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Andrew Moor is president and CEO of Equitable Bank.
Inspired by Mark Twain's view that "broad, wholesome, charitable views of men and things cannot be acquired by vegetating on one corner of the Earth," I recently went to visit financial institutions in Europe to explore what's possible in banking innovation. There were two questions on my mind. Are we on the right path in our digital innovation pursuit? What will Canada's financial future look like?
I visited six banks and financial technology companies in Britain, Sweden and Germany, and came away with some strong impressions about how technology is creating new opportunities and business models.
At Equitable Bank, and EQ Bank, our mobile-first digital arm, we think of ourselves as Canada's "challenger bank." We believe this moniker captures our attempt to challenge conventional banking approaches and our ambition to deliver better customer experience, better service and a better deal.
During the trip, I learned that while the term "challenger bank" is more common in Britain, there are many financial-services providers in Europe that challenge the status quo. Broadly speaking, they can be grouped into three models:
- Banks helping people manage their money and reach their saving goals;
- Specialist lending banks supporting specific customer groups – say, small- and medium-sized enterprises;
- Digital branchless banks trying to supplant traditional institutions and exploit perceived friction points with improved technology.
Fidor in Munich was a real eye-opener to how banking can be rethought with a customer-first lens. Fidor's philosophy revolves around engaging with the community it has created. Their belief that people have the best collective ideas for managing their own financial affairs has led Fidor to launch new products in consultation with its customers. Their community provides a place to share ideas – and Fidor provides the technology to make them happen. When engaging with these new models, people rethink their relationships with their banks – and their money. In Canada, we are starting to see this, too. The potential benefits are many, from lives improved by access to more convenient and better-value financial services to great jobs created in our digital economy. Canada certainly has the engineering talent, entrepreneurial ambition and venture capital needed to embrace these economic opportunities.
However, truly reaping their benefits will take more. We need to ensure our economic and financial environment provides fertile ground for innovation. There's room to improve in at least four areas:
- Reduce the friction associated with moving funds between financial-services providers, including banks;
- Increase open access to underlying transaction data so Canadians can see their total spending and manage their finances;
- Provide a supportive regulatory environment to spur innovation;
- Commit to a Canada-wide agenda to transform into a modern cashless economy.
Canada has a small population with a highly concentrated banking system – and surprisingly poor processes for moving money across banks. It can take two to three days to move money from one account to another at a different bank. Then there are challenges of setting up automatic payments on a credit card on its due date or programming future payments to friends and family across the banking system.
It's encouraging to see many Canadian regulators tailor their approach to foster innovation. A breakthrough, however, might require a level of collaboration we haven't yet seen – for example, spanning federal-banking and provincial-securities regulation. Regulators could accelerate change by providing clear guidance on when it would be acceptable for financial institutions to process or store data using cloud computing and improving the "know your customer" and anti-money laundering processes by developing clear digital identities.
As a country, we really need to commit to a cashless future. It's likely cashless anyway. Why not get in front of it and develop policies and commitments to export made-in-Canada solutions to the world – rather than waiting for the world to force them upon us. The overheads associated with handling and processing physical cash are a drag on our economy. A cashless future where you leave home with your phone, transact anywhere and any time, and better manage your money seems like an achievable and attractive goal for all Canadians.