1. Efficiency vs. Inclusivity
AI can significantly enhance efficiency by automating routine tasks, which can reduce the time and effort employees spend on mundane activities, potentially freeing them up for more complex and rewarding tasks. 69% of 1:1 Natter conversations cited improved efficiency in routine tasks as the top hope for AI in the workplace.
See: When Tech and Humanity Clash: AI Dilemma at SXSW
There is a concern that the focus on efficiency might overlook the need for inclusivity. The automation of tasks through AI can inadvertently embed and scale biases if not carefully managed, particularly in algorithms that drive decision-making processes. This could lead to a workplace that disadvantages certain groups. Nearly a third of conversations expressed concern for the bias and inclusion challenges of AI, indicating that excitement for AI's benefits is tempered by fears of embedding systemic biases.
"AI will be seen as a potential shortcut to cut costs in process-oriented roles - typically entry-level jobs." — Workforce experience leader
2. Creative Inspiration vs. Diligence
AI is seen as a tool that can spark creativity among employees by providing new ideas and perspectives, thus enhancing the creative process and potentially leading to innovative outcomes. Over 69% of leaders stated they believe that AI will improve employee creativity to some degree.
See: The Rise and Implications of a New AI Software Workforce
The risk here is that overreliance on AI could undermine the diligence required in work processes. If AI tools are used without adequate human oversight, the accuracy and thoroughness of work may decline, potentially affecting the overall quality of outputs. 42% of conversations cited concern for a decline in the quality of work, reflecting fears that AI may lead to a lack of thoroughness and accuracy.
"Getting every single employee to think of AI as an augmentation tool and have them be as creative and thoughtful in ways that they can use it in their day-to-day work to supplement and enhance their productivity is something we're pushing." — Workforce experience leader
3. Personalization vs. Data Privacy
AI's ability to analyze large datasets can lead to better personalization in managing employee needs and improving the employee experience. This can make communications and HR decisions more relevant to individual employees.
Enhanced personalization requires access to detailed personal data, which raises significant privacy concerns. There's a risk that the data could be misused or inadequately protected, leading to breaches of privacy and loss of trust among employees. 56% of conversations cited concern about ethical use of AI for data security and privacy.
See: AI Race of 2024 is Intensifying. Google, OpenAI, and Mistral Release New Models
"Using AI for data analysis could be better; and to better understand employee sentiment comments, theming those comments in the right way and understanding the actions from them." — Workforce experience leader
4. Time for Connections vs. Quality of Connections
AI can automate administrative tasks and streamline workflows, potentially freeing up time for employees to engage in more meaningful interactions and build stronger workplace relationships. Over a third of conversations cited that AI has the ability to unlock time for meaningful human interactions.
There's a concern that while AI may create more time for interactions, AI-mediated communications might lack the depth and empathy of human interactions, which are essential for building strong, trusting relationships. 41% of leaders are concerned that AI will degrade the quality of human connections, potentially making interactions less personal and more transactional.
"Does it really give you back time, or does it create more capacity to do more?" — Workforce experience leader
Image: Freepik kues1
Strategies for Managing AI’s Impact
To harness the benefits of AI while addressing its potential costs, organizations can adopt several strategic approaches:
- Develop guidelines and standards for ethical AI use, ensuring that AI systems are designed and operated in a way that respects privacy and prevents bias. For example, AI models should be regularly audited for fairness and accuracy.
- Design AI systems that complement human skills and enhance job satisfaction. Organizations should use AI as a tool to support employees, not replace them, fostering an environment where technology and human expertise coexist.
See: CMA Flags Big Tech’s Tightening Hold on AI Markets
- Clearly communicate with employees about how AI is used within the organization and its impact on their roles. This includes training sessions and open forums to discuss AI projects, addressing any concerns and gathering feedback.
- As AI changes job roles, companies must provide training and reskilling opportunities to help employees transition to new roles or adapt to new technologies, ensuring that no one is left behind as the workplace evolves.
- Adopt robust data governance practices to protect sensitive information and maintain trust with employees and customers. This involves securing AI data inputs and outputs, and ensuring compliance with relevant data protection laws.
