Canadian banking sector risks losses unless invests in fintech – report

The disparity between US and Canadian funding goes beyond 10:1 ratio of economies and the gap raises the concern that Canada and its citizens risk losing out on one of the most important innovation cycles in the history of finance, theglobeandmail.com reports. The US market volume for alternative finance was USD 113.43 per person compared with USD 5.82 for Canada – a 95% discount, according to KPMG report, in conjunction with major academic institutions, the source cites.

The report indicates that more than half of the Canadian volume is attributable to charities or product crowdfunding, implying that the gap is even wider. Part of the disparity falls on credit regulations around peer-to-peer lending. J.P. Morgan employs more software developers than Google parent Alphabet Inc. and 25% of Goldman Sach`s employees build technology tools and platforms. With these capabilities, J.P. Morgan and Goldman Sachs are able to invest and work with dozens of fintech startups to bring new solutions to market.

By 2025, between 10 and 40% of global retail (consumer lending, mortgage, small business lending, retail payments, wealth management) bank revenues are at risk because of fintech startups, although global banking profits exceeded USD 1 trillion in 2014, according to a McKinsey report released in 2015. Other studies show millennials trust technology brands like Google, Apple and Amazon.

A 2014 Accenture study found that almost three-quarters of 18-to-34-year-olds in North America would be likely to bank with at least one non-financial services company. Power Financial has invested in robo-adviser Wealthsimple, online lender Borrowell, and a mobile money application developed by Koho Financial I.

Canada is severely underinvested on a relative basis not only compared with the US but even to other like economies such as Australia. The Canadian banking industry has been held up as the golden standard, largely avoiding the extreme conditions that plagued the rest of the world in 2008.