Will fintech spell the death knell for banks?

Here in Canada, the approach seems to be more of a collaborative one, and major banks are already making moves to actively partner with the wider fintech community, according to panelists at the Canadian Fintech Summit 2016 in Toronto.

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If you believe a recent news story from Down Under, competition from fintechs will soon send big bank revenues into a big downward spiral.

“Australian banks face $13 billion revenue loss to fintech sector,” the headline blared. According to the article, Frost & Sullivan researchers predict Australia’s fintech sector will “strip $10 billion in revenue away from the big Australian banks” — and generate an additional $3 billion in brand-new revenue that never existed before in the marketplace — by 2020.

Just one day before this Aussie story appeared, however, the New York Times ran a story with the far less dire headline: “Fintech firms are taking on the big banks, but can they win?” At least the Times piece, rather than sounding a death knell for banking, still presents the situation as a question remaining to be answered definitively.

That same burning question isn’t just being asked in Australia and New York, of course, but also here in Canada. In fact, a similarly provocative question doubled as the title of an industry panel held during the Canadian Fintech Summit in Toronto, called “Fintech battle: Who will win, startups or banks?”

To debate that query, VPs from two of Canada’s biggest banks — RBC and Scotiabank — sat onstage next to executives from two Canadian fintech startups, online lender Grow and cloud accounting firm Wave. Since this is Canada, eh, it ended on a conciliatory note instead of in an all-out brawl.

The four supposed foes formed a general consensus that there’s room for everyone. They said some Canadian fintechs would indeed choose to be acquired by banks. They believe perhaps one or two fintech firms could go on to standalone global success akin to Shopify’s in the commerce space. They predict that many fintechs will choose to collaborate with banks rather than compete with them directly.

Panel participant Wave has chosen the collaborative option, inking a deal with RBC to be its exclusive provider of bank-based transaction services in Canada. Wave can leverage RBC’s brand awareness, consumer trust level and distribution channels while still positioning itself as an innovator and disruptor in the fintech space.

Canadian banks are also making moves to actively partner with the wider fintech community. Scotiabank launched its Digital Factory startup incubator last fall and Tangerine opened the Thinkubator facility with Toronto’s Ryerson University just two months ago.

The dance between fintechs and banks is still ongoing in Canada, so nobody knows quite yet who’ll be left standing once the music dies down. There’s one thing that does seem promising, however: customers could ultimately end up with more choices and better service. Fintechs are already customer-centric; although banks have been slow to shift in that direction, they’re racing to catch up.

“(Banking) is moving to be more agile and actually looking at customer journeys,” panelist Jeff Marshall told the Toronto debate audience. Until now, banks “were probably really guilty of trying to teach our customers how to do banking” instead of assessing “what’s the natural journey for that customer,” said the Scotiabank vice-president and director of Digital Factory.

This current laser focus on clients — from engaging them in the channels of their choice to personalizing their experience at every stage of the aforementioned journey — can only stand to benefit the customer.

In that sense, customers may turn out to be the big winners, no matter which players emerge victorious from the battle of banks versus fintechs.

Image courtesy of Free Digital Photos

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