It its recently published report on the Canadian banking ecosystem, entitled “Canadian Banks 2016: Embracing the FinTech Movement,” PwC recommends Canadian banks do more to embrace new financial technology, also known as FinTech, innovations, or risk being left by the wayside. With an uncertain economic environment looming in 2016, as unemployment climbs to a two-year high, particularly in oil country, the report argues that FinTech can help Canada’s major banks maintain key aspects of their value chain. Peter Aceto, CEO of Tangerine Bank and a former FinTech disrupter himself, is quoted in the report as saying that “consumers are demanding a different experience [and] they’re expecting experiences that simplify their lives, that make things easy.”
Aceto believes that the banking sector, particularly in Canada, is facing a confluence of social and technological revolutions, in that consumers are losing trust in traditional financial corporations and are looking for new ways to bank. The quickly growing number of smartphone users, as well as an increasing middle class, continues to work in favour of emerging financial companies that embrace FinTech models, the PwC report argues. Canadian banks already appear to recognize this shift – which in and of itself is a big change in the traditionally slow to adapt banking sector.
In 2015, CIBC announced a partnership with MaRS to create a new corporate innovation hub, which would join MaRS’s new FinTech cluster. CIBC’s Apple Watch App was created by CIBC team members based at MaRS, where development was accelerated through CIBC’s ability to quickly prototype the watch with business and tech teams working side by side, the announcement states. Scotiabank has also invested in the FinTech space with an investment in Kabbage, a U.S.-based online small business lender. As well, TD has established an innovation lab at Communitech, an industry-led innovation centre supporting a community of nearly 1,000 tech companies in the Waterloo Region.
Despite these early investments and partnerships, however, the PwC report maintains that more still needs to happen. The report emphasizes that, in this economy, the viability of big banking’s long term development is dependent on understanding innovation and adapting accordingly. The report is adamant that big banks’ legacy systems and organizational structures will not allow them to keep pace with today’s rapid shifts in technology and customer needs unless they truly take the plunge and embrace FinTech innovations wholeheartedly.