Embracing the enemy: Canadian banks partnering with fintech firms after once seeing them as rivals

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Financial Post | Julius Melnitzer | Dec 5, 2019

fintech and banks mashup - Embracing the enemy: Canadian banks partnering with fintech firms after once seeing them as rivalsCanadian banks have become 'incubators and accelerators' for tech talent, helping to get new innovations to market more quickly

For all the buzz about the disruption that’s occurring in Canada’s financial services sector, the country ranks a lowly 23 among 27 countries in its market adoption of fintech.

The information appears in an infographic prepared by Fortunly, an online knowledge base and financial product review-website. The charts examine the significant disruption that fintech solutions are causing in the world of finance, including mobile wallets, cash transaction systems, the rise of blockchain currencies and artificial intelligence.

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Which is not to say that Canada is standing still. The country’s market adoption rate of fintech stands at 50 per cent, not insignificant but still way behind China and India, leading the pack at 87 per cent. Rounding out the top 10 are Russia and South Africa, Colombia, Peru, Netherlands, Mexico, and Ireland and the United Kingdom.

Canada’s adoption rate, however, is ahead of that in the United States, France and Japan.

Globally, adoption rates have risen from an average of 16 per cent in 2015 to 60 per cent in 2019. But Canadian adoption has rocketed even faster, from 8 per cent in 2015 to the current 50 per cent, which means that we’ve moved from 50 per cent of the world average adoption rate in 2015 to some 83 per cent today.

The Canadian Bankers Association (CBA) declined Financial Post’s request for comments, instead pointing to the technology focus section of its website for information.

“Banks in Canada have a longstanding commitment to technological innovation and in recent years have taken an increasingly active role in supporting the development of financial technologies, whether through in-house initiatives or external partnerships,” the site states.

The key phrase may be “in recent years,” which hints at the formative influence of non-banking startups.

“The fintech phenomena — non-banking companies that provide innovative financial products and services — have successfully responded to customers’ needs that weren’t addressed by traditional banks, forcing well-established financial institutions to adapt to this trend,” said Milana Kostic, a content strategist at Fortunly, in an email.

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Indeed, according to Fortunly, a global survey of financial industry leaders in 2017 revealed that 61 per cent believed they would lose 40 per cent of revenue to innovators, with the greatest impact in conducting payments, personal finance and fund transfers.

However that may be, the CBA goes on to say that banks are not only “making significant investments in the digital side of their businesses and in technology writ large,” but “also increasingly finance or partner with fintech companies to help provide access and exposure to innovative products and solutions that benefit customers, while fintech upstarts benefit from having access to capital and a pre-existing client base to help scale their operations.”

The CBA also refers to Canadian banks’ role “as trusted incubators and accelerators in order to stimulate new ideas, tap into high-skilled tech talent and help get innovations to market more rapidly.”

As the CBA sees it, fintech innovation in the banking industry can be categorized in three ways: in-house development of new technologies; technology sourced from or developed in partnership with fintech companies; and banks as tech incubators in collaboration with the fintech community.

The website’s examples lean to the first two categories, with “incubator” activity somewhat less prominent.

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Among the innovations cited as “in-house” fintech developments are:

  1. Bank of Montreal’s QuickPay solution, which leverages machine learning capabilities to recognize information across a range of corporations and statement formats, enabling customers to email their bills to BMO;
  2. The Canadian Imperial Bank of Commerce offers a SME/mobile app that gives business owners a comprehensive view of their finances and provides financial insights;
  3. Royal Bank of Canada’s Express Track Wire Payment leverages SWIFT’s global payments innovation technology;
  4. Bank of Nova Scotia’s eHOME tool modernizes and digitizes the entire mortgage process in real-time and without personal contact with a mortgage specialist or financial advisor; and
  5. TD Canada Trust has the integrated digital mortgage application.

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NCFA Jan 2018 resize - Embracing the enemy: Canadian banks partnering with fintech firms after once seeing them as rivals 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, 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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