Toronto, March 10 – According to PwC’s Canadian Banks 2016: Embracing the FinTech movement report released today, Canadian banks are laser-focused on responding to the threats – and opportunities – posed to the banking industry, at the hands of a group of new companies building financial technology (FinTech) solutions. FinTech offerings range from competing financial services such as alternative lending, to additive solutions atop existing banking services, to enabling technologies for the banks themselves. Capitalizing on the latest mobile, cloud and digital technologies, Canada is now home to many FinTech firms who are trying to shake up and be accretive to the banking value chain.
According to the report, banks have a great deal to gain from FinTechs’ innovation which may become essential in propelling the sector forward by reimagining operating models, streamlining costs, increasing reach in underserved markets, innovating through new product development, and opening new revenue streams.
The increasing momentum of FinTechs and their success is challenging banks to devise a spectrum of strategic responses however – not all FinTechs pose the same threats or opportunities. In some cases, FinTechs will be viewed as enablers to traditional innovation and continuous improvement. In others, it presents a series of disruptions and threats as they continue to make inroads into banks’ traditional territory by offering a competitive service or products. Canadian banks will ultimately employ parallel strategies that comprise collaborating with and leveraging some FinTechs while innovating to compete with others.
“Canadian banks must stay the course with a long term view and continue, as they have, to respond to the needs of an evolving market to create a stronger ecosystem that will position them to be even more competitive on a global level. This must encompass business model innovation, technology and architecture enablement, as well as cultural evolution to align with the new realities imposed by the tremendous uptick in the FinTech space,” says Diane Kazarian, National Financial Services Leader, PwC Canada.
Canadian banks are not only including responses to FinTechs as part of their growth strategy; they are investing in ecosystems which will position them to better compete in the market. Building an environment that produces innovative offerings is essential to be competitive in the years to come.
For Canadian banks, embracing FinTech isn’t a short-term play. Here are six considerations that the financial services sector must consider when integrating FinTech in their strategy:
The report also indicates that Canadian banks continued to see strong performance in 2015, achieving positive revenue growth and posting solid returns. In addition, they improved their 2016 first quarter results over last year despite a slowing economy, slumping commodity prices and low economic growth.
The Big Six banks’ average consolidated revenues were $21.4 billion in 2015, up 4.3% from $20.5 billion in 2014. From a productivity perspective, the banks continued their efforts to increase efficiency and streamline their cost base, however despite these efforts, the overall efficiency was 58.4% in 2015, up slightly from 57.9% in 2014.
To explore this year’s Canadian Banks report, please visit: www.pwc.com/ca/canadianbanks
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