In 2015, the financial technology or “fintech” revolution took flight in Canada. From coast to coast, tech-enabled upstarts are working hard to improve the financial well-being of everyday Canadians. Fintech companies achieve this goal by leveraging technology to make things faster, design a better customer experience, all while working to charge less than the big banks. See this infographic to view the various segments of Canadian banking that fintech players have begun to address.
The Canadian media has been tracking the burgeoning financial technology industry closely, shedding light on how advancements in financial innovation help move things forward for consumers. As you can see above, 2015 saw not only the launch of our tech-enabled lending platform, Borrowell, but also the growth of many new players.
Why is fintech an important subject for Canadians? Technology is not only making banking more convenient for consumers; it is encouraging upstarts to look at what the banks do, and try to do it better. Historically options have been limited by the domination of Canada’s largest institutions. Canada has one of the most profitable financial industries in the world, with the world’s highest banking profits per capita. Some celebrated RBC’s recent news reporting a record annual profit of $10 billion. For the team at Borrowell, this news confirmed something else—in 2016, we want to see even greater financial disruption. Canadian consumers have suffered from limited choice, higher rates, and opaque fees for far too long.
An oft-quoted report from McKinsey & Co. estimates that 20 per cent to 60 per cent of profits in five core banking business links will be at risk by 2025, with consumer finance the most vulnerable. We believe this trend will continue in 2016.
There are voices in the industry who stigmatize financial technology. For example, a recent post in the Globe and Mail argued that ‘fintech’ lending could lead to systemic risk because fintech startups are unregulated and don’t have the same safeguards when it comes to risk management as the big banks. The difference is that fintech players use technology to offer services in a more transparent and faster manner. What’s more, critics fail to point out that fintech startups are regulated and governed by many of the same sets of rules as the incumbents. For example, Borrowell is subject to consumer lending rules and has to obey securities laws.
Our COO, Eva Wong, said it best with her quote at a recent conference: “online lending in 2015 is what online dating was 4-5 years ago.”
While the booming financial technology industry has gained a foothold in the popular consciousness, it is still working for general acceptance. At Borrowell, we think creating fear about financial technology players is similar to the fear-mongering created by the infamous Toronto cab driver who recently latched onto a nearby Uber.
Like Uber and other innovations that have made things faster and fairer for consumers, we believe that financial technology is not only here to stay but is poised for massive growth. What will be important will be continuing to regulate and monitor new players, while creating an environment where incumbents and new players can work together to make things better for consumers.