Finding the right balance between innovation and risk
Canada’s Big Six banks are deepening their connections to fintechs—by way of joint ventures, partnerships and collaboration—in order to foster and benefit from the innovation that startups bring to financial services.
A bank learns from the ability of a fintech to focus on and deliver innovation in specific and scalable areas of financial services. The fintech, meanwhile, benefits from a bank’s substantial resources and customer access, as well as the overall reputation of Canada’s long-established and very stable banking sector.
Banks operate and are regulated on the basis of a trust imperative that’s central to their core mandates. They usually take a more sequential and measured approach in assessing and adopting technologies, leading to incremental innovation that often evolves at a slower pace. This leaves little room for failure, be it fast or slow. Nor do regulators or banking customers want failures that compromise that trust imperative.
Innovative technologies can provide greater insights into the anticipated needs of banking customers. Adopting these technologies can help banks efficiently manage fraud, reduce losses and deliver the services their customers want. But this means that banks need to be at the innovation table—learning about and contributing to these sorts of technologies within a rapidly changing financial services sector.
But where do banks draw the line between these innovations and customer privacy? The trust imperative has to be paramount.
“Banks need to embrace risk. Embrace not only the potential for failure, not only the capacity to celebrate failure — but in this environment, in fact, expect failure.”