- Involve diverse teams in AI development to help reduce unconscious bias in AI systems. Diversity in development teams can help anticipate and mitigate potential bias in AI applications.
Conclusion
Great to see a report that looks at AI from a human-centric lens. AI presents both opportunities and challenges for the workplace. By focusing on strategies that promote ethical use, support workforce development, and enhance employee engagement, organizations can ensure that the integration of AI contributes positively to their operational goals and workforce experience.
The 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
Image: Freepik/gpointstudio
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
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.
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.
See: BoE Report: Open Banking Boosts Productivity, Competition
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.
See: Can Canada Harvest the Next Wave of Productivity Growth?
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.
See: Feds Promise Open Banking Laws in 2024 and to Broaden Access to Payments Canada
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.
See: Open Banking Regulation in the U.S. Strikes a Chord
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.
The 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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Can Canada Harvest the Next Wave of Productivity Growth?
Productivity | March 29, 2024
Image: McKinsey, Investing in Productivity Growth (Exhibit 5)
Global Productivity Grew Sixfold in 3 Decades but Advanced Economies Have Slowed
According to a McKinsey & Company analysis, the next wave of global productivity and economic growth is within reach, yet countries need to invest in productivity to harvest it or be left behind especially when faced with challenges like aging populations, the energy transition, and supply chain reconfigurations. The median economy's productivity has surged sixfold over the past 25 years, with 30 emerging economies experiencing rapid improvements. Yet, advanced economies have seen a slowdown, with productivity growth decelerating by about one percentage point since the global financial crisis.
High investment rates, ranging from 20 to 40 percent of GDP in fast-lane economies like China and India, have supported urbanization, higher productivity in service sectors, and globally connected manufacturing.
See: Canada’s Lagging AI Adoption Needs to Accelerate to Compete
For advanced economies, regaining pre-crisis productivity growth rates could yield an incremental GDP per capita increase of $1,500 to $8,000 by 2030. Directed investments in digitization, automation, and artificial intelligence could reignite productivity growth.
Harnessing the Next Wave of Productivity Growth Should Be Canada's Top Priority
Image: OECD, Business Investment Canada vs OECD Average 1980-2019
Canada's productivity landscape is currently facing significant challenges and opportunities for improvement. According to a detailed analysis by the Bank of Canada, several key factors are identified as crucial for enhancing the nation's productivity:
For Canada to drive greater innovation and efficiency, especially among small and medium-sized enterprises (SMEs), a more competitive business landscape is essential. SMEs often lack the economies of scale that benefit larger companies, making it crucial to foster an environment that supports their growth and innovation capabilities. Many innovation groups and experts have talked about Canada's lack of business investment and outdated policies for moderns times in a knowledge-based economy where intangible assets require investing in intellectual property ownership to capture value at scale.
See: C.D.Howe Report: Canada’s Weak Business Investment Threatens Prosperity
One of the most critical areas of concern is Canada's investment levels in machinery, equipment, and intellectual property. Over the past decade, investment levels have not only been insufficient but have also seen a decline. Boosting investment in these vital areas is imperative for enhancing productivity and, consequently, economic growth and wages without resorting to high inflation.
Ways to Boost Canada's Lagging Productivity
- The adoption of digital technologies, artificial intelligence (AI), and automation has significantly increased productivity in various sectors by optimizing operations, reducing errors, and enabling innovation. "Canadian's need to take more risks"
- Education and continuous skill development tailored to the evolving job market demands ensure that the workforce remains competitive, adaptable, and productive. This requires investing in human capital.
- Investments in infrastructure development, including transportation, digital connectivity, and utilities, facilitate smoother operations for businesses and contribute to economic efficiency.
See: CIC Launch Delayed Impacting Innovation Funding Landscape
- A strong focus on research and development (R&D) across industries fosters innovation, leading to new products, services, and processes that drive productivity growth. Investing in new technologies and education can avoid outdated practices, inefficiencies, and a workforce that is not equipped with the necessary skills for modern challenges. While technology can greatly enhance productivity, it can also lead to displacement of workers. Without adequate retraining and transition mechanisms, this can temporarily reduce productivity as sectors adjust to new technologies.
