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Canadian banks vulnerable to fintech competition

first_img Keywords Fintech Wealthsimple’s peer-to-peer app goes national Share this article and your comments with peers on social media Canadian financial firms are lagging the rest of the world when it comes to partnering with “fintech” startups, and may be vulnerable to competition from these sorts of innovators, according to a report published on Thursday. The report, which was commission by the Toronto Financial Services Alliance (TFSA) and prepared by the Innovation Policy lab at the University of Toronto’s Munk School of Global Affairs, finds that although the Toronto region has all the necessary ingredients to create a thriving fintech environment, these elements are only weakly linked. “The consequence is that the parts do not currently add up to an effective ecosystem,” the report says. James Langton Facebook LinkedIn Twitter Related news Based on interviews of personnel at banks, insurance companies, professional services firms, industry associations, fintech firms, government incubators and venture capital firms — the report finds that Canadian financial institutions have not been as effective as their competitors in markets such as New York and London in developing strong partnerships with startups. In Canada, these relationships tend to be consigned to the margins of the financial institutions’ main operations, the report says, and the bank personnel who are involved, “often lack the executive power to make the strategic decisions required to fully realize the potential of the relationship.” The result, according to the report, is that Canadian financial institutions are at “a significant disadvantage” compared to their rivals in the United States and the United Kingdom. As well, Canadian banks may be more vulnerable to fintech competition than generally thought, the report says. Other obstacles to fintech experimentation noted in the report are financial regulation, a lack of large, inexpensive incubator centres, and a shortage of early-stage venture capital. “The combined effect of the lack of a true ecosystem, difficulties in collaborating with leading Canadian financial institutions, the regulatory environment, and the lack of scale-up resources, means that that even when successful Canadian fintech companies opt to stay in Canada, they are slower to scale-up compared to their U.S and U.K. competitors,” the report concludes. “This prevents Toronto’s fintech industry from reaching its potential and cementing itself as a leading global hub.” The key challenge for policymakers, the report says, “is to develop a vision as to what are the most appropriate policy interventions to increase the connections and linkages among the components of the ecosystem currently found in the Toronto region.” To that end, the report calls on the TFSA to develop a strategy to “determine the most effective way to support the creation of an innovation platform for the fintech ecosystem to facilitate the rapid development of multiple new fintech applications.” “The findings of this report are an important call-to-action for the TFSA and its partners, like the Ontario Centres of Excellence, to address the current silos between fintech firms and the large financial institutions, if we’re going to drive future growth,” says professor David Wolfe, co-author of the report, in a statement. “The impact of not seeing and grasping the opportunity could result in a slow decline in relevance and importance of both the financial services and the fintech sector in the Toronto region.” A copy of the report is available on the TFSA website. Estateably expands to Alberta Mogo to acquire investing applast_img read more

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