In recent years digital financial tools have drastically changed the average Canadians’ relationship with their money, but such innovations pale by comparison to what may be coming next.
A panel of FinTech experts representing startups, established players and traditional financial institutions recently convened at the Ryerson DMZ in downtown Toronto for a discussion about the “Future of FinTech.” During the roundtable panelists gave audience members some indication of what they believe the future of the industry holds, while outlining how far it’s come in a relatively short period of time.
“It’s really interesting because the conversation has changed a bit from FinTechs disrupting banks to FinTechs working with banks, and the real question is the best approach,” said Jamie Alexander, the CTO and co-founder of Sensibill, a Toronto-based startup that offers digital receipt technology for banks. “Four years ago in the early days when we were pitching banks it was really like being in the firing line, especially with the technical folks who saw us as stepping on their toes, but it’s really changed a lot.”
According to panelists, who represent both sides of the industry, the relationship has evolved from adversarial to symbiotic in a miraculously short period of time, opening the door to new and exciting opportunities that were recently far less feasible.
“There’s a lot of interesting financial technology companies that are agile, that are customer focused, that are nimble, but there are a lot of assets that the banks bring to the table as well,” said Andre Salvi, the managing director of BMO Partners. “The banks have a customer base, the banks can do things at scale, the banks have trust and a reputation as big assets, and when you bring the two together there’s a really interesting opportunity to be additive for the customer in this environment where customer expectations are changing so fast.”
Salvi explained that while technology teams within financial institutions may have once viewed FinTech startups as a threat to their existence, startups are much more likely to find willing partners in the traditional financial ecosystem.
“What really made it easy to partner with a bank was they immediately put together a cross-functional team to work with us, and I would really recommend that,” said Jordan Wimmer, the co-founder and CEO of AI powered savings application, Thrive Savings.
Now that traditional financial institutions are actively enable disruptive technologies, panelists were challenged to consider whether future generations would ever step foot inside of a physical bank branch.
“We’ll still have a thriving banking ecosystem, but people will increasingly have the desire and expectation to do all of their banking on their computer,” said Alyssa Furtado, the co-founder and CEO of RateHub.ca, a comparison platform for digital financial products. Furtado, however, says that while Canadians may do their everyday banking on a digital or mobile platform they still insist on speaking with a qualified (human) expert when making major financial decisions.
“We’ve gone deeper down the mortgage vertical and now have a team of brokers,” she explained. “We absolutely need those experts, and customers absolutely want to talk to them, but it doesn’t necessarily need to be face to face; there’s a lot of comfort talking on the phone.”
When it comes to everyday banking, however, younger generations are not only tolerant of digital alternatives, but have come to prefer them.
“Something like 80% of all of our users are under 45, so that’s a huge demographic of our users that lived through the financial crises and may have lost trust in the institutions that their parents had a lot of faith in,” said Karney Li, the vice president of engineering for WealthSimple. “A lot of these younger people grew up in an era where they were trying different apps looking for the best experience, so they’re expecting very different things than the generation before.”
While younger generations are more open to alternative financial products, however, Li suggests that their expectations are also higher, as they’ve grown up using intuitive consumer applications. Another potential challenge for FinTech companies targeting millennial consumers is their lack of financial security compared with previous generations.
“Right now millennials save less than 1% of their paychecks, and half of millennials are actually living paycheck to paycheck,” explained Wimmer, adding that generic savings plans aren’t always a viable option. “I think products will get smarter and more optimized and adaptable to users, and less one-size-fits-all.”
While millennial consumers are, by-and-large, more willing to experiment with digital financial applications from third-party vendors, panelists agreed that their parents and grandparents still prefer to see the stamp of a trusted financial institution.
Though the FinTech industry in Canada began with an adversarial relationship between traditional institutions and startups, their willingness to partner together will ultimately give way to a more robust financial technology ecosystem in the future.