With the US, Asia and Europe investing heavily in fintech, Canada is surrounded by big players in the industry, but recent reports have revealed that although the country has potential for innovation, adoption has been slow. Despite this, Ernst and Young (EY) are positive about this finding as it reminds Canadian banks that newer, sleeker products are seeking to compete with them because adoption is set to increase threefold within the next year.
Partner at EY’s Financial Services Advisory practice, Gregory Smith, highlighted in a recent report that only a small number of digitally active consumers are using fintech products in Canada, putting the country behind the UK and US. “Fintech is relatively recent in Canada, but as the trend continues to catch on, traditional financial services companies will have to be much more aggressive and creative to keep their current customers.”
A reason that is provided for the low adoption rate in Canada is the lack of awareness as users are unaware that certain products and technologies even existed. Alongside this, 10.3% of Canadians are not using fintech products because they don’t trust them. “This finding shakes up our understanding of how far Canadians’ trust goes, and is certainly something for traditional players to make note of.”
Traditional players should take note of these findings, as EY explored, because the next 12 months could be vital for their future as new fintech companies will need this time to fully implement their services in Canada. Smith said that “financial services companies have to review their customer experience, products and services to fit with the new reality. And they have to learn from and partner with the fintech community to meet their customers’ needs – before newer entrants do.”
However, Vancouver has started to follow in Toronto’s footsteps and emerge as a financial centre in Canada; Trulioo, a company that provides ID verification software to mitigate fraud recently announced $15 million in equity financing and was named an Emerging Star in KPMG’s Fintech 100 report.
Another Canadian Emerging Star named was Toronto based FinanceIt, a cloud based POS platform which raised its own undisclosed equity financing round. As well as emerging startups, the Fintech 100 list also showed that Canada is capable of producing players in the industry that are established as identity and authentication provider for organisations, SecureKey, made the Established 50 list after raising a $19 million seed round in 2015.
Canada’s financial sector has also experienced the impact of challenger banks with the launch of mobile bank Koho at the start of this year, which is expected to excel in the deposit-taking business. Users are able to deposit money using an email transfer, online form or taking a photo of a cheque, as well as complete direct deposits, bill payments and electronic money transfers for free.
Co-founder and CEO, Daniel Eberhard, states that fees are a big issue in the Canadian banking space. “We don’t think it is fundamentally right that Canadians are paying some of the highest bank fees in the world to some of the most profitable institutions in the world,” Eberhard said.
Another obstacle that banks are facing is the fact that fintech companies are taking all the tech talent in Canada, as CIBC vice president of digital channels, Aayaz Pira highlighted. “I don’t think it’s any surprise that we are experiencing challenges finding talent, specifically in digital. I don’t think that’s only for banks. I think that’s generally in Canada. Fintechs are finding smart people, we’re finding smart people, but generally speaking, digital was nascent in Canada for many years.”