Dave McKay, CEO of RBC, poses on Bay Street in Toronto on Friday, July 25, 2014.
Financial technology companies can make established banks squirm – but at a roundtable discussion on digital banking on Wednesday, the spirit of friendly collaboration was hard to miss.
The venue may have set the mood, of course: Royal Bank of Canada hosted the event and its chief executive officer, Dave McKay, delivered opening remarks that portrayed fintech firms as potential allies to established banks, rather than threats.
"It is incredibly motivating and engaging for our own employees to partner and work with fintech companies," he said. "We've had enormous success sharing ideas and building on ideas."
His comments follow a number of reports that suggest technology firms are set to disrupt traditional banking with approaches that are anything but collaborative. A recent report from the consultancy McKinsey & Co. argued that banks could lose up to 60 per cent of their retail banking profits to fintech firms within the next decade.
However, the panelists at the roundtable discussion – Marc Barach, chief marketing officer at Jumio Inc.; Chris Finan, CEO of Manifold Technology Inc.; Dror Oren, co-founder of Kasisto; Mark O'Connell, CEO of Interac Association and Acxsys Corp.; and Linda Mantia, RBC's executive vice-president of digital, payments and cards – pointed out that it is often in the best interests of fintech companies and established players to work together.
"The whole approach should be to use disruptive technologies to disrupt the disruptors," Interac's Mr. O'Connell said.
Mr. Oren echoed that sentiment. He said that Silicon Valley-based Kasisto, which develops voice activation software that can be used by financial institutions for their mobile and tablet apps, decided early on that it would work with banks.
"I completely believe that banks will prevail," he said. "They have a long way to go to make technology more accessible, but we want to work with them."
The panelists were not complacent about potential threats, though.
RBC's Ms. Mantia said that she is less concerned about whether fintech firms see themselves as either friends or foes of existing banks, and more concerned about those firms that can address the needs of a very specific type of customer.
"They have their persona, and the persona is a much narrower segment than a big bank would be able to look at – and they are solving a very narrow customer's issue," she said.
Building on that comment, Jumio's Mr. Barach noted that younger, more forward-thinking consumers can adopt new technologies and unleash a chain of events that can be disruptive.
"A perfect service is made for that constituency and it achieves a great deal of success," he said, pointing to Airbnb as an example. "That brings in massive investment from venture capitalists who are looking to finance the next big thing. With that $500-million war chest comes the ability to expand into new segments, and before you know it, there's a whole new way of doing business that was seeded by a small, typically young, group."
Banks, though, may have an advantage if millennials start driving new ways of doing their banking: Banks are generally trusted by consumers, especially in Canada.
"Yes, we have to drive down friction and improve the consumer experience, but you have to do it in a way that absolutely preserves trust," said Mr. Finan of Manifold Technology. "I really don't think that trusted institutions will ever become disintermediated."
David Berman