TORONTO — Banking may be having an “Uber moment,” but it isn’t clear a single winner will emerge from among financial services disrupters and the banks they seek to displace.
Industry players who participated in a roundtable Wednesday in Toronto at the Economist’s Canada Summit said financial technology companies known as fintechs are already challenging and changing the business models of traditional banks, much like Uber did in the taxi industry.
But even the fintech player at the table acknowledged that giving customers what they want often means combining the unique attributes of traditional banks and their technology with data-savvy new competitors.
Brett Huneycutt, co-founder and chief operating officer of Wealthsimple, a Toronto-based fintech in the money management space, said he seeks to emulate the “push button experience” of Uber for Wealthsimple clients, but needed a traditional financial services firm, Power Financial, to partner with to get the new business off the ground.
Cameron Fowler, group head of Canadian personal and commercial banking at Bank of Montreal, said Canada’s fourth-largest bank is devoting significant resources to figuring out which areas in fintech are most likely to have staying power, so a long list of potential investments and partners can be winnowed down from dozens of options.
“There’s not going to be one winner in this game… That’s not the way this plays out in Canada,” Fowler said, adding banks including BMO hope to capitalize on innovation in the fintech sector that will strengthen their relationship with clients.
“We feel disruption here and now,” he said, noting that there have been net branch closures in Canada over the past three quarters as previously lagging mobile banking has begun to take off.
The banks are attractive partners for fintechs because of their national networks, the trust they have built up with clients, and their distribution systems, Fowler said.
Dino Trevisani, the president of IBM Canada, said banks have begun to innovate on their own, driven by the presence of the upstart fintechs.
“The pressure of an Uber moment has really transformed the banks,” he said.
“The reality is if the banks don’t transform, they will have their Uber moment.”
BMO’s Fowler and WealthSimple’s Huneycutt agreed that the payments area is so far facing the biggest upheaval.
Tech giant Apple Inc. just reached milestone deals with Canada’s largest banks to introduce its mobile payment technology Apple Pay, which allows customers to pay by credit card simply by tapping their phones.
Fowler said that as profits in payments come under pressure banks will respond by pursuing innovation in products and services.
“We’re seeing the early stages of that,” he said.
An area that is ripe for collaboration is providing products and services for small businesses, the speakers told the conference, which was co-sponsored by the National Post. But they acknowledged a certain level of trepidation that gets in the way of fintechs and banks from working together.
Companies such as Wealthsimple feel they might be “stepped on” by the “elephants, Huneycutt said, while the banks are “afraid we’re going to trip them up or something.”