The impact non-industry players have had on the financial services industry has undertaken many forms in different countries. Facebook has concentrated on money transfer, while Google Play is partnering with CFSI (Centre for Financial Services Innovation, a non-profit dedicated to improving financial health and literacy) to help customers navigate financial apps. Apple and Samsung Pay are seeking to make inroads into the mobile payments space, while Amazon has aggressively entered the credit card market.
Other technological disruptors that are making a significant impact on banking and insurance include P2P (Person-to-Person) lenders, robo-investment advisors, robo-insurance agents and chatbots for customer service. In continents such as Africa, the collaboration between mobile phone companies and banks has provided basic banking services to a significant portion of the unbanked population.
But disruptors have been unable to shake up Canada’s financial services industry quite like they have in other industries such as retail (ie Amazon) and transportation (ie Uber). The large banks in Canada have been proactive in setting up innovation hubs and collaborative partnerships which have enabled them to be at the forefront of new technological changes. The financial industry is highly regulated and banks have strong relationships with their customers and access to vast amounts of data.
In Canada, trust and satisfaction levels with the major financial institutions remain high, according to Mintel’s Credit Unions and Retail Banking Canada 2017 report. Some three quarters of Canadian consumers trust their bank to treat them fairly, comparing favourably with the three in five US consumers who trust their bank/credit unions. The general absence of banking failures in Canada and the stronger regulatory structure contributes to this higher trust level. The financial crisis of 2008-09 did its part to damage the confidence of American consumers in their banks.
At present, there is little consumer interest in using FinTech products, with only one in 10 Canadians and near the same American consumers interested in doing so. However, some two in five men aged 18-34 in both Canada and the US agree that mobile payments are the payment method of the future, according to Mintel’s report Consumer Attitudes towards Fintech US 2016. There is also a fairly high degree of interest in using newer financial products, both among Canadian and American consumers.
As to what form this disruption will take in the future is hard to predict, but the scope for partnerships resulting in better and more cost-effective financial products and services is immense. This disruption is also likely to increase market efficiency with more customized products and accurate pricing of products based on better credit scoring models. While this disruption is also likely to extend the market for financial services though better servicing of the underbanked and the unbanked, this could result in a trade-off with consumers having to sacrifice more personal data in order to receive better rates.
Sanjay Sharma is a Senior Financial Services Analyst for the Canadian region at Mintel. He researches and writes reports on the Canadian financial services industry. Prior to joining Mintel, he worked in marketing, research and capital markets positions in Canadian financial services with companies such as the Ontario Financing Authority, Toronto Financial Services Alliance, Ipsos Reid and the Canadian Securities Institute.