- Open trade policies and globalization have historically contributed to productivity growth by optimizing supply chains, enabling access to larger markets, and fostering competition and innovation.
- Avoid Regulatory and Bureaucratic Inefficiencies. Overly complex regulations and bureaucratic processes can hinder business operations, slow down innovation, and deter investment, negatively impacting productivity.
- Income Inequality and Access to Opportunities. Significant disparities in income and access to education and technology can limit productivity growth by not fully utilizing the potential of the entire population.
A few links you make like:
- AI’s Impact on Competition: Bureau Calls for Insights
- BoE Report: Open Banking Boosts Productivity, Competition
- DoF Consultation: Financial Competition in Canada
- Global Competition Review: Key FDI Trends
- Vass Bednar: Canada’s Glaring Banking Protections Gap and Implications for Consumers and Fintechs
- NCFA Letter to Ontario Economic Development on Burden (Jan 2019)
- [Report] A New North Star: Canadian Competitiveness in an Intangibles Economy
- Getting tangible about intangibles: The future of growth and productivity?
These insights and trends highlight the complex interplay of factors that influence productivity. Addressing the challenges while leveraging the positive trends requires coordinated policy efforts, strategic investments, and a focus on inclusive growth that ensures the benefits of increased productivity are widely shared.
Conclusion
Global productivity has seen remarkable growth, yet advanced economies are experiencing a slowdown. Directing investments towards digitization, automation, artificial intelligence, and crucially, human capital, nations can reignite productivity growth. For Canada, addressing its lagging productivity through increased investment in new technologies, machinery, and intellectual property, alongside fostering a competitive business landscape and reducing regulatory inefficiencies, is not just an economic necessity for sustainable growth and living standards.
The 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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The Ripple Effect of CBDCs on Bank Lending and Profitability
Report | March 25, 2024
Image: BoC Staff Working Report, CBDC: Banking and Anonymity
BoC Staff Paper Explores the Delicate Balance Between CBDC and Bank Lending
The Bank of Canada published a working staff paper on March 22, 2024 called 'CBDC: Banking and Anonymity' that outlines the intricacies of CBDCs and their impact on traditional bank lending and financial stability.
See: CBDCs in Canada and Impact Drivers on Banking Choices
The Bank of Canada's study exams how the design of CBDCs, particularly the degree of user anonymity they afford, could influence banking practices, credit allocation, and bank profitability.
The Anonymity Conundrum
When a CBDC offered by the central bank keeps who uses it somewhat secret, it changes how businesses act and how banks decide to give out loans. If the CBDC is a little bit private (modest level of anonymity), it might cause some issues. For example, both successful and less successful business owners might choose to use this digital money, leading banks to lend money without being as careful about who gets it.
The best level of privacy for this digital money depends on how it can help businesses. If the benefits are more like using cash, it should be more private. If the benefits are more like putting money in a bank, it should be less private.
Risks of Bank Disintermediation
The potential for CBDCs to substitute traditional bank deposits threatens to undermine the deposit-lending function of banks. This shift could curtail banks' lending abilities, thereby impacting their profit margins and stability.
See: Republican Senators Move to Block CBDCs in U.S. (again)
Initial evidence suggests that the announcement of CBDC initiatives negatively affects bank stock prices, particularly those heavily reliant on deposit funding. This market response reflects concerns over banks' future lending capabilities and overall profitability in a CBDC-dominated financial landscape.
Theoretical models indicate that CBDCs could exacerbate bank failure risks under certain conditions. When banks decide to pay more interest on the money people save with them, they often charge more for loans to make up for this. Also, when borrowers take bigger risks because they think they won't face the consequences, it can make loans riskier. Both factors can affect how risky a loan is and, in turn, how much profit a bank can make. Banks have to balance making loans available without taking on too much risk.
Outlook
The implementation CBDCs into the financial ecosystem is a double-edged sword, offering unprecedented opportunities for efficiency and inclusivity while posing significant challenges to traditional banking models, and let's not forget privacy.
See: Bank of Canada Publishes Staff Paper on ‘Unmet Payment Needs and CBDCs
Central banks must consider nuanced effects of CBDC design and their impact on traditional banking structures and lending practices as they look towards the future of banking and monetary policy.
The 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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